Massive Physical Silver & Gold Buying by JP Morgan

[Bullionwar]

Is JP Morgan Shorting Paper Metals While Acquiring Massive Physical Stockpiles?

As silver investors are likely aware, leading silver analyst Ted Butler has openly speculated whether JP Morgan’s alleged massive short silver position is held on behalf a client such as the Federal Reserve (with the intent to prop up the dollar by suppressing gold and silver) or the Chinese government (with the intent of acquiring physical gold and silver bullion at a discount due to their massive paper short position on the futures market).

http://www.silverdoctors.com/is-jp-m...f-gold-silver/

[devil21]

Seems like a reasonable explanation. Banks do love profiting on both sides of a trade whenever possible and this fits the bill.

Could the Fed be handing out cash to the banks for the banks to buy metals with? Yesterday's pull back seems like a BTFD moment.

[Brian4Liberty]

The trader states that JPM is indeed massively long physical precious metals and set to vastly benefit from the coming mania, precisely as Jim Sinclair has long predicted:

They buy the physical silver at the same time they sell the future (on Comex) futures trade in contango (higher price than spot physical) they get zero interest rate cash from FED so borrow the money for free, they own the vaults to store the silver…. so as the future comes to maturity they can either settle against their physical long or roll the future to collect more free contango…. This is pure arbitrage paid for by the FED. This has been going on for over 30 years and why shouldn’t they be allowed to have 25% of the Open Interest? There is no manipulation because they are short the futures and long the physical and have “ZERO” price risk, but nice profits! It’s brilliant trading and completely 100% legal and that’s why they will never be charged with manipulation because there is none going on. Sometimes it’s just that easy!

David R states there is no massive shortage of physical silver- it is just being hoarded by the bullion banks in their own private vaults ahead of dollar devaluation and collapse:

Let’s go and visit their vaults and you can see all the physical silver there… Lease rates are at full carry +. There is no shortage what so ever and the banks are charging 40 bp for storage because they cannot find any more space to put it all, you can take all the physical you want! The JPM manipulation is not a manipulation, but a way of trading that has been going on for years. JPM is short futures (due to contango) and long physical. People need to understand that metals are just a derivative of the interest rate market and once people do, they will get a better understanding why the market moves the way it does.

I explained to you what HSBC and JPM do on the silver. They get $ from the FED for free. They own all the storage vaults, so they do not have to pay the fees for storage. They then own the physical silver in their vaults and sell the futures contracts (which are in contango) at a much higher price than OTC price so then hold the both till delivery. Since there is no cost for $ and no cost for storage, they made a fortune on earning the contango of the silver and gold market. It’s a brilliant strategy, which has made them a fortune.

Actually a very interesting link. Is the above the truth, or a disinfo campaign to cover up naked shorting?

[devil21]

Well, we know one thing for certain. The dollar isn't getting any stronger so the rest of the story is just details for nerds like us to speculate upon.

APMEX has SAE premiums at almost $6!

[Paul Or Nothing II]

Actually a very interesting link. Is the above the truth, or a disinfo campaign to cover up naked shorting?

There's nothing new or evil about arbitrage, it's a low-risk, low-profit strategy based on divergence between spot-price & future-price, it's a price-optimization mechanism of the market.
Typically, the price of a future-contract is = spot price + cost of financing + storage costs (in other words, spot price = future-contract price - cost of financing - storage costs). If the cost of financing + storage costs are let's say $1000 for a given contract, at a given time then whenever the difference between price of the future-contract & price of equivalent physical is greater than $1000, it creates a small low-risk opportunity to make a profit.
Most really good speculators don't do arbitrage though because as I've said it's a pretty low-profit strategy for the most part.

Clearly, the person doesn't know much as there's no "free money", when a bank borrows from Fed, they have to pawn their assets (usually Treasuries) & usually much more than what the bank wishes to borrow since there's the "haircut" that Fed will consider. And it's not "free money" because banks have to pay back not only the principal but also the interest to the Fed & borrowing from Fed is much more costlier since their rates tend to be higher than the market-rate, & as arbitrage is a low-profit strategy, borrowing-costs can make all the difference!

And what about free storage! What nonsense! It's like saying that living in one's own house is "free", no, one had to buy the house & forego the interest on that money, that's the cost! And if one hadn't then one may have to pay rent. Same with storage facilities, buying them is the cost & if one can't/doesn't want to buy then they will have to pay a storage-fee.

And my favorite

(pure profit- always the ONLY motive for a bankster)

Oh really, that's the motive for all of us in general!

And there's nothing evil about naked shorting either, each market-participant is trying to profit while prices are merely the "collective consensus" of the market-participants at a given moment. People may have different beliefs about price of an instrument, when somebody goes long, they are essentially saying it's underpriced & therefore they expect its price to higher while when someone shorts, they are essentially saying it's overpriced & expect its price to fall. But here's the thing, you only make profits only when other market-participants agree with you so you are long, you will only make profit if market-participants' perception is in line & then there's a bullish momemntum & price goes higher but if not, price could drop & you'll make losses, similarly, anybody can short, nothing wrong with that but they will only make a profit if the market agrees & there's bearish momentum

The point being that nobody can "control" or "manipulate" the market in the long-run, no matter how big a player they are, since people are all free to make up their own minds of what x or y or z is worth & act accordingly & these perceptions along with fundamental market-forces is what forms prices in the market so any such talk may rather be directed at getting hits to one's websites or blogs as opposed to separating facts from fiction.

[Seraphim]

IF JPM does, in fact, have the physical to offset it's short positions, then I have no problems with them (in that sense).

Naked shorting is the problem.

[Seraphim]

By the way, this strongly supports my prior assessment that the 2nd leg of the PM bull market will be people parking PM's, as cash, searching YIELD:

"People need to understand that metals are just a derivative of the interest rate market and once people do, they will get a better understanding why the market moves the way it does."

[Brian4Liberty]

And there's nothing evil about naked shorting either, each market-participant is trying to profit while prices are merely the "collective consensus" of the market-participants at a given moment.

IIRC, it has been banned by the SEC in the US. And of course the reason they first started enforcing a ban was to prevent shorting of the too big to fail banks.

The point being that nobody can "control" or "manipulate" the market in the long-run, no matter how big a player they are, since people are all free to make up their own minds of what x or y or z is worth & act accordingly & these perceptions along with fundamental market-forces is what forms prices in the market so any such talk may rather be directed at getting hits to one's websites or blogs as opposed to separating facts from fiction.

Sounds like something Bernie Madoff might have said right before his scam fell apart. Manipulations, frauds and scams exist. They have always existed, and they always will always exist. The more complex the system, the more prone to manipulations.

You might argue that in theory, poker is an honest and fair game. That does not mean that cheating has never occurred, and never can occur. Wall St. has more in common with a casino than with a business that actually produces and sells products.

[Paul Or Nothing II]

IIRC, it has been banned by the SEC in the US. And of course the reason they first started enforcing a ban was to prevent shorting of the too big to fail banks.

Well, I don't really care what a coercive authority has to say about something, my point is simply that naked-shorting is a legitimate & necessary market-practice so whether they are doing it or not is irrelevant from a libertarian ethical standpoint. The fact that government likes bloating prices & everything going up so that people don't jump on their throats is the reason why they try to control prices in various ways but markets always find a way.

Governments try to control price of labor through minimum wage laws & markets hit back with illegal labor, it's just markets at work, nothing evil about it from libertarian standpoint.

Governments try to ban things like drugs, it may be "illegal" but people still sell it, it's just markets at work, nothing evil about it from libertarian standpoint

Sounds like something Bernie Madoff might have said right before his scam fell apart. Manipulations, frauds and scams exist. They have always existed, and they always will always exist. The more complex the system, the more prone to manipulations.

You might argue that in theory, poker is an honest and fair game. That does not mean that cheating has never occurred, and never can occur. Wall St. has more in common with a casino than with a business that actually produces and sells products.

Of course, frauds exists but that's not what I'm talking about.
By "manipulation" & "controlling markets" I'm referring to people who say something "should be" worth "X" when it's actually worth "Y", well, if markets say it's worth "Y" then it's worth "Y", of course, one may think that it's overpriced or underpriced but that doesn't mean whatever it's worth at the given time is necessarily "wrong", it's the "right" price for that given moment, under the given circumstances.

If one believes that controlling markets & prices is possible then one must believe that central-planning is also possible. But of course, as evidence shows, even the most powerful & dictatorial governments failed miserably in controlling markets & prices, only because nobody can control them.

Of course, one can influence markets but then we all influence markets in some way but it's rather far-fetched to confuse momentary influence with control; & those who think they can control markets & prices, fall.......no matter how big they are - Hunt Brothers for example.

[Brian4Liberty]

If one believes that controlling markets & prices is possible then one must believe that central-planning is also possible.

Very good analogy. They both probably have the same lifespan. Pyramid schemes, frauds and manipulations always fall apart eventually, that's why we don't like central planning. But their lifetimes vary greatly. How long has the US dollar pyramid scheme been going on?

How long was Enron able to shut off electricity and skyrocket prices in California? It was a short-lived manipulation, but even that was too long.

[twomp]

Well, I don't really care what a coercive authority has to say about something, my point is simply that naked-shorting is a legitimate & necessary market-practice so whether they are doing it or not is irrelevant from a libertarian ethical standpoint. The fact that government likes bloating prices & everything going up so that people don't jump on their throats is the reason why they try to control prices in various ways but markets always find a way.

Governments try to control price of labor through minimum wage laws & markets hit back with illegal labor, it's just markets at work, nothing evil about it from libertarian standpoint.

Governments try to ban things like drugs, it may be "illegal" but people still sell it, it's just markets at work, nothing evil about it from libertarian standpoint



Of course, frauds exists but that's not what I'm talking about.
By "manipulation" & "controlling markets" I'm referring to people who say something "should be" worth "X" when it's actually worth "Y", well, if markets say it's worth "Y" then it's worth "Y", of course, one may think that it's overpriced or underpriced but that doesn't mean whatever it's worth at the given time is necessarily "wrong", it's the "right" price for that given moment, under the given circumstances.

If one believes that controlling markets & prices is possible then one must believe that central-planning is also possible. But of course, as evidence shows, even the most powerful & dictatorial governments failed miserably in controlling markets & prices, only because nobody can control them.

Of course, one can influence markets but then we all influence markets in some way but it's rather far-fetched to confuse momentary influence with control; & those who think they can control markets & prices, fall.......no matter how big they are - Hunt Brothers for example.

How about when a bank like say Goldman Sachs takes a derivative consisting of bad mortgage loans then gives it a AAA credit rating and sells it off? Would that be considered fraud? They said that this derivative was worth X when it was really only worth Y. This DOES happen and WILL continue to happen until the government and the FED stops bailing them out.

[Paul Or Nothing II]

Very good analogy. They both probably have the same lifespan. Pyramid schemes, frauds and manipulations always fall apart eventually, that's why we don't like central planning. But their lifetimes vary greatly. How long has the US dollar pyramid scheme been going on?

How long was Enron able to shut off electricity and skyrocket prices in California? It was a short-lived manipulation, but even that was too long.

Well, it may or mayn't involve fraud or coercion but that's not what I'm trying to point out here, in the context of this thread.

The main point in the context of this thread is that there may be people who may buy a lot of X which may push up its price but that's not "manipulation" neither is it "manipulation" if someone shorts X & it causes it's price fall beacuse if others think it's uncalled for then they can always take the opposite position & then they stand to profit if the market sides with them; what is bothersome is the proclivity of some people to sometimes pretend that anything that causes the price of something to go in the direction they don't want it to go is "manipulation" & "wrong" & such.

[Paul Or Nothing II]

How about when a bank like say Goldman Sachs takes a derivative consisting of bad mortgage loans then gives it a AAA credit rating and sells it off? Would that be considered fraud? They said that this derivative was worth X when it was really only worth Y. This DOES happen and WILL continue to happen until the government and the FED stops bailing them out.

AAA doesn't imply any EXPLICIT PRICE-GUARANTEE so obviously that can't be considered fraud. And Sachs can't "say" what something is worth, it's priced on the market & people buy/sell according to their expectations, which turn out right for some, wrong for others, that's the nature of prices & markets. Obviously, sellers want to sell at the highest price they can get & buyers want to buy at the lowest price they can get & there's nothing fraudulent about it.

For example, you may sell your house for $100,000 & after a while its price falls to $80,000, now, the buyer can't accuse you of fraud UNLESS you offered an EXPLICIT PRICE-GUARANTEE of some kind as per the terms of sale that price wouldn't fall below X or Y or whatever.

You know, plenty of people here have been buying gold & Ron Paul himself has been buying it for ages & obviously the price paid by him & others at the time mayn't remain the same but is that somehow a fraud? Obviously, Ron Paul & many others knew that price of gold would soar so can somebody come to Ron Paul & say "hey, look you bought gold from me & paid me with dollars & now, those dollars are worth less than they were then as price/value of dollars has gone down so you're a fraud!". I mean that'd be ridiculous unless there was some explicit price-guarantee (which I don't think Ron ever agreed upon)