The Twilight Zone

While many financial developments in the world seem quite strange to me of late, a new observation has me feeling as if I truly entered the Twilight Zone, the TV series that ran from 1959 to 1964, created and hosted by Rod Serling, in which the characters find themselves in disturbing and unusual situations. I guess I have been so preoccupied with the strange events going on in silver that I wasn’t paying close attention to many other commodities. Therefore, it came as a bit of a shock when I scanned the commodities board (after all, my professional upbringing had been as a commodities broker).

I hadn’t really noticed that corn, the largest and most important grain, was trading for current delivery at over $7 a bushel (only a dollar from all-time highs) or that soybeans were trading over $15 a bushel for current delivery, also only a bit less than all-time highs. I did know that copper was at $4.50 per pound, close to its highest price in history and that palladium had just reached its highest price ever at $3000 per ounce and that other PGMs had hit all-time highs. I also knew that lumber prices are at all-time highs and that there was pronounced backwardation in many of these commodities, signifying shortage to this long-ago spread trader.

Away from the commodities I used to trade regularly, a whole host of industrial commodities from steel to more finished products like semiconductor chips are said to be in shortages not likely to be relieved any time soon. And with the economy rebounding strongly and extra stimulus coming out the yin yang, I’m even hearing plausible-sounding stories suggesting more shortages may be in store, such as for gasoline if the virus-bound population decides to hit the road.

Why it feels to me like I’m in the Twilight Zone, is because the one commodity I follow and am more interested in than any other, silver, is still 50% below either its all-time highs of more than 40 years ago or of ten years ago, even though the evidence is strong that a pronounced physical shortage has been developing. Of course, even if I weren’t so interested in silver or had studied it so closely for decades, I would have been perplexed that it, as well as gold, hadn’t tracked more closely with the tremendous price surge occurring in so many commodities of late.

Even more perplexing is how, of all commodities, only in silver has a grassroots movement developed and strengthened in which, quite literally, many tens of thousands of participants who hadn’t previously focused on silver longer than even a few months ago are now apparently deeply wedded to the idea that it is artificially and deliberately depressed in price. I find this absolutely remarkable – mainly because it appears so close to the truth as far as I’m concerned. I mean, what are the odds that this movement could have erupted if there wasn’t one scintilla of proof that silver wasn’t artificially depressed in price. And almost to a man, even those who still deny a silver manipulation exists, are nonetheless bullish on its price prospects for other reasons unrelated to a price manipulation.

However, what rescues me from thinking I have permanently entered into the ether of the Twilight Zone is the cold reality of the public data, including that published by the CFTC. To my knowledge, no one is leasing and physically dumping the equivalent of hundreds of millions of ounces of silver in any other market – not corn or soybeans or copper or lumber or palladium. And, just as importantly, no other commodity has close to the concentrated short position that exists in COMEX silver.

In fact, the concentrated short position of the 4 largest shorts in silver is ten times larger than the equivalent short position in corn, six times the concentrated short position in soybeans or copper, four times the short position in palladium and so much greater than the equivalent short position in lumber that it’s impossible to calculate. To my knowledge, there is no short position in semiconductor chips and most other items.

Only in silver does such a gargantuan and grotesquely large concentrated short position exist and has existed for more than 3 decades. This uniquely large and oppressive short position, along with leasing, exists only in silver. And as just released official data published yesterday indicates, the uniquely large and grotesque concentrated short position of the 4 largest shorts increased over the past two reporting weeks. Is it any wonder that the price of silver has not advanced as the commodities not burdened by an equivalent short position have advanced?

And I would suppose that there can’t be much wonder that the federal agency responsible for both the reporting of the concentrated short position and for explaining to elected officials the role that the uniquely large concentrated short position in COMEX silver plays has been inexplicitly delayed.

I would remind you that not once, to my knowledge, has the Commission commented in the least on the record or near record prices of late in corn, soybeans, copper, lumber, palladium or any other commodity – even though it is the federal commodities overseer. Yet on a stinking $3 or $4 move that still left silver close to half its previous long ago price highs (unadjusted for inflation) it saw fit to offer an announcement about its deep concern for the market activity in silver and how it was working (with anyone who would work with it) to get to the bottom of the silver price advance. $7+ corn, $15+ beans, $4.50+ copper, $1500 lumber and $3000 palladium? No problem. $29 silver? Big problem – call out the riot police.

I would also remind you that the very large price increases in corn and soybeans and copper and lumber have direct negative consequences for US and world consumers, something that one would think the Commission should have a passing concern for. On the other hand, a big price advance in silver, aside from benefitting silver investors, would have much less of a negative impact on consumers. Such an increase in the price of silver would have a negative impact on the 4 and 8 big shorts and it’s hard not to conclude that is the Commission’s primary concern.

Therefore, I’m still assuming the delay in the Commission responding to my March 5 letter suggests that it is seeking to dance around the substance of the allegation that the big concentrated short position in COMEX silver is suppressing the price of silver. And while it is delaying, the 4 big shorts are free to increase their manipulative concentrated short position at will – according to its own data. Maybe we’re all really in the Twilight Zone, after all.

Ted Butler

www.butlerresearch.com