Comment Text:
10-005
COMMENT
CL-02446
From:
Sent:
To:
Subject:
secretary
Friday, April 2, 2010 2:38 PM
Metals Hearing
FW: March 25, 2010 Hearings on Silver Manipulation and PM Positions
From:
[email protected] [mailto:[email protected]]
Sent:
Thursday, March 18, 2010 4:27 PM
To:
secretary; Gensler, Gary; Chilton, Bart
Subject:
March 25, 2010 Hearings on Silver Manipulation and PM Positions
Dear Honorable Sirs:
I again submit evidences and information written and compiled by Mr. Theodore Butler. I have copied and pasted
his March 15, 2010, essay below, and as that this be made part of record on the hearing minutes and recordings.
Mr. Butler, AGAIN, has put the final nail in the coffin and is right ON mark. Please read, consider and make this
essay part of your considerations and adjudication respecting the illegal crime in progress in the Precious Metals
Markets, especially silver, being committed by the 2-4 banks in question in collusion with the United States
Treasury and the Federal Reserve. These shorts must be stopped, and punitive damages collected from these
banks illegally shorting positions with the lions share Mr. Butler has produced evidence on. Any punitive
damages must NOT pass to the taxpayers, and punitive damages MUST be judged to be a rule of law that this
kind of behavior will never happen again. It is still an ongoing crime in progress, as i write.
Thank you for your considerations and making this letter and Mr. Butler's 3/15/10 essay a part of record for the
March 25, 2010 hearings before your Commission.
As always, God bless you all in making the RIGHT decision and judgments on behalf of the Citizens of the United
States of America.
Respectfully submitted,
DONNA BADACH
Hillsboro Beach, FL
Ph. 954-571-6799
Here is the copy and paste of Mr. Butler's essay of March 15, 2010:
Butler Research LLC.
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<< Back to Reports10-005
COMMENT
CL-02446
March 15, 2010 - The Bottom of the Barrel?
posted:
3115/2010
The Bottom of the Barrel?
Recently, there have been significant withdrawals of metal from the big silver Exchange
Traded Fund (ETF), SLY. Last week, the withdrawals totaled 5.5 million ounces over a
seven business day period. These withdrawals are potentially very bullish.
The big silver ETF, which goes by the name iShares Silver Trust (ticker symbol SLV), was
the first silver ETF introduced in April 2006, about a year and a half after the first gold
ETF. In contrast to the introduction of the gold ETF, the SLY did not come into existence
without controversy. A strong campaign against it was waged at the time by the Silver
Users Association, who urged the SEC to deny its approval for fear it would cause higher
silver prices. The SUA's fears proved to be valid. I also thought there was a good chance
that the SLY would be rejected due to the impact it would have on price. There was no
doubt in my mind that the SLY would be the most important factor in silver to come
along in a long time. For the first time, institutional and other investors could buy and
hold the equivalent of real silver in a common stock form. Because it was required to
buy and hold real metal for every share purchased, the SLY created a mechanism for
vast investment demand for silver.
Early on, a friend of mine, Carl Loeb, labeled the SLV as the "Death Star," because it
seemed destined to gobble up all the available silver in the world. That's not far from
what has occurred. Since its introduction in 2006, the SLV has accumulated almost 300
million ounces of silver. Its success has resulted in other silver ETFs being created, as
well as increased demand in other funds' holdings in silver (like the Central Fund of
Canada). In total, over 450 million ounces of silver has been bought in the various silver
investment funds over the past 4 years, or more than 100 million ounces annually.
That's a lot of silver demand. Prior to 2006, there was no net investment in silver for
decades, making the surge in demand particularly noteworthy.10-005
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Combined with the holdings in COMEX-approved warehouses, just over 600 million
ounces of silver are now held in the visible and recorded inventory category, or 60% of
the one billion ounces of total world bullion inventories thought to exist. By way of
contrast, total ETF-type gold holdings, plus COMEX warehouse stocks amount to some
70 million ounces, or 3.5% of total gold bullion inventories of 2 billion ounces. Removing
the COMEX warehouse stocks from the equation, ETF-type silver holdings total 500
million ounces, or 50% of total silver bullion world inventories, while gold ETF-type
holdings total 60 million ounces, or 3% of the 2 billion ounces of gold bullion
inventories.
Why is there such a disproportionate percentage of total silver world inventories in ETF-
type holdings (50%), compared to the percentage of gold world inventories held in ETF-
type holdings (3%)? There is a greater need to professionally store silver than there is
the need to store gold. Because gold has a high dollar value compared to its physical
mass, there is less need to have someone hold it for you for safekeeping. One hundred
ounces of gold bullion, a bar weighing 7 Ibs, is currently worth $110,000. The average
person would have no trouble personally storing and safeguarding a bar of gold, or
several such bars. In fact, given the principle motivation for the purchase of gold is
because it is an asset that is no one else's liability, most gold holders would prefer to
hold their gold personally and not have it stored for them by someone else.
However, the same $110,000 would buy you 6500 ounces of silver, or more than 450
Ibs. The average person (or institution) would have trouble storing such an amount, to
say nothing of multiples of that amount. Usually I point out that this proves you get too
much for your money with silver. My point is simple - because one gets so much more
physical weight and bulk for each dollar invested in silver compared to gold, the need
for professional storage is greater in silver. This is why such a large percentage of the
world's total silver bullion inventory has ended up in the various silver ETFs.
There are two categories of world silver bullion inventories, reported and unreported.
Together, they make up total world silver bullion inventories of one billion ounces.
Silver bullion is defined as silver held in industry-standard 1000 oz bars, or silver that
could quickly be transformed into 1000 oz bars. Prior to the introduction of the silver
ETFs, the amount of silver bullion that was in the visible and openly reported category
was around 150 million ounces, out of a total of one billion ounces, meaning there were
850 million ounces in the unreported category. Today, as I indicated above, there are10-005
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600 million ounces in the reported category and 400 million ounces in the unreported
category. (As far as I know, my estimate of one billion ounces of total world silver
bullion inventories and 400 million in unreported inventories is higher than any other
published estimate. If my estimates are too high, the circumstances are more bullish
than I have concluded).
In essence, there has been a transfer, since 2006, of some 450 million ounces from the
unreported category to the reported category of world silver bullion inventories. My
analysis is that the total bullion inventories haven't changed much from the one billion
ounce level, just that there has been a massive rearrangement between the reported
and unreported categories. Included in the 450 million ounce transfer was the 130
million ounces formerly held by Warren Buffett's Berkshire Hathaway.
Silver prices have more than doubled from the 57 level since when the SLV was first
proposed in the summer of 2005 (and at one point tripled). However, considering the
amount of silver that has been bought in the various ETFs since 2006, I have been
genuinely surprised by the relative small increase in the price versus the large quantity
of silver purchased. Yes, I'm keenly aware of the manipulative impact of the hundreds of
millions of ounces sold short by a few commercials on the COMEX, but I fully admit that
the ETFs took in far more silver than I expected.
I believe that the price of silver is manipulated downward by the obscene and
concentrated short selling on the COMEX. I believe a few crooked commercials are
behind the short selling. These same commercials are the kingpins of the wholesale
physical market. They don't actually mine and refine and consume the actual silver, but
they arrange for shipment and distribution all along the wholesale production and
consumption process. So the big commercial paper shorts on the COMEX who are
managing the price are also managing the wholesale physical market.
These big commercial shorts are the entities that moved the 450 million ounces of silver
from the unreported category of world silver bullion inventories to the reported
category over the past 4 years. Clearly, it was bullish that investment demand was
strong enough to require the big commercials to transfer the silver from the unreported
category to the reported category in order to satisfy ETF-type demand. But it also
created the impression that these big commercials had unlimited amounts of silver in10-005
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unreported holdinl~s. In other words, if they transferred 450 million ounces in 4 years,
who could say that they didn't have another 450 million ounces, or any other larl~e
amount, behind that? The feelinl~ the larl~e transfers from the unreported to the
reported catel~ory created was that they could be maintained indefinitely.
This feelinl~ of silver abundance created by the transfers has worked to the bil~
commercial shorts' advantal~e for years. For instance, it kept the rel~ulators and users at
bay, amid risinl~ numbers of complaints about a silver price manipulation. No problem,
the bil~ shorts could claim, we have plenty of silver remaininl~ in unreported inventories.
No, we can't show it to you, but don't worry, we have plenty. Trust us. In addition, the
seeminl~ly effortless manner by which the bil~ commercial shorts could come up with
silver from unreported inventories weil~hed on investor psycholol~y. If it were precisely
known how much silver remained in the unreported inventories, investor psycholol~y
would undoubtedly be different. As Ionl~ as silver flowed freely from unreported
inventories to reported inventories, the illusion of plenty could sustain the bil~ shorts'
bluff. But when the flow from unreported inventories ceases, the bluff is called. That's
what is so potentially bullish about the recent transfers out of the SLV.
There is no question that if silver is manipulated in price and its wholesale physical
movement is manal~ed by the bil~ commercials, as I allel~e, that they would prefer to
conduct their operations with the minimum of transparency and scrutiny. Beinl~ able to
secure and transfer silver from unreported inventories allows these commercials to
shield their activities from pryinl~ eyes. The minute the availability of unreported silver
inventories dries up and the commercial shorts must resort to movinl~ around reported
inventories of silver, their activities become visible.
The movement out of the SLV stronl~ly sul~l~ests that the commercials have run out of
easy access to unreported inventories of silver. Certainly, there is no evidence that the
5.5 million ounce decline in SLV holdinl~s was plain-vanilla investor liquidation. Price
action, volume and continued metal flows into the other silver ETFs arl~ue al~ainst
investor liquidation. Investor demand for silver is boominl~, and it makes no sense that
silver is beinl~ dumped by investors in the SLV. It is important to remember that the SLV
is the larl~est holder of silver in the world and as such is the Iol~ical place to I~o to when
important quantities of silver bullion are needed in a hurry. While I think that the short-
sellinl~ of SLV shares is an abomination, the fact that this ETF allows for its shares to be
converted to metal (throul~h an Authorized Participant and in increments of 50,00010-005
COMMENT
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shares/ounces), makes it a logical source of physical silver supply in a pinch.
Furthermore, the silver leaving the SLV seems to be finding its way to the COMEX-
approved warehouses. The timeline for that tracks pretty closely. Approximately 5
million ounces have recently been deposited in these warehouses, in an apparent
response to demand from new buying of futures contracts in the current March delivery
month. This amount of silver moved into the COMEX is strongly suggestive that it came
from the SLV. Such buying can only be for delivery purposes in the March contract. This
new buying has been unusual and reflects immediate demand for wholesale silver
quantities. Interestingly, the prime deliverer on the silver COMEX contracts this month
has been JPMorgan in their proprietary trading account. Finally, the timeline of the
withdrawals from the SLV and the deposits made into COMEX warehouses, if they
involve the same silver, would suggest the mode of transportation is by air-freight and
not shipped by boat, and further connotes urgency.
Importantly, superimposed over all this is the need to remember, whatever the actual
amount of silver in the reported and unreported inventory categories, there is really
only one category of inventory that matters the most. That is silver available to the
market, at or near current prices. In a very real sense, it doesn't matter if there is one
billion ounces of silver total inventory or ten billion ounces, if only a few million, or less,
is available for current sale. More important than the total quantity in inventory is the
quantity that can be bought immediately. It appears to me that very little of the
remaining silver inventory, both reported and unreported, is available for sale near
current prices. That's because most silver investors are long-term in nature and are
looking for much higher prices before they sell. If anything, they are more inclined to
buy at current prices, than to sell. This is a key price determinant in any market, even
one as manipulated as silver. And considering the current low price of silver, combined
with just how little may be available at this time, it wouldn't shock me if some well-
heeled investor entered the market at any time, impacting the price in a big way. In fact,
it's more of a surprise that it hasn't happened yet.
Admittedly, there is much speculation behind my thought process. There is also much
fact. It would be safer to wait for actual confirmation of genuine shortage in the
wholesale physical silver market before officially declaring that shortage. But safety has
a cost, because by the time the silver shortage is visible to all, it will already be visible in
the price. Therefore, by definition, if you hope to profit from the price impact of a10-005
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shortage, you must be early. Yes, you can get false starts and signals before the actual
silver shortage hits, but that's unavoidable. The best way to play it is with physical silver
held on a long-term basis and no margin. You don't want to lose positions if what looks
like a shortage developing is postponed. I don't know for certain if the recent removal of
silver from the SLV signals the start of a genuine silver shortage. But it just may and I
see no benefit in not sharing my view with subscribers.
Ted Butler
March 15, 2010
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