Precious metals analyst Ted Butler returns to the podcast this week to discuss the long-suffering silver price.
Will the beatings continue? Or is there finally reason to believe that, after seven painful years of languishing, silver may finally see a brighter future?
Butler predicts a turning point is nigh. And ironically, he thinks silver's savior will be the same culprit responsible for keeping the price suppressed for all these years:
Every time we’ve had a rally in the last 10 years, ever since J.P. Morgan took over the investment bank Bear Stearns, J.P. Morgan has added aggressively to its paper short division on the COMEX as speculators, technical fund,s and what-have-you come in to chase rallies higher. J.P. Morgan has always been the seller of last resort, and they sell whatever is required to satisfy all buying. And, ultimately, after that buying is satisfied, the prices roll over and come back down. This is the "wash, rinse, repeat" cycle that many people have become aware of. J.P. Morgan adding short positions has stopped every rally in silver -- and gold, for that matter -- over the last 10 years.
J.P. Morgan never sells on the way down. They only sell and add short positions on the way up. So, the manipulation in essence takes place on the rally. And, when J.P. Morgan adds short positions, once they’re done selling and the buyers are done buying, the price stops going up and people turn to sell. That’s when J.P. Morgan rings the cash register and buys back all the shorts that they’ve added at lower prices than where they sold, meaning they always make a profit.
J.P. Morgan has never taken a loss in 10 years when adding short positions in silver like I just described. They’ve only made profits -- to varying degrees, but never a loss. This is the essence of the manipulation.
When is their stranglehold of paper control on the price ever going to break? The answer to that important question gives me tremendous reasons for optimism. In fact, it’s the mirror image of the pessimism that is naturally generated by these prices that do nothing but go down for no legitimately explainable reason. J.P. Morgan by virtue of its giant physical silver holdings now, has positioned itself and may be done positioning itself -- we won’t know that until after the fact -- but, the same causes that have driven prices down in a bewildering, unexplained fashion, are going to cause those prices to explode.
The thing that’s going cause that explosion when it occurs—while I can’t tell you when it’s going to occur, I can tell you it will occur—the lynchpin to that is that one of these days, and I think real soon, J.P. Morgan is not going to add to their silver short positions as they have on every single rally over the last 10 years. If they don’t add to short positions and cap and control the price, the price of silver is going to explode.
There’s really getting to be very little reason for J.P. Morgan to add to short positions in the near future. They're positioned perfectly. They’ve been buying back as many short positions as they can, paper short positions as they can on this decline. It’s all in the CFTC commitment of traders documentation. They reached a critical point where they can’t really buy any more, because there are no sellers on the other side. When prices start to turn up and all the technical funds and managed money traders that have been selling so aggressively, just because prices have been going down, these same traders will start to buy, simply because prices are going up. If J.P. Morgan doesn’t add short positions, silver will explode in price.
If you put a paper to pencil and start to calculate how much J.P. Morgan will make on a significant price rally, just multiply 750 million by $1 for every dollar that prices may go up. If silver runs up $100/oz, and I don’t see any problem in that, that will mean J.P. Morgan stands to make $75 billion. That’s serious money, and that’s the only reason that they’re in this. They’re not in this to control the world, or enslave us all, or to save the dollar, or anything like that. J.P. Morgan is in this to make a buck. And they’re going to make the biggest buck ever when silver and gold take off to the upside.
Click the play button below to listen to Chris' interview with Ted Butler (43m:34s).
Chris: Welcome everyone to this Peak Prosperity podcast. I am your host, Chris Martenson. And it is July 18th, 2018. Today, we are going to talk about precious metals - silver specifically - which is one of my preferred investments. Full disclosure, I own a bunch of it. Now, that makes me a little bit nuts, right? Silver has been going down for basically seven, going on eight years now. It has gone nowhere in the last year. The last month has been painful. So, why silver?
Well, our guest today is Ted Butler, who thinks it’s going to be going up and he’s got some very good reasons. I want you to be able to hear what those are. I think he’s one of the people most well-suited and qualified to be talking about what’s happening in silver and in COMEX. He follows all of this space very, very closely.
And, COMEX, of course, is the place where metals purchases and transactions are conducted. So, that’s something we have to be aware of and there’s shenanigans going on in there, of course, courtesy of the banks, the bankers and all those other participants. But, really interesting story developing there, specifically around everybody’s best friend, J.P. Morgan. So, we’re going to hear more on that in just a second.
So, Ted Butler runs his own site, Butler Research, and he’ll tell you more about that in a minute. Ted’s been analyzing silver for a long time, and I’m pleased to have him back on the program today. Welcome, Ted. It’s great to have you back.
Ted: Thank you very much, Chris, for the very kind welcome.
Chris: Oh, you’re most welcome. So, Ted, I got to start with the price of silver. Back to around 15.50 today, right, where it was last July. It’s gone nowhere this past year, obviously, and every time it’s tried to go somewhere recently, it seems to get clubbed back down. How do you explain that price action?
Ted: Well, it’s kind of simple. You mentioned the name in the intro, it’s J.P. Morgan. Specifically, every time we’ve had a rally in the last year, in the last 10 years, for that matter, ever since J.P. Morgan took over the investment bank Bear Stearns, J.P. Morgan has added aggressively to its paper short divisions on the COMEX as speculators, technical funds and what-have-you come in to chase rallies higher. J.P. Morgan has always been the seller of last resort; and they sell enough, whatever it is, or whatever is required, to satiate, satisfy all buying. And, ultimately, after that buying is satisfied, the prices roll over, come back down. And, this is the, you know: wash, rinse, repeat cycle that many people are tuning into and waking up to. But, that’s, the answer is simply J.P. Morgan adding short positions has stopped every rally in silver and gold, for that matter, over the last 10 years.
However, I think there might be something going on that it may not occur again.
Chris: Okay. Well, I want to get to that in just a second, but let’s help people understand what really is going on here. So, let me just illustrate one thing that you’re talking about. I’m looking here at June 2018, I’m looking at a chart here. Silver climbed up pretty carefully over the first nine trading days of June, did a pretty nice rise. Went from 16.45, roughly to about 17.25. So, nine trading days, it’s climbing up and then on that next, on the tenth trading day, it’s all gone, got smashed away in one day. Huge volume comes in.
So, to me, that kind of defines silver’s typical trading pattern of late, over this past 10 years, but certainly over this past year. And, when it goes down like that, it positively gets smashed, tons of volume comes in. How much is J.P. Morgan a part of that story when we see those, that crush come?
Ted: Well, J.P. Morgan is not part of the story at all once the crush comes, once the prices retreats and comes back down. But, if you go back and look at commitment of traders data from the CFTC, the federal regulator, you’ll see that on that rally that you just referenced from, in the beginning of June, from 16.50, whatever it was, to 16.30 to 17.25, CFTC data—you have to look at the concentration portion of the data—will show you that J.P. Morgan added 20,000 additional short contracts to 20,000 they already had at the bottom in June, on that rally. So, they had a short position, they added 100 million ounces of paper shorts, increasing their position to $200 million at the 17.25 mark, the number that you quoted. And, on the subsequent decline, that’s when they start to buy back these short positions.
So, this is very clever. It’s not that easy to see, and you have to be looking for it. But, J.P. Morgan never sells on the way down. They only sell and add short positions on the way up. So, the manipulation in essence takes place on the rally. And, when J.P. Morgan adds short positions, once they’re done selling and the buyers are done buying, the price stops going up and people turn to sell, that’s when J.P. Morgan rings the cash register and buys back all the shorts that they’ve added at lower prices than where they sold, meaning they always make a profit.
I don’t know if you know this, Chris, J.P. Morgan has never taken a loss in 10 years when adding short positions, excuse me, in silver like I just described. They’ve only made profits, varying degrees, but never a loss. So, this is the essence of the manipulation. You look no further than J.P. Morgan.
Chris: Hey, if you’re never taking losses, you’re not trading, because that means there’s no risk in whatever it is you’re up to. So, clearly, they have market control.
Now, I’m no expert in this, but I thought, I remember reading somewhere, Ted, correct me if I’m wrong, that no one entity is allowed to hold more than 5,000 contracts in silver at any one point in time. But, you just mentioned J.P. Morgan adding 20,000 across a nine-day span. That doesn’t, how do I make sense of that?
Ted: Well, you make sense of it because there is no, you know, there should be a position limit and there’s talk about position limit, and there’s even, there’s even statements on the books talking about accountability limits. But, this is like a 10-mile-an-hour speed limit, posted speed limit on a super, on the autobahn, okay. Nobody pays attention to it. So, you know, ask the CFTC why, how they’re allowed to sell, add 20,000 contracts to the equivalent of 100 million ounces. And, certainly, if I’m wrong, anybody can come back, J.P. Morgan, the regulators, and say, “No, they never did this. Butler’s full of hooey. That’s not happening.” This is what they’re doing.
Chris: Well, 100 million ounces, just to put that in context, I think it was about 850 million ounces of total mine supply in 2017, the last year I got figures for, obviously, full year. And, so that’s 100 million out of 800 million, that’s a really, on a percentage basis, that’s an extraordinary amount. I’m not aware of any other commodity where one entity in a few days’ time could basically short out the equivalent of 15% of total world output.
Ted: That’s a good observation. You’re 100% correct. That’s why silver, COMEX silver stands out like a sore thumb, head and shoulders above any other commodity. That’s what makes it the most manipulated. But, I can’t get more specific than this, it is J.P. Morgan, those are the amounts that they sold in June. I can go back over the last 10 years and show you how many contracts they added on silver rallies and subsequently bought back. It’s all from source documentation from the CFTC, the regulator that’s supposed to not allow this in a million years.
Chris: Right. Well, yeah, good luck with that. So, let’s turn now to the other side of the J.P. Morgan story, because I was reading some articles of yours recently, and certainly, I’ve been hearing a lot about J.P. Morgan and their silver hoard. I didn’t really know about the dimensions of it until I read your work. Walk us through that. So, while J.P. Morgan’s busy playing its paper games, shorting, they’re also accumulating not just a big silver hoard, but maybe a historically unmatched silver hoard.
Ted: Absolutely. In fact, let me go to the beginning. Back when J.P. Morgan took over Bear Stearns and got a green light of some type from the government to continue to manipulate the silver market as Bear Stearns had been doing up until that time, March of 2008, J.P. Morgan stepped right in on the short side and did this wash and repeats, add short positions on every rally and buy them back when the prices declined, making a profit every time. But, they got almost stuck, okay, in early 2011 when silver ran up to near $50 an ounce. J.P. Morgan was short at the time. They were wise enough not to add to short positions on that big rally but, and that’s probably what allowed the market to go up among other things. But, they were given the fear of God, okay, on that rally, because they were short. And, when the prices went up, I think it occurred to them that this position that they’re in, okay, was no good and they needed to do something.
What they decided, and it was a genius, albeit criminal solution, they decided that they couldn’t buy back their paper short positions on higher prices. Because, that would just cause the price of silver to go to 200, 300, pick a number to the upside. They were the ones that were keeping a cap on price. So, what they decided instead, in order to cover their short position and take themselves out of harm’s way, they thought of this genius solution of we’ll use our ongoing ability to manipulate and depress the price of silver, cap every silver rally. But, instead of just buying back the short positions at big profits when it came down, we’ll use the opportunity to buy physical silver in such quantities that eventually we’ll be able to offset completely our basic short position on silver.
J.P. Morgan has always been short COMEX silver, and really can’t, haven’t
been able to get out of the position completely, can’t do it by buying back paper short positions. The only way you can do it, it decided, was to buy physical positions. And, within a year or two, from the peak of silver in 2011, when it came right back down to like $30 and less, okay, per ounce, J.P. Morgan had bought back about 100 to 200 million ounces of physical silver. People stopped buying silver on the way and started selling it when it started to come down, typical investor behavior. That’s just the way things are. And, J.P. Morgan used that opportunity to buy 100 to 200 million ounces within the first year or two of the price peak in 2011, to basically satisfy their paper short position.
However, they realized along the way how easy it was to keep accumulating physical silver, so they said, “Now that we’ve got our short position covered, why quit? Why not keep on buying physical silver, keep the manipulation game going? We’ll continue to sell short, cap prices,” like they just did in June. “And, we’ll use the opportunity to buy more and more silver.” And, they did that over to this day. They’re still doing it, and they’ve picked up in my estimation, okay, at least, I think it’s up to 750 million ounces of physical silver right now. That’s, just so I’m not stuttering here, that’s three-quarters of a billion ounces. I think 150 of it, 144 million of it is in their own COMEX warehouse, which they started and opened on the same day they made the decision to accumulate physical silver back in April of 2011. But, 600 million ounces is held out of sight, mostly in London.
And, they’ve gotten this silver from a variety of ways, but the main thing is they got it on the way down in price, very much unlike the way that the Hunt brothers accumulated their physical silver on the way up in price, or even Warren Buffet when he bought close to 130 million ounces of physical silver back in 1997. So, J.P. Morgan has got every aspect of this market covered. They are the dominator of this market, and they put it to good use.
In addition to the silver, this 750 million ounces of silver that they’ve accumulated, they’ve also picked up like 20 million ounces of physical gold. But, and that’s even bigger in terms of dollars and cents, because gold has a much higher price than silver. But, these guys have just loaded the boat with physical metal, all while being short on the paper market, controlling the price. It is the perfect crime times a thousand.
Chris: Well, that’s, I’m struggling to understand it, the exact mechanisms of this. So, I know that if you are short something, you possibly have the prospect of having to deliver that metal. And, if you’re long the metal in the futures contract, you have the right, depending on your futures account, but if you have a delivery account you could get delivery. So, how is it that they managed to both short and get the metal? I’m stuck on the mechanism here. How does that work for them?
Ted: Well, being that they’re two different—you have a paper market, the COMEX, which sets and determines the price. The futures market has come to set the price on every commodity, okay, copper, gold, crude oil. You pick a commodity and there is basically some futures contract, paper futures contract and go in the price discovery process. So, if you can set the price, okay, on the paper market, you can turn around. And, because everybody in the world is a basic price-taker, not a price-maker, all the producers of silver, all the consumers of silver, all the investors in silver are price-takers. Whatever the COMEX sets the price at, okay, is the price that everybody goes by and does their business.
So, if you can control the paper market, the price of the paper market, which J.P. Morgan clearly can do, has and is doing, you can use that price that you’re setting to take on offsetting transactions, physical transactions, not paper transactions, in markets away from the COMEX. So, you use the paper to control the price, but you do your real buying in the physical market, which is dependent on the paper market for pricing.
It’s crazy. I mean, it’s like it’s upside-down. It’s the tail wagging the dog. It’s always been the case that the futures market, okay, is basically setting the price. It’s getting more egregious and more blatant every day, because there is no other explanation for why silver and other commodities would be priced the way they are. You’ll drive yourself insane if you’re trying to come up with legitimate explanations, supply/demand, fundamental explanations for why silver is priced where it is, why silver has been priced where it has been for the last 10 years. If you’re not looking at the paper COMEX manipulations, for lack of a better word, you’re lost. It’s like there is no plausible explanation.
But, once you’ve got that, once you got that price control via the futures market, the ability to sell 100 million ounces of paper silver any time you want, okay, you can use that to your benefit. And, where J.P. Morgan has used it, and they’re the only ones from what I can see, they’ve turned around and used that price control to their benefit by buying in other markets, okay, physical silver.
Chris: Yeah, and this is, again, to broaden it out, you know, this tail wagging the dog, I think this is an important conversation. Because, it vexes me that it happens to something that I happen to be invested in, which is gold and silver. But, I could only imagine the vexation that must befall the producers who are on the other end of this, whether they’re farmers, whether you’re a cocoa trader or, you know, a consumer or user of a variety of things. The prices are being set by, largely by the, well, the commodity trading advisors. You’ve got these managed futures funds. There’s just huge amounts of money in there just, you know, winging around in the futures market, driving the cost, you know, the price-taker’s experience of whatever the commodity is we’re talking about.
And, it’s completely obvious to me that if a market exists to find a clearing price between buyers and sellers, that there are price-manipulative events happening in everything from cocoa to oil to gold to silver. I think the whole market’s a complete mess. I think the CFTC has completely, you know, allowed a situation to develop that never should’ve been allowed to develop. And, I think they just got overrun by the computers, I think they got overrun by the technology. I think they’re outmatched. I think that taking Goldman Sachs, you know, managing directors and putting them in key positions in a revolving door fashion in the regulatory body on the CFTC was a bad idea, and so on.
But, here we are, and it’s true that these markets are no longer really expressing good, accurate pricing. But, there’s got to be an opportunity in that, right? Because, you know, what I’m looking at here from a supply standpoint, at 15.50 silver is below the all-in cost of production for the average primary silver mine, which isn’t that many. Maybe 25%, 28%, somewhere in that zone, of world silver supply comes from a primary silver mine, meaning that’s its main or sole product. The rest of it’s a byproduct from lead, zinc, copper and gold-mining.
So, if we look at that, though, the all-in cost of producing silver is much higher than the current price of silver. To me, Ted, that’s always been a reliable place to sort of buy into a commodity. But, that’s been kind of upside-down for at least five years now, by my guess, maybe longer.
Ted: You’re 100% correct. I don’t, I can’t disagree with anything that you said. It just proves the point that something else is setting the price. It’s not the producers, the primary producers, because they’re bound by the laws of supply and demand and cost. They’re not, they’re a taker, they’re price-takers, they’re just taking whatever price the COMEX dishes out. And, as you say, the traders on the COMEX have largely, have been distilled down to just a relative handful of large, either managed money traders on one side and commercials and other traders taking the other side of those positions. And, they’re excluding everybody else.
In this case, I have to say that the consumers of silver are getting a lucky break in that they are not hurt by these low prices. But, that’s beside the point. When this manipulation ends, then those same consumers who have been enjoying basically a free ride will, you know, will be behind the eight-ball, and the producers will be in much better shape.
The question is, okay, when is this going to happen? When is this stranglehold of paper control on the price ever going to break? And, therein, I see, you know, tremendous reasons for optimism. In fact, it’s the mirror image of the pessimism that is naturally generated by these prices that do nothing but go down, okay, for no legitimately explainable reason. Well, these, particularly J.P. Morgan by virtue of its giant physical position now, is positioning itself, has positioned itself and maybe done positioning itself. We won’t know that, okay, until after the fact. But, the same causes that have driven prices down, okay, in a bewildering, unexplained fashion, are going to cause those prices to explode.
And, the lynchpin, the thing that’s going cause that explosion when it occurs—I can’t tell you when it’s going to occur, I can tell you it will occur—and, the lynchpin to that is that one of these days, and I think real soon, J.P. Morgan is not going to add to their silver short positions as they have on every single rally over the last 10 years, including the one that we just, you just referenced in June. If they don’t add to short positions and cap and control the price, okay, the price of silver is going to explode.
And, I see that there’s really getting to be very little reason for J.P. Morgan to add to short positions in the near future. They are positioned perfectly. They’ve been buying back as many short positions as they can, paper short positions as they can on this decline. And, it’s all in the CFTC commitment of traders documentation, okay. And, they reached a critical point where they can’t really buy any more, because there’s no sellers on the other side. When prices start to turn up and all the technical funds and managed money traders that have been selling so aggressively, just because prices have been going down, well, when prices turn, and these same traders start to buy, simply because prices are going up, if J.P. Morgan doesn’t add short positions, we will explode in price.
And, I think there’s much better odds than ever before that they won’t add, and the odds are basically centered on the 750 million physical ounces that they hold. If you put a paper to pencil and start to calculate how much J.P. Morgan will make, okay, on a significant price rally in history, just add, just multiply 750 by a dollar for every dollar that prices may go up. If silver runs $100, I don’t, and I don’t see any problem in that, that will mean J.P. Morgan stands to make $75 billion. That’s serious money, and that’s something, that’s the only reason that they’re in this. They’re not in this to control the world or enslave us all or to save the dollar or anything like that. J.P. Morgan is in this to make a buck, and they’re going to make the biggest buck ever when silver and gold take off to the upside.
Chris: Now, I know that the amount that J.P. Morgan might hold in COMEX is a matter of public record. How did you arrive at your estimate for what you think they might be holding in London? Where does that data come from?
Ted: Well, that, it’s been coming over the last, I’ve been categorizing this for the last, continuously for the last seven years, okay, ever since, or six years, ever since it dawned on me what J.P. Morgan was up to. Right off the top of my head, okay, 150 million, we know they have 144 million in COMEX. We can’t, we don’t have to argue about that.
Where do I get off saying that they own another 600 million that we can’t see? We’ll go down the list. First of all, they picked up 150 million ounces of silver, physical silver, by buying for six years running silver eagles from the U.S. Mint and Canadian-made silver maple leaves from the Royal Canadian Mint. Over that period of time, we had nothing but record-breaking sales, 40 million ounces a year or more in silver eagle sales for like six years running. I’m saying J.P. Morgan bought at least half of that, half of what the Canadian mint, the Royal Canadian Mint produced. They took that 150 million coins, combination of silver eagles and Canadian maple leaves, melted down every single one of them into thousand-ounce bars. And, the reason they had to melt them down is that there’s no way you can sell 150 million ounces of coins in any, at any reasonable time or price. You had to put it into industry standard form. So, that’s 150 million ounces right there.
They also got at least 250 million ounces from the SLV. When the SLV first broke in price, okay, in April/May of 2011, it broke by almost $20 an ounce, okay, over one two-month period of time. Some 60 million ounces were liquidated, physical silver was liquidated from the SLV at that time, within a two-month period of time. J.P. Morgan picked up every ounce of that, because they were the responsible behind orchestrating the big price decline that we had starting on May 1, 2011. So, they got off to a real good start, picked up 50, 60 million ounces from the SLV. The silver didn’t stop to exist in the SLV, it was just liquidated and sold by investors. That was a big chunk for them.
But, for the next seven years, they were able to get another 200 million ounces from the SLV. They are, of course, as I’m sure you know, the custodian, the official custodian of the SLV, meaning that they’re in charge of keeping track and making sure that there’s a right amount of physical in the SLV, the trust, okay, to match the shares outstanding. So, they, this is their business. So, they were able to convert shares of SLV any time they wanted into metal, which they just put in their own warehouses, that they don’t have to be recorded anywhere.
There’s another factor where they got as many as 200 million ounces from. In the COMEX, the COMEX silver warehouses starting in the same date, April of 2011, started to experience a phenomenal and heretofore and to this day unprecedented physical turnover. Not many people are aware of this, okay, but every week some four-to-five million ounces of physical silver, I’m talking about silver that comes off of trucks into the COMEX, six COMEX warehouses, out of the six COMEX warehouses into trucks. There’s a total movement of an average of four-to-five million ounces a week, physical movement in and out of these COMEX warehouses that started just at the same time, April 2011, has persisted to this day. That’s the equivalent of 200 to 250 million ounces annually that’s physically being moved from trucks in warehouses in the New York City area into these COMEX, and out of these COMEX warehouses. Over the last six, seven years, it’s close to a billion-and-a-half ounces of physical silver that’s been turned over. No other commodity has ever had, has ever had this type of physical turnover in warehouses, not gold, not copper, not anything, okay, just COMEX silver.
I’m claiming that the only reason for this turnover was that J.P. Morgan could skim off a portion of this sight-unseen, without people knowing it. And, of that billion-and-a-half total movement that has taken place, which is highly documentable, J.P. Morgan has been able to skim off 200 million ounces or so that they’ve stuck in their warehouses elsewhere, mostly in London. So, you’re up to 600 million. I could probably go more than that, but the three principle sources of getting the 600 million ounces that we can’t see is from the meltdown of the eagles and maple leaves, from the conversions of shares to metal in the SLV, which they’re the custodian of. And, taking a portion of this frantic and unprecedented physical movement.
Here’s the thing you have to understand about this 600 million ounces that you can’t see. If you could see it, we wouldn’t be having this conversation. It would be common knowledge to everybody that J.P. Morgan has not 140 million ounces in the COMEX, they have 750 million ounces when you add it all together. The fact that you can’t see this 600 million ounces, okay, is what makes it possible for J.P. Morgan to be doing this and nobody to be aware.
Chris: Now, I agree with you that they’re just trying to make a buck, and that’s their primary positioning. Now, as the so-called financial aspects of our system, you know, get out of control, with financialization being the tail that now wags the dog and it’s just, it’s got too much power, too much prominence. And, you know, courtesy of the central banks and flooding the world with liquidity and all that stuff, we can, you know, worry about the unintended consequences of that later. But, the real-world consequences are easy enough to see. And, so what we’ve seen is that, you know, despite a world economy that’s growing, despite seeing that we’re looking at mine output up across a lot of the base metals, silver output has dipped for two years running, 2016, 2017. The primary mines dipped another 9% in 2017. Obviously, they can’t make money at this level, so it makes sense for their output to fall. That’s sort of on the supply side.
But, looking at the demand side, first, can you shed any more light on the supply side, but also what’s the demand side tell us, if we were going to get all fundamental for a minute here?
Ted: Silver is basically a GDP-sensitive commodity, meaning whatever the economy is doing, silver’s industrial and total demand fabrication needs are intertwined in the economy. If we have growing economic activity, we have growing silver demand. You don’t have to, you know, drive yourself crazy trying to get all the details and the nuances.
Commonly, in the world, there’s been strong for seven years or so. There’s no reason to believe that silver consumption would be down. We use it for every damn thing. It’s the best conductor of electricity. You don’t have to go any further. Everything we produce nowadays is electrical of some form. It’s either electrical or electronic, which is the same damn thing. So, it’s impossible for us to have the economy that we have, and we can look around and see the world economy has been growing, okay, over the last five, 10 years or so. Therefore, silver demand has to be up.
The trick to this whole thing, Chris, is that unfortunately, because of the paper dominance, the COMEX paper dominance, okay, on price, on the price discovery process, you can take supply/demand fundamentals and throw them out the window. I spend, I used to spend all my time, 30-some, 30, 35 years ago studying intently the supply/demand situation in silver. It’s all I basically did. I stopped doing it, because it doesn’t matter. It’s like what matters is what these crooks in the name of J.P. Morgan are doing on the COMEX, and what’s going to be good for them.
So, we could debate the merits of silver mine production being curtailed by the price and no reason to curtail demand, because the low price would only stimulate demand. We could do that until the cows come home, but it doesn’t matter. It’s like it’s all on the COMEX and it’s all on when J.P. Morgan decides to let this baby go.
Chris: And, of course, that’s unknowable at this point in time. Because, obviously, they’ve carried this on for quite a while, and I don’t detect anything currently that would make them sort of shift this. But, given the amount of money that they stand to make off of this, and the fact that they’ve done it while cornering the market in a way that the Hunt brothers were punished for and anybody else would be punished for.
I don’t know if you followed this, but Matt Tibee just wrote about it in Rolling Stone, talking about how, you know, all the big banks got sort of nailed manipulating LIBOR, the London Interbank Offer Rate. But, that was bad enough, but then the ISDN crew, also run by big banks, they were caught manipulating the swap figures, so that everybody who had an interest rate swap, which is a huge market. Anyway, they got sued, the federal judge just threw it out a couple of weeks ago, said, “You know what, we agree with the banks’ argument.” And, the banks’ argument was, “Look, we’re crooks, you should’ve known we’re crooks.” I’m paraphrasing, but this was, their legal argument was, “You all knew we were going to fudge those numbers,” and the judge said, “You’re right. Everybody should’ve known that.”
So, we now have institutionalized and structural malfeasance. It’s just, there’s no consequence for these people. So, in terms of trying to figure out when they have to, you know, when they might shift this, I think they’ll do it on their own terms and when it makes the most sense for them, and not a minute sooner. Because, there won’t be any legal consequences, and there won’t be any political consequences as things currently stand.
Ted: I couldn’t agree more. It’s going to be when they decide it. So, instead of, even they’re not going to tell us. We’re going to have to try and, if there’s any kind of inkling as to what they may be up to, I think the only way, based on what you just said, again, which I agree completely, is when it would seem to be most opportune for J.P. Morgan to let the silver, let the gold market go, okay, to the upside. And, there, I’m keeping it simple, since they own more, their net position, okay, their physical long position minus their paper short position, they have never held a larger net-long position in either silver or gold than they do as we speak, okay.
And, to me, that would seem to suggest that the time is much closer, because they stand, J.P. Morgan stands to make more the bigger their position, since they have the biggest net-long position they’ve ever had as a result of buying back these recent short positions added on the COMEX, okay, on this price decline. I would say that tells me in a logical basis, completely criminal and manipulative, no doubt, on a logical basis that’s real reason for optimism that the move up is maybe a lot sooner than you expect. If they do it again, look, if they add to short positions for yet another mediocre, piddling rally of dollar, two or even three dollars in silver, and J.P. Morgan comes right back to the well and starts to add short positions like crazy like they always have before. Then, guess what, that ain’t the time, right, it isn’t going, they’re going to be adding shorts aggressively. The odds of it being the big move up are rapidly diminished.
But, if they don’t add the short positions, okay, it’ll be simultaneous. We’ll see it in price, we’ll see it in commitment traders’ data, and we’ll all sit around wondering why the heck is silver taking off like a scalded cat, okay. There will be only one reason, J.P. Morgan is not adding short positions. If the silver price struggles on the way up as it struggled over the last 10 years on every rally, it’ll be because J.P. Morgan is adding short positions.
I can’t say what they’re going to do. I can say there’s never been a better time for them, dollars and cents-wise for them, not for you, not for me, not for anybody that’s invested in silver, not for any producer of silver. They don’t give a damn about anybody, they care about themselves. And, they’re in the best position to make the most money ever, if they let it go soon, while they have this very low short position. Anyway, that’s my take.
Chris: Very, and not just a low short position, but I think if I heard you right earlier, their longest net-long position in gold and silver.
Ted: Well, that’s because, that’s because of the giant physical position.
Chris: Because of the giant physical position, yeah.
Ted: That’s been growing for seven years without interruption, and now that the paper short position has been reduced, the net long position that they have has never been larger than us having this conversation.
Chris: Right. Well, you know, when you and I were growing, the phrase was don’t fight the fed. Now, it’s don’t fight the criminals. So, just keep track of them.
Ted: That’s it.
Chris: You know, you got to see what they’re up to, and I think your analysis is spot-on. They don’t give a damn about anybody. They’re there to make some money, it’s all about the money. It’s money-worship, and that’s what it’s all about. And, how many people get hurt, how many miners go out of business, what happens to the environment, none of that matters.
So, here they are, they’ve been playing their game for a long time. I just think that’s a really interesting analysis and I’m going to following it closely.
And, I have to plug in right here, Ted. You know, I’m going to be offering with, David Stockman is coming to a seminar that we’re holding. It’s a summit. We’re going to go through data like this. We’re going to cover all three E’s, economy, energy, environment, lots of data. That’s Saturday, September 19th, and you can find more about that at PeakProsperity.com/NYC.
And, Ted, why don’t you tell us about your own site and service now?
Ted: Well, anybody that’s interested in digging into this type of analysis, I put out two fairly lengthy reports weekly. And, they can get the information, can do it on a month-by-month basis, not expensive, www.butlerresearch.com.
Chris: All right. Well, Ted, thank you so much for your time today, and for this wonderful podcast.
Ted: Thank you. Have a good day, Chris.