Houston, This Is Blythe, I Have A Problem

Tyler Durden's picture

And silver surges on margin hike news, taking out $32, and fresh 31 year highs. Something is very wrong. Our only question: how long before the American taxpayer has to repeat the AIG experience, and bail out JP Morgan over its billions in silver shorts. For our non tinfoil heat wearing friends in the various operating subsidiaries of the FT, we have one comment: "We have sold everything we can produce in silver and have demand for at least twice that volume,” said David Madge, head of bullion sales at the Royal Canadian Mint, which produces the silver Maple Leaf coin. Silver coin sales at the US Mint and the Austrian Mint also hit record levels in January"

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Turd Ferguson's picture

Yes, read that!

Also, if you are trading PMs, I strongly suggest you take time to read this, too:

http://tfmetalsreport.blogspot.com/2011/02/wow.html

doomandbloom's picture

what is the problem....master! :-)

IQ 145's picture

 There isn't any problem; it's my birthday, it's a full moon, and God loves me. Since I'm 200% invested in Silver Bullion, this is merely God's way of giving me a birthday present; quite simple, really. Oh, and by the way, Thanks God.

Cognitive Dissonance's picture

I think you have hit the nail on the head Turd. We shall see, we shall see.

   Recall for a moment how the EE caps price. They do so by flooding the Comex with an almost endless amount of unbacked, paper silver. Think about that trade, though. To sell short, you need a buyer on the other side of the trade. And now, at this late hour, how can you reduce the open interest in the March contract if you're only selling new paper shorts to resolute longs who intend to stand for delivery in eight days? By raiding and selling, you're only compounding your problem because you are creating more open interest! If you're Blythe, you're left with only being able to freely sell the forward contracts in an attempt to influence the spot and nearby price. Does this explain the current backwardation? Probably.

   To the point, however, what's a girl to do? You can see by looking at the chart above that Blythe tried to raid today but she didn't seem to do it with the usual bluster and gusto. How could she? Every new March contract she sells only adds to her problem. She is truly caught in a catch-22. Again, what's a girl to do?

   If the March longs stay resolute, she's screwed. Even if only 20,000 stand for delivery, thats 100,000,000 ounces that the Comex has to deliver. By most estimates, that's their entire inventory. She and The Evil Empire must, somehow, convince/force March contract holders to close their positions but if they can't scare them by crushing price, how do they do it? They could get the CME to raise margin requirements but if you're ready to stand for delivery by putting up 100% of the cost in eight days, a margin increase today is of zero consequence.

alien-IQ's picture

I realize I may be jumping the shark here...but when it comes to JPM...well...they simply seem to operate by a different set of "rules"...so here goes: What are the odds of JPM being simply "pardoned" for their short position? As in forgotten and never need to cover? I realize this is an outrageous proposition...but then again...isn't this market outrageous? Isn't this system outrageous?

Any thoughts on this?

EscapeKey's picture

What are the odds of JPM being simply "pardoned" for their short position?

100%. They will, without a doubt, be pardoned.

Cognitive Dissonance's picture

Agreed. The rules will be changed when the rules are no longer convenient for the Ponzi and the Ponzi players/manipulators/teat suckers.

SWRichmond's picture

Silver is on a train today again...up $0.75 as I write this.

Hephasteus's picture

He has it right but here's the monkey wrench in the machine.

Comex has to paint a 30 dollar tape. If they can't paint a 30 dollar tape then the scheme is busted. It's got something to do with the dollar being simply a derivative of the silver and gold price. If silver is high but gold is low the dollar falls. If gold is high and silver is low the dollar falls fast, if gold and silver is high the dollar falls mega fast. Something tells me gold is 1500 for it's tape. If both silver and gold go above those set points then everyone dumps dollar, dollar goes way up then boom falls on the floor.

Wynter's plan is to push comex for settlement in cash. But since they are already blowing out the tape even if they get offered 50 percent over spot to roll and play it another month it will only drop the price down to 30.50 ish. May be worth another months play may not.

The really horrible news is the gold bugs are coming next also. And they aren't going to dick around. They won't have the people stripping bars and coins out of shops like silver does but they are going to empty comex.

Then you got double dollar fall. Government printing like mad with world dumping it. Time for a really good look at a 5 dollar can of soup. People are going to go hungry this year and being in america or europe won't help you at all. It will actually hurt you as everybody will be dumping dollar reserves competing with your dollars.

 

malusDiaz's picture

it has to do with the Weight of Money:

 

50$ Gold Coin = 1 avoirdupois oz 

avoirdupois oz of 50$ bills = 1 400$...

 

1$ Silver Coin = 1 troy oz

1 troy oz of 1$ bills = 31.1$

 

Those are break points... 

Hephasteus's picture

I've never been persuaded by the weight of an arguement until now. LOL

malusDiaz's picture

it has to do with the Weight of Money:

 

50$ Gold Coin = 1 avoirdupois oz 

avoirdupois oz of 50$ bills = 1 400$...

 

1$ Silver Coin = 1 troy oz

1 troy oz of 1$ bills = 31.1$

 

Those are break points... 

Math Man's picture

Seriously, why does the rumor persist?

JP Morgan closed their prop commodities desk last summer, and has had a trading profit EVERY SINGLE day since last June.

Both of which, make the probability of having a massive silver short approximatley ZERO.

This JP Morgan rumor is the biggest lie out there. 

Silver may be moving up, but it is not because JP Morgan is short.

I just bought some July 25 puts. 

tmosley's picture

No-one has EVER cooked the books before.

EVER.

alien-IQ's picture

Your faith in JPM's honesty is...interesting.

Pegasus Muse's picture

That will push us ever closer to a new justice/political system.  Like what's going on in the ME right now.  The difference being, since we have a Second Amendment, government thugs will not be pulling a Bahrain on us.  Could be just the opposite.

whatsinaname's picture

After all they dont need to mark to market any losses to eternity ?

yellowbr's picture

Then JPM will have defaulted and lost more than some credibility. Oh, and by the way the COMEX also.

That would be the beginning of the end.

alien-IQ's picture

What credibility do they have now? In fact, ever since the adoption of mark-to-unicorn accounting standards...what credibility do ANY of the TBTF banks have?

Oh regional Indian's picture

Alien, I think we are in (and more and more obviously now, with ME tensions rising) the war that will make such pardon's Unnecessary.
Looking at the ME dominoes tripping, oil rising, PM's rising, inflation inflating, jobs dis-appearing...clearly this situation is not going to go to bed nicely. It will be warred on.

And unless something is done NOW, by most of us, the next cycle will look just like this one. And therein lies the tragedy.

Did not think I'd see 32 today. But the big boyz are not out of ammo by a long shot yet. It must be suiting them for allowing this. The ARE the government after all. Moneylenders always have been.

Exciting times though, for sure.
ORI

http://aadivaahan.wordpress.com/2011/02/16/truth-about-america-truth-abo...

gwar5's picture

James Turk suggested it's possible JPM could call for the government to grant them a force majeure because their position so untenable. And since they are part of the cartel that really runs this country that may well happen.

But in practical terms, considering their criminal behavior in mortgages, and other activites, so much confidence would be destroyed in the banks and the dollar there will be a big shake out, not head scratching this time.  

Ron Paul has got to love this. I am so glad he's sitting in the chairperson seat right now.  Short JPM. Buy gold.

 

StychoKiller's picture

Sounds like the price whipsaw that JPM is holding onto is starting to glow cherry-red from all the movement(s) -- and poor Blythe with no asbestos gloves on!

Thomas's picture

If you wish to listen to a podcast by one of the douche bags who posts occasional comments at ZH, try the following...

http://www.chrismartenson.com/blog/mapping-fugly-future-david-collum/53003 

(OK. So I'm jumping a thread with self promo: shoot me.)

Nine Pies's picture

Great write-up, TF.  Thank you.

philgramm's picture

Long live the Turd.  Happy B'day brotha!!!

IQ 145's picture

 It's just rubbish. You don't know anything at all about the Comex. They've been rolling over contracts since you were in grade school. You're just going to make a fool out of yourself with these kind of breathless anouncements that will, and I'm telling you right now, they will; turn out to be nothing. non-events. The Comex problem is the global warming of the financial blog world; enthusiasm and belief on the part of people who don't have the basic science under their belt. What you're looking at is a bull market in Silver; this is suprising? Why ? You want to know how to make a lot of money on this; ask me politely and I'll tell you. I don't do theories or make up stories; but the Comex is waiting patiently to give you lots and lots of free money.

tmosley's picture

You don't get it.  These guys are highly leveraged.  If they were planning to roll their contracts this month, they would be doing it NOW after this margin hike announcement.

You have normalcy bias.  It WILL kill you.

Azannoth's picture

Congressional Commission: Blythe why did you short 1 years worth of production of silver ?

Blythe: because silver has no real value, and you can't eat it :°|

 

EscapeKey's picture

Nah, they'll just claim they were "a market maker in precious metals, and worked to stabilise the environment, and provide a service for the financial community."

Plus, of course, some rubbish about this "once in a lifetime event" being "impossible to predict".

Amish Hacker's picture

And they provided liquidity (Kudlow's favorite word). Don't forget liquidity.

StychoKiller's picture

They used to execute people by pouring molten metal into their mouths -- liquidity is waay overrated!

markmotive's picture

Here's the reality. If the tin-foil hat wearing folks are wrong about JPM's short position, silver is just another industrial commodity with growing demand. Still a good reason to be bullish.

If the tin-foil hat wearing folks are right about JPM, silver could see a massive short-squeeze sending it to $50 or beyond. http://www.planbeconomics.com/2010/10/29/could-silver-hit-50-in-a-few-months/

jus_lite_reading's picture

And the conclusion is- BUY SILVER either way.

repete's picture

anyone see the vw short sqeeze? never shorted with common after that.

I think I need to buy a gun's picture

Bernanke a few minutes ago..."the international monetary system must be reformed to benefit all"

naughtius maximus's picture

The international monitary system must be abolished!

slow_roast's picture

Will it hold?  I don't know...but this was expected.  It would be great to see a pullback and then a slingshot higher.

jus_lite_reading's picture

I smell $35...

I may have to adjust my $40 in 3 weeks prediction to $400 in 3 weeks! ;)

unky's picture

yes my friend, i think so too

jus_lite_reading's picture

Someone stated yesterday that if we see silver going up $1 for days in a row, it may be time to panic. What happens when silver goes up $5 in a single day?

I'm tempted to place a sizable order just for the hell of it. Who needs fiat money when you have silver?

Kali's picture

Yup.  While very happy to see it blow past 32.50, this is making me nervous.  Good for silver, but a sign of SHTF?  Yikes!

jus_lite_reading's picture

Do you prefer to be slow roasted or beheaded? If you're wearing a silver colar, you'll survive.

StychoKiller's picture

Kali my love!  What is thy bidding, my mistress?

Bet you're looking forward to the upcoming Great Implosion and all the blood it will generate.

Snidley Whipsnae's picture

Silver up 45 cents in the last hour and fifteen minutes... That is impressive!

Treeplanter's picture

Will take profits at $37.  Turn margin bought silver mining shares into my money so I canbuy the next dip.  QE will fuel shorts and status quo happiness and create more dips.  With one exception.  Not touching SLW.  It will have extra booster rockets when the first moonshot happens.

IQ 145's picture

 This is the slingshot following the last pullback. 

Top_Kill's picture

We Have a problem....bitchez