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The Silver Bears Are Back For Round Three, Explaining Two Key Recent Developments In The World Of Silver
Confused by the recent downdraft in the price of (paper) silver... Even more confused by what is happening with the record open interest in the metal? Have no fear. The bears are here, and explain things in their traditionally simple and sound effect-filled way.
And for those who are confused by the above, here is another explanation of what may be happening courtesy of a "letter" to Blythe (thanks John).
Blythe,
This is what I am hearing from your former traders (who made "very interesting career decisions"). Well it seem that they are on to a new scheme to corner the Comex and drive the price of silver up $10 to $15 dollars in a matter of weeks.
The strategy is as follows. We know that Comex only has 105 million ounces of silver of which only 50 million ounces are availabe for delivery. (I personally don't believe the Comex numbers are anywhere near that high, but that is neither here nor there for now.) Well, all it would take is 10,000 contracts on the Comex to buy up all the "available silver" at the Comex and 20,000 contracts to deplete it completely. The current front month March OI is north of 78,000.
Watch the OI closely. Blythe's former traders are advising major hedgefunds and billioniare investors to buy up as many contracts as possible as March 1 approaches and deposit the cash needed to stand for delivery for the month of March. The purpose is not necessarily to bust the Comex but to force the Comex to pay a premium (some as much as 30 percent) for cash settlement. Think about it. If a group of hedgefund gets together and bankroll $1 billion, they can buy more than 30 million ounces of silver. Of course, the contract sellers like The Morgue cant deliver the silver so a cash settlement is the only recourse. So what's wrong with $200 million in profit on a $1 billion investment that takes less than 4 weeks total?
Guess what Blythe? Your former traders are advising everyone they know to put on this trade come the first week of February. Is this what happened in the Decemeber contracts? Is this why silver went from $22 on September 30 to $29 by December 1? How much do you think silver will spike in February as we approach March 1? The traders think silver will be north of $45. Heck it went over $9 as we approached December and everyone who got a pay off in terms of a premium cash settlement will be back for more. And they are all gonna be bringing friends to partake in the bounty.
Your former traders are telling everyone who would listen that all they need to do is purchase a huge amount of March contracts near the end of February and stand for delivery and they will all make 20 percent in a matter of days. Is this what you are hearing Blythe? If so, shouldnt you let the price of silver move up so that you can get some physical to deliver before March 1?
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http://www.youtube.com/watch?v=VPgHbt0ODr4
Stand and deliver.
Silver vigilantes coming to kick your ass.
Silver is kinda kickin' ass tonight.
A few observations on the mechanics of taking/making delivery, one of our staff having done so on 50 contracts on more than one occasion.
1- first notice day- the day you, as a long must declare if you want to take delivery or not. shorts declare nothing, they wait for the exchange to tell them someone wants metal.
2- you can declare you want delivery and will then be obligated to put up the actual cash value for the metal in a number of days. The difference between first notice and actual expiration day being that time frame to come up with the money.
3- between first notice and expiration, you may also sell your metal in the futures market thereby "reissuing" your claim for delivery
4- the game has always been this- you decide if you will take delivery or at least declare that you will take delivery if you believe the contango between the front month and the next future will come decrease in a few days. if you believe that the contango has been exacerbated by too many funds mandated to roll over their longs, than it is a good trade totryto capture that contango collapse, provided you dont have too much open interest yourself to get out of afterwards.
as expiration day approaches, the comex seeks to match up buyers and sellers. if there is an imbalance of either side, that side must close its risk in the thinning futures mkt.
historically this game was won by the shorts, who went longthe second month adn short thefirst i nanticipation of the funds having to roll their positions, adn not being permitted to take delivery. much like ETFs today ,they were a captive audience who HAD to roll or puke, and the bullion dealers front ran them in anticipation of the trade. nothing criminal about it. its bayesian probability. Guy keeps doign something the same way mechanically, you fade it. than game ended when Buffet though Phibro said,"I 'm standingfor delivery" and the mkt went bonkers. Producers and bullion dealers had gotten comfortable not only playing theshort front mont side, but they alo added to and rolled shorts borrowing metal for actual delivery when they could. so this massive complacent lopsided shortphysical mkt was rocked by Buffet.
the shorts had to get their spot metal back and rollled out 1 year at a backwardation equal to a 40% lease rate. And so Buffet caught them with their pants down.
that is how it would be done. otherwise its jsut the inverse of what used to happen, shorts get squeezed for a week adn then get their metal back. lease rates go up and the problem is solved.
thats ancient history...now shorts are being really slaughtered...but hey goodluck
Spreads do not reflect a short squeeze. keeping in mind we are short silver spreads and short bonds as an interest rate hedge betting on the squeeze. we just dont see it yet.
Thanks fmxconnect, informative and explains the position.
+1
+ another 1
Yesterday ordered 25 Canadian Wolves, 2 Pandas, and 2 new Libertads from APMEX. Small potatoes and not really investment type stuff but I'm a hopeless coin junkie and I have to have these for my collection. Now that the price has gotten so high I'm buying less but cherry picking odd ball coins that I want to round out my collection. My way to keep participating. I friggin love coins. I work to make paper money to buy coins with pictures of fierce animals and ancient gods on them. If I couldn't buy silver or gold coins with fierce animals or Gods on them I would not work. That is all. Oh yeah. 29 more silver bullets bitches.
This one is for you from a like minded.
bought the one ounce lunar tiger after
hearing this song.
http://www.youtube.com/watch?v=gSq8ZBdSxNU
Silversinner,
Ha.I started playing guitar a couple years ago but haven't written any songs yet. When I do every single song is going to contain lyrics like Zepplin's: "I live for my dreams....and a pocket full of gold." I could write a whole album on gold and silver and several songs about coins with fierce animals.
Picked one of these up at the Hard Assets conference. You might like it:
http://store.greatpanther.com/popup.aspx?src=images/Product/large/1.jpg
This game will continue until the longs
can no longer be bought of by a 20%
fiat premium and demand the physical.
Think it will also be intresting to watch
the moves of people whom need the
silver for their production proces,if
they start hedging physicly all bets
are off to the upside.
Does anyone has some good information
on this;for instance:how much silver do
the electronic compagnie's have in stock
etc
Hmmm... a plausible explanation for the large silver contracts on the comex. I don't see a default, but then again, anything is possible.
Da Bears. The Bernank -- $15 Trillion? Buy the F'ing dips, and wait for Da Bears and ZH. Good advice.
APMEX is selling six COMEX deliverable bars for as low as $0.29 over spot. They have been there at least a couple days, and I have never seen this many at once:
http://www.apmex.com/Category/518/Silver_Bars_Secondary_Market__New.aspx
I know physical silver is in short supply and even APMEX is a drop in the bucket, but it seems like COMEX would buy these bars plus any others selling for less than 20% over spot, just to avoid bribing the longs. Why are these bars still for sale at this price?
Exactly. Cant find any silver... unless you are an individual looking, then its everywhere.
You guys aren't thinking like billion dollar companies. I seriously doubt that COMEX wants a 1099 oz bar, a 1081 oz bar, a 989.5 oz bar, etc. COMEX uses 1000 oz bars to settle. Where are the 1000 oz bars? Ooops...sold out!
There is a supply problem, and the APMEX inventory confirms it. Basically the leftover scraps with odd sizes are all that's available. Now a year ago, they had 1000 oz bars. Not any more.
When the Super Shortage hits...all that "metal" at APMEX will be gone in an hour.
No, those are deliverable, and are the same type that the COMEX uses to make deliveries. If you read Harvey Organ, you will see that the the delivery amounts are almost always uneven. It's just that the number at APMEX and elsewhere are so tiny that they have no real effect on the market.
http://www.cmegroup.com/rulebook/NYMEX/1a/112.pdf
Good point on the odd-sized bars. They are a valuable indicator.
Read the manual posted above. 10% bandwidth is deliverable. 6 bars is hardly a single contract.
Sure. But if I need to deliver 5 million ounces, I need FIVE THOUSAND bars of 1,000 ounce size. And in December, what...10-12 million ounces was delivered?
Ok, now add up 10-12,000 numbers of those weird sized bars if you want to drive yourself nuts.
Back when those bars were minted & only worth $5 an oz it was close enough for rock n roll. Newer bars are more accurately made.
I noticed APMEX was having a sale on some of their silver items the other day. Some smaller bags of junk silver. Odd.
I can't help but wonder if one last big deflation wave would benefit the elites more than just hyperinflation from here.
Well. They only have 3 COMEX bars now and I didn't buy them so maybe someone from JPM read your post. I've seen them with Penoles 20 COMEX bars after Lehman collapsed and the spot price was under $10. They sold them quick. Also I've noticed that whenever they do have COMEX bars available they don't last long.
Somehow I doubt that JPM shops at APMEX.
JPM is APMEXs bank.
So? I used to have a bank account at Wells Fargo. That didn't mean they had any influence over me. They have to have some sort of clearing bank, or they wouldn't be able to do the volume of business they do.
So, if you're a Goldman Sacks or JPM analyst and you are reading Zero Hedge what do you do tomorrow morning?
you fade the flow, like always. if your clients are buying, get long in front of them... if selling, hammer it before you take the call.
"I am trying to figure a way to hedge without all precious metals. Other choices are Sprott and CEF which hold bullion."
See Goldmoney.com. You get to choose which on of their repositories your purchase is held in, they have allocated bars, but the buy/sell premiums is more than a ETF.
Thanx Blythe. I have dry powder for when the price drops. I fucking love Physical Silver. I would welcome $1.00 Silver with open arms!!!!!!!!!!!!!!!!! "Blue Horseshoe loves ECUXF"
Hoser
I love those bears.
Gosh, I love cartoons.
Silver, gold, yes!
Do not neglect your lead cache either.
Zerohedge is getting pretty desperate posting anonymous Yahoo message board posts and referencing it as something more than what it was (with a broken link to boot).
I saw that post last week. Makes me think I can dream up some anonymous letters myself and write them on Yahoo, and then Tyler will link to them. Pretty cool! Lots of fanbots of this site will follow.
Tyler - if you want credibility (which you had, but are losing fast) you need to do better than this. That includes the cartoon bear stuff, c'mon.
Just saying.
You obviously don't understand what Zero Hedge is, then. None of the Tylers are looking for credibility or recognition.
OK, I'll bite. What are they looking for then?
To remain anonymous I'd assume.
At the expense of posting made up stuff elsewhere?
Can you prove that? Prove it or lose it.
Lose what?
Believe what you like to read, my friend, I can assure you that message is nonsense.
Notice how Tyler (or should I say "Tylers") conveniently leave out the last part of the Yahoo message post at the top of this blog. Also notice how the Tylers don't link where they got it.
Here is what the last line says....
"You're going home in a body bag, do-da, do-da..."
Real nice.
So you can't prove it. Got it.
No more replies to you. See ya!
You know what. Tyler doesn't have nuclear weapons. I don't think he has a million guns. I don't think he builds jails. I mean he could have handcuffs for marla I don't know and don't care.
When I start to get paranoid and want to go all stranger danger stranger danger. I like to look at who can do the most damage given thier resources. Because they are usually responsible for all the shit that's wrong with this world. So if you want to look for sinister and dangerous in all the wrong spots be my guest. It's exactly what the people with the security and the agency and the armies and weapons of mass destruction want you to do. So sherlock holmes it up.
You are a nutball like most of the posters here. I asked a simple question, not looking for sinister information. Enough said.
Won't it be fun when you can report to me to the nutball police and have me arrested. You'll be so powerful. It'll be awesome.
C'mon Worry... still waiting.... please humor or enlighten me. You junked my post. What is ZH about?
ZH is a place where the unapparent is made apparent and those looking to blow off steam go ape-shit on trolls like yourself. By troll standards you're pretty tame. I suggest you take it up a few notches to get more responses.
Dude, I'm no troll. ZH used to be a place where real information could be found. Not anymore it appears. It's a a mess like the Yahoo message boards, with the same type of wacky messages. The only difference is those who post here can do arithmetic.
Except you forgot that the strategy posted by that message will work.
My dinosaur brain is not grasping the mechanics of this.
So the Chicoms short\sell paper Silver, and JPM et al send them the physical? If the Chicoms are selling, wouldn't they be the ones who have to supply the physical at some point?
What am I missing?
TIA.
From what I understand. The chicoms use thier own tools against them. They play the flip flop game drive the price down and then stand for delivery.
For all of you fretting over the fiat change of silver, by all means, please sell immediately! I would love the price to "plummet" another couple bucks before I pick up my next 100 ounces. Actually, I'll give you my email address and we can work out the details, and do you a "favor" by taking it off your hands.
Any reader of ZH knows that our entire financial system is screwed, now it's just a matter of which cliff we plunge off of first.
For those holding Federal Reserve Notes, at least hope that burning them next winter (or maybe the one after, things can stay irrational and actually work for a lot longer than most can imagine, until it doesn't...) will keep you warm!
I've not seen any reference to the latest by Charles Savoie:
The Silver Stealers
http://www.silver-investor.com/charlessavoie/essayofthemonth.pdf
FYI
Its well put together but too far fetched to be credible.
The Council on Renewal (Hahaha) is ceasing operations after 1 year. They are giving up on Amerika:
http://csper.wordpress.com/2011/01/08/in-conclusion/#comments
"It’s an illusion to think arguing about finance, economics, and markets will fix anything
There is no way around it because the ruleset we’ve lived within for decades was not sustainable. It depended upon exponential growth, exponential debt, exponential resource consumption, and exponential environmental impact.
As the world goes through a necessary reset of the rules, we will experience significant upheaval. "
You silver kooks are sick in the head, according to Liminalhack. If only you understood FIAT.
http://liminalhack.wordpress.com/
Xtranormal is great. Check this link out.
http://www.youtube.com/watch?v=lomjuMk7HjQ
http://www.marketoracle.co.uk/Article25465.html
US Mint Bullion Sales: New Annual Record for Silver Eagleshttp://news.coinupdate.com/us-mint-bullion-sales-new-annual-record-for-s...
It's amazing how technical traders have tunnel vision and justify any move by some technical gimmick. The truth is the price of silver these days is impacted by many things beyond just technical analysis. One bit of news about inflation/deflation or monetary policy will directly impact silver price, and news doesn't come out of technical charts, it comes from the real world. I wouldn't hold your breath on getting in at $26.20.
did Max Keiser crash JP Morgan yet?
Sounds a bit fishy to me,we could get slaughtered
in case the silver is there and then they crash the price.
Just but physical silver only and hold.
Paper silver and gold are a no no to me.
Not even etfs are good.
Buy the feaking physical and hold it yourself bitches.
look out for squidly...
http://www.barnorama.com/wp-content/gallery/6drawings/08.jpg
Impressive Trade Ideas
While I have been wasting my time trying to trade S&P 500 futures, perhaps the most liquid but also gamed by HAL 20000 computers, I have actually done better using specific stock trades that I have identified from patterns and candlesticks, and really, from ideas that I purchased.
Check out this trade log, there are a few losers for sure. Let the stop do it's work, then move on, NEXT TRADE!
These are from Breakpoint Trades
http://oahutrading.blogspot.com/
Don't over think this
Why would people be so greedy? So reckless? Who knows....maybe "they" know the rapidly accelerating magnetic pole shift could cause alot of earthquakes or volcanos. Is this news to you? Best research it a bit.
But try not to overthink this whole mess.
The world is in a world of hurt.
bonds are not safe, stocks are not safe.
Cash is kind of safe except you can guarantee that printing presses the world over will be going off......
hmmmm how about buying stock in a printing press company?
http://oahutrading.blogspot.com/
There is some major shortage of 30kg silver bars going on in Japan.
Just letting you all know since this may be useful.
Hooters and blow, bitchez. The only 'safe' place to put your money.
Short paper silver and buy the dips, only what are the dips to buy on? What if this week's CFTC decision will limit position sizes. Perhaps only dips on the upside.. I ordered 500 Canadian maples last monday, not perfectly timed I agree, but better late than sorry.
Yeah, get it while you can and celebrate that you made the move.
This has the nauseating sound of "This time its different".
"Forget about the price its fiat" (!!!!!)- very dot.com don't you think?
"New paradigm" - the CFTC ARE actually going to change the rules.
High OI on the COT usually is prescient of a decline in an asset value.
We're also very close to the top of a monthly channel going back to '04.
OMG!!
Having said that I can actually see prices rising on the LBMA despite the paper contracts tanking - that is a very reassuring sight to behold.
Mao had 300,000,000 ounces of silver!
Good christ didn't anyone gag on this "fact". Mao and China were flat fucking broke. I wouldn't suggest trading on thie "insider information"
The Barack Must Not Be Reading Zero Hedge
I smell a country music hit that will sweep the nation...
If China is running shorts they will buy out when they get what they want. This is a temporary dip. The biggest risk is that Obama's people will keep shorting til hell freezes over. They have the QE money to do whatever they want. Or the demand will overwhelm them as the shortage of metal gets well known. Whatever. The rewards justify the risk. Gold will stay ahead of the falling dollar. Silver will make you a fortune. We hope.
Mining Stocks Explained
http://www.youtube.com/watch?v=z2F50CamWlQ
In the end it will come down to manufacturing demand for silver. In many products it is a minor but essential input -- that means you must have it or your production stops -- and the cost is not that important. When do the end users panic and start grabbing every bar they can get?
Royal Candian Mint - most bullion sold out. Current 1oz gold wafer only avaliable at $1545 CAD.
I really like the silver short bears and actually looked them up a few days ago looking for this one, the third installment. I'm glad it's finally arrived. So I just wanted to comment on a few things.
1. My ADHD-DDD is so bad I blurt out the extra D's ... beep beep cavities!
2. Advice to buy-the-dips is now tainted advice. Another cartoon showed buy-the-dips as a f-ing pyramid scheme.
3. The spot price already feels irrelevant to those of us paying $35-40 for eagles and maples. My guess is that the spot price will become increasingly irrelevant by anyone not at a cash-for-your-silver store.
Yes, silver is currency. Look at the Currency Act of 1789. That is until the Fed got their pokers in the fire. The manipulation is a factor since the settling of this country. Originally, money was backed by all commodities. Once the gold and silver was introduced as the only acceptable medium, the con began. The tidal wave is coming.