A Simplot Scenario for Silver

When both Andrew Maguire and Ted Butler write about the same thing over weekend, one should probably sit up and take notice.

In this case, what they were discussing was a possible, end-game scenario for the silver manipulation. The commercial short position has grown so extreme AND the physical supply has grown so tight that, suddenly, these two great minds were exploring the available options for JPM et al as they attempt to extricate themselves from what is growing into an unmanageable and untenable position.

Andy commented that in his "thirty years of experience, he'd never seen a more dangerous situation developing" and that, soon, the only possible way out would be a "back door solution". This "almost certain" resolution would hinge upon the cash settlement of futures contracts that would position paper traders on the sidelines before the "gap higher" next trading day in the new, physical market.

Andy's commentary had already roused my attention and then I read Uncle Ted's weekly review. In it, he discusses the "Maine Potato Default" of 1976. First of all, here are two links that can provide some background for you: http://www.time.com/time/magazine/article/0,9171,947729,00.html & http://news.google.com/newspapers?nid=1988&dat=19760526&id=a2YiAAAAIBAJ&sjid=06wFAAAAIBAJ&pg=1377,2637833

Here's the introductory paragraph of Ted's analysis:

"Since the problem is JPMorgan’s 38,000 contract net short position in COMEX silver, that problem will disappear if the regulators, as is within their powers, decree that a market emergency exists and orders all silver contracts to be unilaterally closed out and settled at an arbitrary price. In an instant, JPMorgan will be let off the hook and the problem, from a regulatory perspective, will exist no more. Yes, it would represent a contract and market default and reflect badly on the regulators, but it would resolve the extreme market structure issue immediately. Further, this is not a resolution that would be without precedent. Almost 40 years ago, the predecessor of the NYMEX defaulted on their important Maine Potato contract because the largest short seller, the late J.R. Simplot, couldn’t deliver as promised. All open contracts were artificially closed out at a set price and that was it. Yes, it was a scandal and a black eye on the world of commodity trading, but not one in ten million even remembers it today. The scandal led to a cessation in the trading of Maine Potato futures and a similar COMEX forced settlement today most likely would lead to the termination of silver futures trading in the US. One could argue that silver trading today is more important than potato trading was in the 1970’s, but my point is that to the average citizen, a COMEX silver shutdown would be forgotten in time and life would go on." Subscribe and read more at: http://www.butlerresearch.com

So why do I bring this up? A number of reasons.

  1. We KNOW that this silver manipulation cannot go on forever. In fact, the increasing physical supply tightness makes this eventuality a possible near-term event.
  2. A Comex/CME cash settlement screw job would not be surprising at all. If you don't believe me, ask anyone who had an account with MFGlobal for their opinion.
  3. Though painful to the short-term reputation of the Comex, the CME and the Silver Cartel (mainly JPM), the event would barely register in the financial press and would soon be forgotten. If you don't believe me, ask yourself the last time you saw a headline on the LIEBOR Scandal.
  4. Though there would likely be a significant runup in paper price and other warning signs of this impending "default", paper traders had better be fully aware of this possibility/probability.
  5. The Maine Potato Default of 1976 clearly shows that there is precedent for this kind of event.
  6. In this scenario, holders of all types of paper silver (futures contracts, paper certificates for physical, ETFs) will cash settled and be left on the sidelines, holding the bag, out of the market and unable to participate in the next-day reset in price.

Once again, your only solution is the purchase and delivery of physical metal. Period. End of story. Yes, it's fun to trade and the leverage applied may allow you to increase the stack of your fiat. However, there is no substitute for physical metal. Holding physical metal is not just the only way you are guaranteed to participate when the Silver Scheme finally unravels, it is also your only protection against the other financial calamities that are just around the corner.

It's nice to see a bounceback in price this morning, though we are clearly seeing some continued volatility. I expect our support levels to continue to hold and I expect a "Happy Tuesday" rally tomorrow as the banks will want to cover some of last week's shorts ahead of the CoT survey. Both charts got painted with ugly, engulfing candles back on Friday so we need to see a rally this week in order to invalidate them and discourage some momo-chasers from piling in. Rest assured, though, I still expect December to be a solidly bullish month that will set the stage for a powerful 2013.

Lastly, just another reminder of the free webinar on Wednesday. It's scheduled for noon EST and will last 15-25  minutes. It will begin with a brief commentary from Andrew Maguire. He'll discuss the metals markets and the increasing role that the HFTs are playing. Then, Paul Coghlan will give a presentation of his technical analysis methods. This will be extremely valuable information so I strongly encourage you to listen in. The entire presentation will also be recorded for playback by those who are unable to listen live. To access it, though, you must pre-register. You can do so by clicking here: https://www1.gotomeeting.com/register/240678176

OK, that's it for now. I hope everyone has a great Monday!

TF

 

419 Comments

Groaner's picture

Anyone come across a good brief summation?

ON..... The Masterful Ponzi Scheme perpetrated by the FED/Central banks, Wall Street and the Government?

I know there is endless stuff written about each one, but how about a couple of paragraphs???

SIlverbee's picture

Imagine this...

A JPM whistleblower is prepared to spill the beans at great risk to themselves, but is aware JPM can also do the potato thing at a drop of a hat and all manipulation is forgotten. At the same time JPM is aware that there are preparations to spill the beans. Who jumps first? The whistleblower would rather wait and let JPM pull the plug but JPM are in no hurry and will only do it if the whistleblower is about to tell. 

So stalemate. This could be why June turned into August turned into December etc?

ivars's picture

Just bought this book:"DEBT

Just bought this book:

"DEBT the first 5,000 years" by David Graeber

http://www.amazon.com/dp/1612191290

Can already recommend it. Because it is the initial source of an in depth study of an original idea by its author. I bet once I read it, i will have not many basic questions about debt, money and power relations left. Historical outlay is always the best as it gives perspective which most current preachers of debt and money creators lack. Opponents may lack it as well, building utopian ideas about self destruction of current system without destruction of lives. The book was recommended by Didier Sornette, and he is my guru in non-linear market studies and predictions, a serious scientist. His own work is unique. He said that is a scientific work, and that is enough. Not journalism or a copy cat short version.

I will report if this is true, after some time.

TexasStacker's picture

so, seriously...

im still 12 dollars upside down on my slv holdings.

is the advice to sell it now as comex default is imminent?

if comex defaults, slv will be redeemed at spot price? above spot? below?  slv holdings are not even 10 pct of total portfolio, why am I letting this be a stressor?

Turd Ferguson's picture

Crude turned away at $90 resistance

MODERATOR

Watch the $90 level closely. Close above there and we're looking at $93-94 and it would a precursor to "hotter times" in the MENA.

silver66's picture

Just bought the book

Ivars, the book is great, have you watched his youtube speech?

Silver66

The Watchman's picture

Jamie Says:

ivars's picture

@silver66 not yet

But I will mark it. I prefer to read book first, video  later. So I do not miss details and take in enough information to be able then perfectly understand the essence in video lecture.

Thanks

ChocoHotDog's picture

I hate this manipulation in the silver market.

Fuck you, Blythe. Fuck you and the horse you rode in on. Go sit on a cactus. 

JohnnyR's picture

Sometimes you read something

Sometimes you read something that … well … helps … clarify things …

Firstly, may I apologise to the ladies that read this post, and also to those that are easily offended. My wife says I tend to swear when I get angry, well I guess I’m pretty angry as this really makes my effing p!ss boil.

I don’t believe for a second that any central banker will ever tell the truth. My feeling is they will always give a rosier picture than is really the case …

Andrew Haldane, (No idea who he is, but he’s some geezer at the Bank of England).

"If we are fortunate, the cost of the crisis will be paid for by our children. More likely it will still be being paid for by our grandchildren."

Source :- http://www.bbc.co.uk/news/business-20585549

I have two kids, a 4 year old and a 2 year old. Like all kids, they have done nothing wrong. They are not old enough to make mistakes (financial mistakes I mean). Those mistakes were made by people that are my age. So why do my kids, and your kids … and your neighbours kids … in fact everyones kids get to pay for my generations mistakes? That’s the thing that really makes ‘things’ boil.

I / my family are pretty much 100% ag, and I get to be the fund manager. I’ll be blunt, sometimes it’s scary. There are times when I really have to question things … have I made the right decision ? … do I need to re-assess things ? … should I lighten up on our metal ? And a zillion other very uncomfortable questions, constantly whirling around my head. Luckily, I remember reading that when you have doubts, when you are unsure … take a step back … look at the basics … and the bigger picture … everything will be a lot clearer and you’ll make a better decision (I read that here, either by Mr T, or in a comment on some post).

Well sometimes I don’t have to step back, or look at the bigger picture. Because there are times like today … when some prick in the Bank of England points out that my kids (and their kids) have to pay for something that they have no responsibility for. It’s days like today when I know for certain that I have made the right decision.

Nana's picture

@ The Watchman

Didn't Jamie use the same gesture when he described just how little physical silver was left in COMEX.

LOL, couldn't resist.........

ancientmoney's picture

@Texas Stacker

I assume most of your other 90% holdings is physical gold and silver.  If so, I agree that your 10% SLV holdings are not a big problem.

If you have little or no physical in your other 90% holdings, why don't you sell SLV and buy the physical?

To answer the question, if COMEX defaults, SLV will be terminated, and shareholders will be paid out as of previous day's SLV close, in fiat.  No premium.

boatman's picture

decoder ring

you mean you guys didn't get yours?

Nana's picture

@ Orange Re: Bix and David

David's entrance was brilliant!

Very good video, thanks.

Peoples Front of Judea's picture

Possible dates????

If i was going to put the silver market into default

I would choose , End of trading DEC 21st....If my assumption is correct  the 

market is closed through to the 26th DEC  ????

BWTFDIKfrown

silver66's picture

Ben Stein-The great advisor

http://www.businessinsider.com/five-year-anniversary-of-ben-stein-ripping-jan-hatzius-2012-12

I remember reading his critique, I was not awake at that time. I remember him arguing with Schiff on CNBC as well. I guess with his track record there is not much to advise about today.

Silver66

JohnnyR's picture

Re : This is more appropriate

 

All us Brits look like that ... well the women anyway. The blokes look like BM.

Icarus's picture

I've got a secret

Ok,  I've been trained to use the scientific method to reason out solutions.  Lets try and figure out what's going on.

First the Turd comes out with HEH.  Then Bill Murphy of GATA has his own HEH.  Finally our own Bollocks has inside information on what could be an historic rise in the price of silver.  Those are facts.  Now lets do a little analysis.

If Turd knows 'it,' and Murphy knows 'it,  and an ordinary guy like Bollocks (meant in a nice sort of way) knows 'it', don't you think that Blythe and Gensler and Hedge funds and the EE also know 'it'.  I think that logically follows. They are after all the insiders.

Now if all the big players know 'it' wouldn't you think they'd front run this HEH?  Of course they would.

Silver is comatose.  There is no front running. As a matter of fact, just the opposite is occurring.  Short interest is approaching all time highs and the price is gradually going down.

Deduction?  The big money is not overly concerned with HEH.  It's a non issue to them. Maybe they already have contingencies to fight it, or maybe it turns out to be the big bust, like when the Swiss Bank announced that they would debase the Franc (one of the truly safe havens in the world) and the only real safe haven left (gold) subsequently got smashed.

I wouldn't hold my breath on HEH amounting to much. Nor would I take ANY action based on the 'secret'. Based on the data available, it's a non issue.  I wouldn't get too excited my friends.

Please critique the above. I'm always open to alternative views.

Regards,

Icarus

P.S. Those miners are just getting creamed again today.  Looks like another smack down is in the works over the next 24 hours.

robov's picture

Miners Down, Metals Slightly Positive

Always portends to a next day raid on the metals, so unless something has change we know what to expect with the metals tomorrow and it won't likely be a short covering rally. I would love to be wrong.

Regarding the thread and what Maguire and Butler are suggesting. The Wall Street bought & paid for government already announced they would backstop the CME if a failure where to occur (big surprise). After all these crooked banksters are just doing the Feds/governments dirty work in keeping the metals massively shorted & price capped. If these criminals can just walk away from their massive silver shorts & possibly gold then there is no incentive whatsoever to cover & not continue adding naked unbacked shorts until such time as the government rescues them. There all in bed together anyway.

murphy's picture

Nana

No, that's about the size of it.

napa698's picture

December is going to be fun

Total US Debt Hits $16,369,548,799,604.93; Debt Ceiling Just $63 Billion Away

So we are going to do a Thelma and Louise ,hit the debt target and the comex is going to default around the end of the month when nobodys looking

Brilliant

PS don't tell anyone

TexasStacker's picture

thanks ancientmoney.  I had

thanks ancientmoney.  I had hoped to get back to breakeven before slv becomes worthless.  we'll all see how it plays out.

Nana's picture

Christmas List

Stop the NWO

Enforce the Constitution.

Jail the banksters, most of the gang of 535, corporate thieves, the alphabet thugs , unconstitutional  judges and so on and so forth.

Let metals go to their true value.

and

A Real Good Tan!

The Watchman's picture

TRUE

Jamie-Dimon-Jail.jpg

babaganoush2307's picture

Nana,

that's a pretty good wishlist yes

Basil's picture

A load of bollocks ??

OK - Bollocks has got some info from somewhere.  So that's fine,  and he seems like a good guy to me, so I'm sure he believes this info.  And he could be right to believe it .....

..... but probably not.  I say this because over the last few years we have been offered any number of rumours that something momentous is about to happen, often attributed to "insider sources"  with "A commercial signal failure" or a default at the Comex being among the most common.   Well every single time, these rumours have amounted to nothing.

So yes - it is possible that Bollocks has a real game changer - but let's be honest and accept that it's most unlikely. 

I don't mean to be boring - just realistic, because losing touch with reality in financial markets can be exceedingly expensive.

Mickey's picture

for discussion, let's say there was a comex, LBMA default

AGQ is leverage silver. It has contracts and cash (or treasuries).

If the paper price of silver was to be settled in cash, and silver price is say 33 just before--what will the cash settle price be?

a) significantly higher

b) moderately higher

c) the same

d) down a bit

e) down a lot

My guess is that since AGQ is a mixture of cash and futures contracts, or perhaps options on futures, the decline in agq could be significant if the cartel has a say in what the settle price is. USLV on the otherhand is an etn and Credit Suiss backs that and the etn fluctuates based on price of silver. This if they drive the settlement price of silver down , AGQ and USLV both suffer. The problem is also  that if there is cash settlements and silver goes parabolic, AGQ will not have the same run up and USLV harms its sponsor, UBS,

I seem to think holders of uslv agq and even options on slv woudl make $$ since the settlement shoulf IMO come at higher price. As nobody with physical wil be selling.

the Bloombery treasury article on scarcity today is unadulterated bullcrap. As we know its the Fed holding up demand otherwise interest would be well into double digit area. This should be great for gold and silver. But we also know that the markets are broken.

Turd Ferguson's picture

Bollocks' info has nothing to do with my stuff

MODERATOR

He admittedly stumbled into it via a conversation with someone in the metals "industry".

It has nothing to do with HEH.

Response to: I've got a secret
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