Guest Post: Breaking The Silver Manipulation Barrier

Tyler Durden's picture

Submitted by Brandon Smith of Alt Market

Breaking The Silver Manipulation Barrier

In 2011, so far gold has been the champion investment above and beyond any contender, including stocks and equities. At the announcement of the S&P downgrade of America’s credit rating, only gold showcased immunity. In fact, gold has thrived (as we predicted) in the face of any potential economic threat, from deflation in stocks, to inflation of fiat currencies. Some may wonder, though, where silver has been while its big brother is flexing its investment muscle? While traditionally, silver tends to follow market surges in gold, the past eight months have been rather confusing for the cheaper metal. Admittedly, silver has performed far beyond the predictions of slow witted mainstream skeptics, but it still has not come anywhere near its true potential, especially in light of gold’s incredible strides. Many may be wondering how it was possible for gold to stampede into the $1800 an ounce range after the downgrade while silver stayed completely static at around $40 an ounce. The behavior of commodities markets has been, indeed, very strange…

The common assertion by MSM pundits is that because silver has a larger industrial market than gold, silver is affected more negatively when stocks decline. This is absurd logic. Silver is still very much an alternative currency and just as much a hedge against market instability as gold is. All told, silver should actually be MORE apt to increase during economic uncertainty than gold, because of its wider industrial usage and subsequent decreasing supply. The “utility argument” for decreasing silver values just doesn’t fly.

As many are well aware, silver is a much smaller market than gold, with fewer primary players in control of tighter trade. Most of us are also well aware that one of these players, JP Morgan Chase, was exposed as a massive silver manipulator in 2010 by commodities trader Andrew Maguire. Gold and silver investors have been demanding a Commodity Futures Trading Commission (CFTC) investigation of such manipulation for decades. These demands fell on deaf ears, and claimants were quickly disregarded as “conspiracy theorists”. Issuers of ETFs (paper silver or gold) have long circulated silver equities supposedly backed by real metal, but when investors began to notice that the amount of paper issued far surpassed the amount of real silver in actual circulation, the scale of the manipulation in progress became quite clear. Global banks were purposely driving down the value of silver by creating the illusion that there is a greater silver supply than there actually is. JP Morgan has also been caught red handed initiating coordinated naked short selling of silver equities as a way to fool average investors into believing that demand for the metal is falling.

With the Maguire revelation, the hope was that the CFTC would finally do their job and take market manipulation seriously. So far, they have not. Maguire’s evidence and testimony have been ignored, investigations were limited to a few pointless committee hearings, and the global bank ETF fraud continues.

Another snake in the grass when it comes to precious metals investment is the COMEX itself. The COMEX is not a free market by any means of the term. It is in fact a highly micromanaged exchange owned and operated by an organization called the CME Group based out of Chicago. CME is the preeminent hand in the flow of trade in all commodities (at least until recently). Their main method for stifling the rise in metals is the use of “margin hikes”. Buying silver equities “on margin” allows investors to borrow capital from a company with a certain percentage of their own cash as collateral, in order to get more silver than they would using their personal funds alone. When the silver margin sits at 50%, for example, an investor with $10,000 can borrow from the company to buy $20,000 worth of securities (ETFs). However, if the CME increases the margin from 50% to 75%, that investor will have to quickly increase his collateral by 25% or lower his silver holdings. CME has the ability to make these changes at will, and such margin hikes have the ability to trigger massive sell-offs in metals, especially silver. In May of this year, as silver edged towards $50 an ounce, CME hiked margins four times! Three times in the span of only seven days! Investors scrambled to unload their ETF’s, which they could no longer afford to collateralize, and silver’s price plummeted to around $30 an ounce.

The CME (and the idiots who defend the CME) often claim that they must raise margins aggressively in order to offset market volatility caused by “speculators”. Strangely, though, there was NO VOLATILITY in silver markets in May. Not until the CME actually increased margins, creating an engineered dump of equities. This forced reduction in silver prices also greatly benefits consistent short selling manipulators like JP Morgan and HSBC, but that’s just a coincidence, I’m sure.

Obviously, someone out there does not like the idea of silver crossing the historic $50 an ounce mark…

So, the next logical question is; how long will this manipulation go on, and how can we fight back? The keys to the end of commodities manipulation may already be in play, while methods for combating centralized control of metals are increasing. Here’s why…

China Competes With The Comex

As of this summer China now has its own Comex, called the Hong Kong Mercantile Exchange. The exchange opened for trade on May 18th (the CME’s incredible margin hikes in silver began only weeks before, which suggests to me that they were trying to preempt the positive effects the HKMEX would have on metals). The HKMEX moved into action only five months after the Chinese Pan American Gold Exchange was instituted. The exchange issues its own ETF’s in gold and silver. These securities, though, are not based on leverage or derivatives like most Comex based ETFs. The bottom line; the Comex global monopoly on commodities trade is over:

http://www.chinadaily.com.cn/bizchina/2011-01/13/content_11846539.htm

http://af.reuters.com/article/metalsNews/idAFL3E7II0W920110718

This would explain gold’s unstoppable expansion into the $1800 range, and how silver was able to climb back after the CME’s brutal margin manipulation into the $40 range. Only last week, the CME issued a margin hike on gold of 22%. Despite this the fall in gold was minimal, showing that their influence, though vast, is beginning to wane. With competition, manipulation becomes more difficult, and room for growth is created.

The new Hong Kong Exchange coupled with the now explosive buying of physical PM’s by Chinese consumers is slowly but surely overriding the long prevailing manipulations of corporate robber barons intent on ensuring gold and silver are never treated as a currency alternative to the dollar. Silver markets in the East were set into motion a bit more slowly than gold markets were, but given a little more time, I suspect that the resultant spike in silver prices will be the same.

Global Silver Investment Growing

World investment in silver rose by an impressive 40% in 2010 and industrial use increased by 12%, while global supply from mining production only increased by 5%. Growth of demand severely outweighs the growth of supply. After the opening of the HKMEX, China rushed into silver markets. The CME margin hikes that caused the substantial drop in silver spot price in May only served to create a buying opportunity for those investors smart enough to see the writing on the wall. After the S&P downgrade of the U.S. AAA credit rating, silver values did not skyrocket like gold’s, but in the face of extensive manipulation attempts by the CME and major banks, silver’s steadfast hold to its current prices says quite a bit about is resiliency.

One very important factor to consider is that silver is the common man’s currency, and has been for thousands of years. Both gold and silver are solid hedges against financial crisis, especially inflation. However, silver retains more accessibility. As gold continues its climb into the thousands of dollars per ounce, silver will become more appealing to those of us who want to protect our savings, but can’t afford gold. Being that the economic crisis we currently face is unfolding in almost every nation, the demand for a safe haven will increase exponentially. It is only a matter of time before silver is engulfed by an enormous surge of buyers.

With the Federal Reserve continuing to print progressively devaluing dollars, the European Central Bank announcing its own TARP measures, and China in the midst of a full-on inflationary battle royale, national currencies are undoubtedly losing market favor. Gold’s price will soon become unreachable for common people, but silver will be there to fill the void.

How To Break The Barrier

Methods for smaller investors to fight back against the market manipulations of large banks have been sparse, and often limited to desperate appeals to the CFTC and the government, who are bought and paid for, and who have no intention of ever stopping global financiers from dragging their unwashed behinds across the face of the planet. Relying on bureaucrats to mend the wounds they themselves encouraged or inflicted is foolhardy, to say the least. Top down solutions are NOT an option now, and I’m not sure if they ever were. This leaves us with only one other choice; to fix the problem with our own hands from the bottom up. This is, of course, easier said than done…

In the case of silver manipulation, what we are faced with is an unprecedented effort to subvert and suppress an alternative system so that the mainstream system can continue to assert control over our financial lives. To effectively confront this issue, we must first end our reliance of the mainstream system. The longer we continue to participate in the fraud, the longer it will go on. Here are just a few strategies for decoupling, and walking away from the rigged game…

1) End The ETF Casino: If you play the ETF lottery, for god sakes, STOP! You are only perpetuating the con-game that is paper silver. While the allure of speed of light silver trade can be overwhelming, the bottom line is that even though you may think you have the market right where you want it, you don’t. ETFs are an amazing rip off. Trade fees can nickel and dime smaller traders to death. ETFs being held, even without trade, lose value through numerous surcharges as companies nibble away at your holdings. Most ETFs also will NOT allow you to take physical delivery of silver when cashing out your equities unless you have extensive holdings, and even then, it may take months for the silver to reach your doorstep. Because banks issue ETFs for silver they don’t actually have, they would never allow you to exchange them for physical if they can help it. Otherwise, the scam would be exposed, and they would be out of business.

Playing the margins is shear stupidity when you realize that global banks are hell bent on suppressing silver values. There is no rhyme or reason to silver ETFs and margin hikes beyond the whims of corporate puppeteers. Mainstream analysts can pretend as if there is a hard science to this brand of investment, but in reality, it is a large and very expensive joke. Unless you have a crystal ball, your only other tactic for discerning when to sell is pure luck. The very idea of the CME being able to control the price of physical by hiking the margins of paper securities that represent silver that doesn’t even exist is a farce beyond reckoning.

Buy physical, not paper. Be a part of the solution, not part of the problem.

2) Vault Storage Depositories: If you aren’t a buy and hold investor, and insist on participating in short term selling strategies, there is an effective (and smarter) alternative to ETFs and the fake paper market. Silver and gold vault storage depositories allow you to buy and store large quantities of physical metal while having the option of liquidating your holdings for cash just as quickly as if you were selling ETFs. Depositories do not charge hidden fees and do not reduce your silver holdings while they are in the vault. What you put in is what you get back. Period.

Because your silver is already sitting in their vault, a mere phone call allows you to liquidate a portion or all of your stock into cash whenever you wish, just like ETFs, but without the fraud. On top of this, depositories will deliver any or all of your silver or gold on demand to your doorstep, usually within 48 hours. If a sizable number of silver investors switched from ETFs to vault depositories, the ETF market would crumble, and market manipulation would end.

3) Encourage Physical Trade: Max Keiser’s ‘Crash JP Morgan’ campaign was an excellent first step in encouraging silver investment by showing average Americans that they can hurt the big banks simply by purchasing something they don’t want you to have. The next logical step would be to, of course, encourage larger ETF investors to demand physical delivery on their holdings by showing them the folly of the market itself, and, to encourage average investors to actually utilize the silver they buy not just to crash the banks, but for organized trade.

The construction of silver based barter markets must become a priority. Owning silver is not enough. We must start to use it in place of dollars if we are to have any control over our own economy. Barter efforts like this are becoming much more common, but we are still a far cry from full scale utilization of alternative currencies. With the implosion of

the dollar, it will only be a matter of time before metals take primacy as a means of trade, so why not get a head start now? Eventually, the increased circulation of physical will allow the free market to determine the natural value of silver and gold, instead of the subjugated paper market, until finally, the mainstream spot price is completely irrelevant.

4) Offer Incentives: For business owners or for those who are involved in private barter, offering incentives to those who pay in physical would encourage more silver investment, and by extension, more silver circulation as a currency. Add a certain percentage above spot price for silver trade, or, offer a discount on goods or services to those who pay in silver. Businesses, for that matter, could very well give their employees the option of being paid in silver, completing the currency circle and the flow of commerce. The more silver is used day to day, the harder it is for banks to control, and the more its value will rise.

All economies larger than a small village need a unit of trade beyond the barter of goods and services. They also need a unit of trade that maintains its value and buying power, instead of devaluing, inflating, and destroying the savings of those who hold it. Precious metals are the only existing option that can take on this role, and silver is the most attainable for average people. There is a reason why MSM analysts and establishment economists have been trying to crush interest in PM’s for years. There is a reason why global banks have gone out of their way to suppress the market values of metals. The second Americans realize there are other choices, other systems for living and working beyond the controlled paradigm we have been handed, the illusion slips away, and centralization becomes a memory. This is true for all aspects of economic structure, social structure, and political structure, not just for silver or gold. Ultimately, though, we have to start somewhere, and silver is as good a place as any.

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Mr Lennon Hendrix's picture

Silver has caught a serious bid today, and so has oil.  The dollar flails around like a senile old man yelling about how Bernanke studied the great Depression.  It is somewhat forgotten as to what monie is, even by such bright minds as Webster Griffin Tarpley, among others.  The end result is inevitable:  precious metal is monie, and it will be used as such soon.  It stores wealth, and nothing else does, except land, and land ownership might be fun, but you will never own the land, the land owns you.  So to protect yourself, and fight the establishment, buy silver.  Its time is due.

Dry Drunk's picture

Keep to your platitudes, Judas. You are a Hawk.

Mr Lennon Hendrix's picture

Shut the fuck up.  You don't know me.  You don't know my motives.  Shit, you don't even know if I have any.  Get fucked.

gtb's picture

There are mean drunks and stupid drunks.  Pretty clear you're one of the stupid ones.

Chicken_Little's picture

Appears the dumb asses come out posting first in a very good topic and maybe ruin a very good thread of people that could add to the author's opinion.

Dental Floss Tycoon's picture

Actually dry drunks are worse than mean drunks or stupid drunks.  Never met a dry drunk that wasn't 100 percent asshole.  He just needs to keep going to meetings and work his program otherwise he will stay fucked up.

goldfish1's picture

And for everyone else is the other program.

RockyRacoon's picture

...dry drunks are worse...

That's very true.  Untreated alcoholism results in a very disagreeable personality.

knukles's picture

A dry drunk is an alkie who no longer drinks but has experienced no change in mental conditions whatsoever, still thinking and acting like the practicing alcoholic.... generally astoundingly angry, ungrateful, hostile, egotistical, immature and impolite.  In short, unbearable, but thinking himself as a wonderous gift to mankind as he's no longer consuming.  Fucking nightmares.  (I've had the unfortunate experience.)    Guess the difference comes down to the dry drunk has enough energy and stamina that without the passing out is an asshole with his disease spreading misery to all comers 24/7/365.  At least the practicing alky in incapacitated a goodly portion of the day.
Both are bad juju.  No heaven, just hell on earth.

RockyRacoon's picture

Yeah, I know.  Seen plenty.   20 years FOB last April.

B9K9's picture

Gwar5 posted up an excellent link in the Quinn post with regards to financial repression:

http://politicalmetals.com/financial-repression-what-is-it-and-how-does-...

Here's my reply:

Gwar, hopefully you'll see this comment: Yes, yes, and finally, one more time, yes! Financial repression is just another term to describe the various processes by which the core objective, continuity of government (COG), will be achieved.

I have repeatedly said that bankers don't control the federal government, it's the federal government that controls bankers. Oh sure, they're highly compensated in their role of facilitating empire, but it's merely a historical accident that this function was outsourced. A parallel construct, the MIC, represents a more traditional approach with its quasi-private/public form of organization.

So all serve to keep the great beast alive. It's both naive & absurd to believe that this country operates under any form of constitutional restraint. This is where brilliant analysts & writers like Quinn, Denninger, Mish, Stoneleigh, et al fail: they appear to believe (a) markets 'work'; and (b) it's immoral  to manipulate markets (and impossible to maintain for long) to serve other, unstated ends.

Wrong, wrong & wrong! There is no immorality (eg starving seniors) when the objective of 'saving the system' aka the "American Way of Life" is the "noble" objective. Casualties are always inflicted to preserve the greater good, and during this cycle, it's the oldsters who are going to bite the bullet. To believe Bernanke has trouble sleeping is to believe Patton had trouble sleeping - both rationalize the deaths under their watch as a necessary bi-product of the ultimate goal.

The debt will be inflated away. Savers will be crushed. Controls will be instituted. And there will be no way to exit the system. The only way out is if/when the whole shabang comes down, and that might be prove to be more painful than the existing status quo.

Temporalist's picture

The banksters and politicians are all part of the kleptocratic class.  The banksters own the politicos because once they take graft they are easily blackmailed.  So it is more of a symbiotic union where both groups agree to just feed of the host of the citizenry without killing one another until the host dies.

shortus cynicus's picture

All deflationists assume some rules and derive the future vision from them.

But sad reality is, that any rules became void and overridden if it became serious.

FOFOA got it right: in terminal crisis currency will be sacrificed to save "the system" - people in power. Once in power, always in power. That is the goal.

Frog-And-Toad's picture

If you do own SLV, is there a way to demand delivery on the shares that you own?

 

I have been researching this, and found that only "baskets" of 10,000 shares can be delivered, which seems absurd.  I have about 1,000 shares right now, and I would like to take possession.  Anyone know how to go about this?

Mr Lennon Hendrix's picture

Only the five largest shareholders will be paid in physiacl if demanded.  Switch to Sprott (PSLV) or buy the coins.  I prefer the latter.  It is nice having it around.

Manthong's picture

You will never see a grain of metal out of SLV.

You need to amass 50,000 (units, I believe, but maybe oz.) to redeem from Sprott. 

I never expect to see any metal from either, but I am figuring that the PSLV is the least risky place to park paper that I cannot convert to physical inasmuch as I want that paper to follow the price moves of Ag for later conversion.

PHYS (Sprott Au) has been a good place to be for me as well. 

SLV is for trading risk assets in order to take the profits and convert to physical.

Chicken_Little's picture

Check out James Turk's Goldmoney.com. I know for a fact that anyone having gold with him can demand delivery in cash or LBMA good delivery bars or even 1KG bars AT ANY TIME.  I know of a friend that has 90% of a full pallet of silver in a Viamat vault in Hong Kong (full silver pallet=30 1000 ounce silver bars). He said that your gold will let you sleep at night and your silver will make you rich. There are only a handful of reliable PM companies you can trust if (when) the global SHTF. In the UK, the best one is Bullionvault.com and Adrain Ash previously of GATA.org is involved in it. These are my top 2 picks for PM buying because these are the only 2 that the gloom and doom gold bugs haven't said a bad word about. Because I have a considerable amount in one of the 2, I can say that one is okay. Sprott is not one of them.

 

HungrySeagull's picture

Hmm. I have to look into that.

Manthong's picture

The ETF's gives exposure for tax deferred assets and participation without the complications of reporting foreign ownership.

For physical ownership, right now, I prefer my own custody.

I do not believe that Ash or Turk would have anything detrimental to say about a Sprott position.

Nage42's picture

You read the PROSPECTUS...
It states how you take ownership and even how to convert physical into *poof-its-gone* SLV.

If you're dealing with a reliable broker, they'd had better be providing it to you... and I'm sorry, but isn't it silly to purchase ETFs without knowing the nitty-gritty (like is it leveraged, what's their ratio, any encumbering, blah blah), which is usually creatively hidden in the prospectus. I'm feeling reasonably benign today, to boil it down, you need to be a "registered entity" to take custody without breaking the "good delivery" chain, or go via a physical broker that can do this for you (read: no hope in hell they'll bother with you small-fry). I might be having a brain-fart, but I though the SLV->Phys was 50K but Phys->SLV was 10K. /meh I stopped smoking paper back in March.

Frog-And-Toad's picture

I just graduated last year, and I have been harping on the PM horn for about 4 years now.  I wish I had the capital I have not, back then, but all well.  I was playing the options game with SLV, and actually bought some shares prior to researching how the ETF was leveraged.  I assumed (ass out of you and me I know) that each share was backed by a paper stock (haha).  I was naive when I first got in, and am now trying to see if I can convert these paper stocks for a bar or two.  

So it appears that I will need to have about 10,000 shares to even think about demanding delivery?  Don't think I've built up that much capital, but I have started purchasing 100oz bars in the past week.  I am just trying to figure this out before spot goes over $50 in the next month and a half.  

clymer's picture

Dude, if you just graduated and are buying 100oz bar('s - plural)

 

..I'd say you're way ahead of the curve. Keep waking people up, and prep yourself for becoming a leader in some harsh times to come

Nage42's picture

Hmm. Well, be careful out there kids. During the "waking people up" you don't want to make it too hard of a sell in the sense of telling people that you've bought gold/silver. Unfortunately they are unlikely to follow your advice, but you can bet your left ballsack they'll remember you bought it when SHTF and they'll thank you for your forward thinking with a crowbar to back of skull and leg'it...

Kung fu baby, they need to snatch the pebble from the hand before they can learn the true secrets. OK, mystical-mode-off: Don't tell people you've bought, allow them to find it for themselves -- keep yourself safe.

Frog-And-Toad's picture

I just bought two of them.  Made some serious fiatcos by shorting Netflix when it hit 300/share.  Used the fiatcos to purchase a couple of bars, but I'd love to have more.  It has been a frustrating 4 years so far, but people are beginning to listen to me, especially buddies that were too young to think politics effected them directly.  As they cannot find jobs, they are very open to the concept that the system is fucked right now.  I can't tell you how many of my friends have (after ridiculing me for being a Ron Paul supporter since 2007) come to me and apologized and said I was right.  The message of liberty is gaining traction, and there's nothing these power-hungry pompous assholes can do to stop it.  In about 20 years, a true leader will be someone who can provide just enough oversight to let people follow their dreams.  If they fail, they have only themselves to blaim.  

Thanks for the support! 

CompassionateFascist's picture

Switched from SLV to bullion, by way of $, recently. 5,000 Oz/shares = 1 "basket" redeemable in silver. Of course, when TSHTF and the brokers are overwhelmed with sell orders, only the high rollers will get metal...everyone else will be left holding a bag of air.  

HungrySeagull's picture

I sit and look at your post. 1000 peices of paper written in crayon "Silver" did Crayola have Silver at one time for a color?

 

There HAS to be some way to offload that paper onto some other CHUMP and move your proceeds elsewhere.

 

1000 ASE Shares = 2 Monster Crates delivered. round 42 thousand and change today cash.

That for you friend is a once in a life time oppertunity. Do it.

fallout11's picture

Crayola did indeed once have a "silver" (and a "gold") crayon, at least they did in the 70's and 80's. They came in the larger sized (more colors) boxes.

chumbawamba's picture

1. Sell your shares for cash

2. Take cash to silver dealer

3. Buy physical silver

4. Profit!!!

I am Chumbawamba.

RockyRacoon's picture

Nice 4-step recovery program for SLVaholics!

MsCreant's picture

Very funny stuff. Sell fake in order to buy real.

CompassionateFascist's picture

Thas' whut I did. And Mr. JPM broker was highly resistent. When silver hits $70, JPM is long gone.

MsCreant's picture

Hope you are right. Bet you are not. They are pernicious.

Diogenes's picture

Just sell your shares and buy your silver on the same day. You do not have to buy your silver from the same place you bought your shares.

You should get practically the same amount of silver anyway.

DormRoom's picture

see you @ gold: 1100 and silver @ 25 in 6 months time.

SheepDog-One's picture

Any reasoning to back up your statement?

FeralSerf's picture

It's a prayer.  Reasoning has no part in it.

Nage42's picture

So you'd like to write that up in a contract that we will both honor in 6 months time? Or is this what internet warriors refer to as ... masturba^H^H^H^H^Hspeculation?

oddjob's picture

Enjoy your life as roadkill.

cowdiddly's picture

In other words I sit in my dorm room with 0 ounces.

Rynak's picture

The current moderation system on ZH is a bit annoying.... first, we had the junk system - it didn't really achieve much, but at least you could let of agression on the regular trolls..... then for a short time we had ratings..... which actually did have an effect, since you could set a threshold for how many "junk" of a post you tolerate.....

.....now we have.....  just frustration and incentives to feed trolls.

Cognitive Dissonance's picture

I suspect ZH pulled down the new UI, along with all other 'extras', in order to prevent the system from crashing. You may remember earlier this month when ZH was crashing several times a day. As soon as ZH stripped off the new UI the site was, and continues to be, up nearly all the time.

chumbawamba's picture

We all have our theories ;)

- Chumblez.

SRV - ES339's picture

Hope they leave it like it is... much less bs over nothing, and much more actual debate without the constant negative rating focus.

... wtf happened to spell check?

chumbawamba's picture

The rating system is chosen based on how much traffic it generates for Zero Hedge.  A free for all atmosphere engenders many page views.

- Chumblez.

Cathartes Aura's picture

'specially if the pages have corndog pics. . .

pavlov, Horndogs!