The Silver Bull Market of 2012

No sense in mincing words tonight. The CFTC has finally acted and silver is headed significantly higher. Maybe not tomorrow but soon. Very soon.

Position limits in silver will soon be enforced. Yes, there will be delays. Yes, there may even be legal challenges brought by The Cartel. However, there is a very high likelihood that, on a beautiful day in 2012, JPM et al will finally cede control of the silver market back to legitimate investors, speculators, producers and hedgers. When this happens, silver will finally be freed of its EE-supplied shackles and price will move dramatically higher.

But first, get ready for some craziness. Beginning tomorrow, all bets are off. As of the last Tuesday's CoT survey, the commercial short position in silver was still over 58,000 contracts. Though this is down from a peak of about 90,000 contracts back in April, there's still a long way to go before JPM is compliant with the new limits. At 58,000, the speculation is that the short position of JPM is still between 15,000 and 20,000 contracts. Clearly, they have a lot of work to do to bring themselves into compliance.

As you know, if they go off blindly covering short positions, they'll drive price higher and higher and thereby create for themselves steeper and steeper losses. They are going to want to continue to inspire more selling, similar to what we've seen over the past three weeks, in order to cover at lower prices, instead. The question is: Can they pull this off? 

With the limits soon going into effect, no institution is going to want to significantly add to short positions. Therefore, the only selling pressure that can drive silver lower from here will have to come from discouraged spec longs. But here's the rub: Spec longs peaked in early April near 50,000 contracts. In the subsequent decline from $48 to today's $32, we've lost over half of that spec long position. The latest CoT spec long total was just 23,571. How many more specs can be chased from silver to drive price substantially lower from here? 2,000? 5,000?. It's hard to say but this much I do know...get ready for more, even crazier volatility.

Why? There is really no other option. JPM et al need to force silver lower in the days and weeks ahead otherwise they will be faced with covering thousands of contracts at very steep losses. They must drive price lower just as they did three weeks ago. But with open interest and spec long positions so low, how can they get people to sell? The answer: Let the CME do the dirty work!

Remember, the CME allegedly raises margins only in response to volatility. IF The Cartel can create enough volatility, the CME will be forced to act. ​And, as we saw in April, margin hikes when combined with steep selloffs can create the conditions necessary to force spec longs out of the market. So, the formula from here is simple:

1) Violently manipulate silver to create unprecedented volatility.

2) Have the CME raise margins again in response to this volatility.

3) Use dips in price to hurriedly cover short positions.

4) If Cartel buying spikes price back up, this added volatility may inspire additional margin hikes.

Eventually, two things will have been accomplished:

1) JPM will have extricated themselves from the short position and brought themselves into compliance with the position limits mandated today.

2) To help avoid a subsequent run on the CME-owned Comex, margins will have been increased so significantly during the process that Comex leverage will have dropped down to 3:1 or so. This, for all intents and purposes, will make The Comex a physical-only exchange. Making The Comex physical-only will preserve the viability of the exchange and limit the future liability of the CME Group.

Look, I could be wrong. What the hell do I know? I'm just a Turd. But I've thought about this all day and this is the most plausible, short-covering scenario I can envision. So, what does this mean for you, my dear reader?

1) Please do not get caught up in the emotion and the disinformation of the next 3-6 months. The wild swings in price and the inevitable dips will shake you to your core. You must have faith and confidence that you are right and that you will prevail in the end. If it took a 33% drop in price to shake 50% out of the spec long position, how low must price go to get another 25-50% decline in the spec long position? $24? $22? Don't be surprised if it happens.

2) Therefore, now is the time to set up a disciplined, regular physical purchase plan. You should consider buying some physical silver every week or two, regardless of price, until the limits are finally enacted.

3) Though silver will likely become a physical, spot-priced market, you can rightly expect significant price increases in 2012. Unencumbered by EE suppression, price will finally begin to reflect true value. Does this mean that the gold:silver ratio will finally revert to 16 or 12 to 1? Probably. How soon? Too many variables to hazard a guess but the day is definitely coming.

Rejoice and be happy, my friends, for today we have won a great victory in the battle against The Evil Empire. Though the war is not yet won, the end is in sight. Keep the faith and be diligent. Steel yourself for the tremendous volatility that is coming. Use it to your advantage by buying dips and taking delivery.

Sic semper tyrannis!  TF

231 Comments

Icarus's picture

Position limits and volatility

Turd you're brilliant.  Makes so much sense!!!!!!!!!!

Regards,

Icarus

Anyone know at what contract level the Morgue is within limits???

Shill's picture

(No subject)

Damit lol.

Great post Boss man, buying physical, noted.

Tringo's picture

Props to Icarus (and of course Turd!)

Nice to not see a claim of being the initial poster.

backseatdriver's picture

Turd

Thanks Turd. I was looking forward to your thoughts on todays drama. I think this post should be bookmarked because we may look back on it 1 year from today and say that was the day things changed for the better (Fingers Crossed)

I now must walk back something I said today in light of all this. Maybe JPM will go long once they get done covering there naked shorts, if so then holy smokes look out.

BSD

Turd Ferguson's picture

I haven't seen anything

MODERATOR

I haven't seen anything concrete yet but, from the last proposal, it should be somewhere between 4,000 and 5,000.

Ole Blythe has her work cut out for her.

bigmark99's picture

will see, time will tell.

will see, time will tell.

Planters's picture

Sell off a bit

I think I am going to sell of some of my phys silver and wait to BTFD cause ya know it is the calm before the storm. JPM will not go down without a Blythe Masters Rotten Crotch Staining Panty Raid.

BMRCSPR

Enjoy this one is one me.

uggglet

Dr G's picture

Turd, well said. Brilliant

Turd, well said. Brilliant post and great analysis. Thanks for the time you put in here.

¤'s picture

I like the sound of that

Good post. Makes me want to order more silver right now.

Anyone who gets the buying urge tonight, use the links to the PM dealers maybe.

TFMR gets credit for it.

Dr G's picture

@Planters, so why sell? What

@Planters, so why sell? What if it doesn't go down? Now is the time to buy more, not try to be tricky and time dips. Buy some each day.

backseatdriver's picture

Turd, will they obstruct

Will JPM and others impede the CFTC ruling through the courts, to draw this out as long as possible?

BSD

Timber Tim's picture

Good post Turd.Maybe the news

Good post Turd.Maybe the news itself will shake the specs out.Knowing what JPM is going to have to do to survive.Maybe everyone will just step aside to be rid of them.Still they could all pile in and trap them for sport.Years of tail wagging the spot dog can make a dog very angry.wink

printmemoney's picture

If they push too hard

the comex might fail...if they push the price too low, the asians or arabs can stand for delivery

Planters's picture

Sell a bit ./. not all... I

Sell a bit ./. not all... I will chance out a guesstimate out of 300 z - 100 of it to buy it back at at 22+prems, could possibly get 33% more silver by just BTFD if it comes........ Kinda like shorting myself. Seriously if a world class raid comes like the prior two this is easily a possibility.

I would def not buy now, JPM will not lay down, they will drop their shorts ( no pun intended ) If the markets are rigged and we all believe to the dick bone they are....they will NOT lose money for the fun of it. Expect a drop, maybe like one we have never seen before.

I wouldn't be surprised if the EE drops a duece on the Globex tonite.

cpnscarlet's picture

The Balance

Therefore, Turd, We have two possible forces at work in Ag - a force moving price higher in a short squeeze maneuver as JPM looks at approaching limits and another force moving price lower via volatility leading to margin hikes, shaking longs out. This could very well lead to an average price over the next several months around where we are now (and in whose chart have we seen that prediction lately???). It makes the work of a certain guy whose name begins with I look even more interesting IMHO.

On the other hand, cloak and dagger is still very much on the menu until all is down in black and white. If I wake up some morning to Ag under $28, guess where my 20% cash position is going!!!

DPH - Duplicate posts, indeed. You just love ham that much.

Sneed Hearn's picture

Legal challenges

You may count on bankster litigation to set aside the new rules. That will undoubtedly include a request for a restraining order to delay implementation. The action will be brought before the most favorable judge they can find at the last minute to file suit and will take years to play out. The collapse of the system is likely to occur long before there is legal finality.

printmemoney's picture

nuts

you're nuts to sell your physical medals......any gain results in a 28% tax burden

that means after you pay uncle, you can buy back for your net at 25.....or you can just evade taxes...good luck with that if you're dealing with any kindof amount

R man J's picture

First bit of good news

...in a long time.

Vision of Future is Gold $10000 / Silver $350 but unfortunately that is measured in tattered, soiled US FRNs in a volatile crazy evil world.

But as Gretzky said "I go where the puck's gonna go, not where it is..."

¤'s picture

If you buy enough silver you could become the ....

Ritchie Blackmore's Rainbow

Goodnight all...I'm beat Falling Asleep

backseatdriver's picture

Sneed

Exactly. This is what I was thinking. Thanks for answering Sneed. ;)

BSD 

firstsilver's picture

Still suspicious that this is the end of manipulation

Simply put, the other side of this tug-of-war has clever, resourceful people pulling on the rope.

Finally getting position limits seems to be a win for the good guys -- that would be us -- but I'm keeping one hand on my wallet.

We already in the good, old USA, have a 28 percent cap gain on precious metals. What if the cartel, evil empire, whatever, decide to give up the COMEX ghost and deal with silver and gold demand simply by taxing the accumulators here into submission.

I know, I know, it's jingoistic to think the U.S. is the be all and end all of the globe. But maybe similarly revenue-starved governments elsewhere can single out purchasers of precious metals for harsher-than-normal tax treatment. The cover story could be that we are all rich, greedy types profiting on the misery of others. This could be communicated in a modern day Cross of Gold speech.

Don't for a moment think the unwashed masses would be reluctant to swallow such rationale hook, line and sinker.

So, celebrate the apparent CFTC victory for our side. But beware that there is no more dangerous creation than a cornered animal -- which would describe TPTB at this time.

I fear this is not over by a long shot.

exiledbear's picture

When you'll need your silver

Most likely you won't be trading it back into dollars at all - you'll be using it as direct payment. I suppose you still have to report it, but like all cash transactions that leave no paper trail, it's all more or less on your honor.

Is anyone that "honorable"? I suppose.

¤'s picture

China on U.S. Treasurys: No Thanks

China on U.S. Treasurys: No Thanks
Oct. 18, 2011
DJ Newswires reporter Ian Talley makes a stop on Mean Street to discuss China's decision to not buy U.S. Treasurys in August, as did many other foreign countries. AP Photo.
 
Tesla's picture

Cheers to that! Thanks Turd!!!

beer_toast1.jpg

bullclip's picture

Lie in wait

Lucky for me that I live in Western ND. and surrounded by oil rigs. The landscape has changed so much in 1 year it's had take. Let alone the current activity and future growth. But I've had enough and put the house on the market and rented an apartment 100 miles away. I'm cashing in on the oil boom here and adding to my physical metal holdings after closing the sale.   It will be nice to have some cash to use on dips.  Maybe I can upgrade in a year or two with the metal profits.  Thank you to everyone in here for all the various thoughts to think things thru!!

Stoxxman's picture

Superior Pooh

Wowsers am I glad I stumbled onto this site.  I am proud to be a Turdite now.

I say again people ... click those adsense ads (every time) so that this terrific resource gets a return.

Exergy's picture

Turd's got it

GREAT summary Turd...makes perfect sense.

Three points to ponder:

1-if the cartel tried to jam silver down into the low 20's from 30 here and now I suspect they risk creating a stampede for physical and uncoupling the Comex prices from reality in a way never seen before. Think of Asia's reaction and the traffic that would flood to Asia's new exchanges.
With so much silver in strong hands and 6:1 ratio now, a lot of the volume hitting the exchange would stand for delivery. Because of the huge value being offered, the CME and their warehouse would empty.  Any paper short's being offered up would knowingly be toast as soon as the metal's get delivered and price discovery goes boom.  I think we may see a run up to 40 and possibly even 50 with folks thinking they are going to see the next fibonacci of 75...and then one more major crash in the next 6 months to get them under their needed limit rather than a crash now....but hey I am only one vote around here.

I agree the risk of SEVERE volatility is clear and present until they these rules are real and in place....now they just have to define "swap"...lol 

2- I vaguely remember reading somewhere hat JPM inherited their silver short position when they had to take over Bear Sterns and that one condition of the deal was that the FED backed any losses on  that book.  Everywhere I look  tonight I see the word's JPM taking over BS's silver short's with the Fed's "backing" but this implies approval not an explicit agreement to eat any losses.  If they have a tacit agreement to see the FED eat BS's losses then JPM's only job is to cover their own shorts and let the FED eat the losses on the other?  In that case the volatility may not be as crazy as needed if the Morgue hands the bill to the Fed to quietly pay off. If I have this wrong...we go right back to #1.

This is totally from memory from some vague article I read somewhere...can other's help?

Any input folks?

3) It just occurred to me to toss in the rumor of that $36 derivative bomb for JPM if price stays over 36 for 60 days so that may mean final high before they crash it may be tied to time after 36 is reached rather than actual height.

Add all this up and you get rough seas before we see any calm sailing... any way u cut it.

ewc58's picture

Requirement to verify hedges are backed by phyzz is crucial

As we know the Devil is in the details, let's watch the verification issue very closely. Now that they lost the battle over Position Limits, their fallback position will be to de-claw and emasculate them. I agree the banksters could also go the lawsuit route, but gutting new rules by inserting loopholes/conditions/exceptions is the age old SOP to neutralize them...

From Bill Murphy earlier this evening

As to whether this position limit thing is worth a darn, it all comes down to whether JPM is forced to verify that their hedged positions are backed by physical metal. There is disagreement in our camp as to whether that will occur. I know Bart Chilton is very aware that this is the key to this entire exercise. Only time will tell whether he is able to back up what he says the CFTC intends to do.

JUST IN…

14:12 CFTC votes 3-2 in favor of approving commodity position limits, as expected
* Vote in favor of reform was expected to pass by a 3-2 margin, with the CFTC's three Democrats forming the majority
* Reform will place limits on the size of positions in the futures and swaps markets
* Limits will first apply to spot commodity markets 60 days after the CFTC passes a separate rule that legally defines swaps.

backseatdriver's picture

The Wicked Witch and Rupprecht

Blythe cant be having a very pleasant evening. That said, there is a lot of ammunition here for The Wicked Witch and Rupprecht to make another return to the Xtranormal "silver" screen.

BSD 

Syndicate contentComments for "The Silver Bull Market of 2012"