The Criminality of The Comex

Sun, Jun 28, 2015 - 6:19pm

How is this even legal? That's a serious question and I'd like a serious answer after the you read what is presented below.

Immediately following the short squeeze in mid-May that resulted in a 10% price move in just five days, the "Large Specs" in silver set out to rebuild (or were tricked into rebuilding) a massive naked short position in Comex silver. As you can see on the chart below, over the past five weeks, these Large Specs have added 41,806 gross naked short contracts to their accumulated position. This drove their total reported position up from 16,891 contracts on May 19 to last Tuesday's 58,697 and is the sole, primary reason for silver falling by $2 over the same time period. (click to enlarge)

Here is where this "market" becomes fraudulent and clearly fails to serve the world's silver producers and consumers. These "Large Speculators" as a group are collectively hedge funds, managed commodity funds and High Frequency trading funds. By definition, these are trading groups and they do not hold any physical silver. Therefore, they are truly "naked" in their position as they do not have physical silver to deliver to buyers at a future date (one of the rationale for having futures markets in the first place).

And let's put this into perspective...

These Large Speculators added 41,806 naked short contracts over these last five weeks. At 5,000 ounces of "silver" per contract, that's the equivalent of 209,000,000 ounces of silver.

  • In 2014, the entire world only produced 877,000,000 ounces of silver. Therefore, over just five weeks, the Large Specs naked shorted 24% of global mine supply. And, again, this is silver that they don't have.
  • Perhaps you think that, instead, this shorted silver has already been parked at the Comex for future sale. Well, as of Friday, the entire Comex silver vault holds just 183,000,000 ounces. So, over the past five weeks, these Large Specs have naked shorted 114% of the entire (registered and eligible) Comex vault.
  • However, only registered metal is allegedly marked and ready for sale/delivery. As you can see on the CME Silver Stocks report below, Friday's registered silver total was just 58,000,000 ounces. Using the same math, in just the past five weeks the Large Specs have naked shorted 360% of the total Comex registered vault.
  • Now lest you think I'm cherry-picking information to make my "case", let's venture into the weeds a bit and get down to the nitty-gritty...

    The term "Large Specs" is only used on the traditional, "legacy" version of the criminally-complicit CFTC's Commitment of Traders report. On what they call the "disaggregated report", we can find positions assigned specifically to a group called "Managed Money". What is Managed Money, you ask? Here's the definition from the CFTC's own document:

    Money Manager: A “money manager,” for the purpose of this report, is a registered commodity trading advisor (CTA); a registered commodity pool operator (CPO); or an unregistered fund identified by CFTC. These traders are engaged in managing and conducting organized futures trading on behalf of clients.

    OK, so this is pretty clear. This is a grouping of "traders (which) are engaged in managing and conducting organized futures trading". Nothing mentioned here about holding physical metal or hedging future delivery. Just traders looking to hold derivative positions for trading profit.

    On this week's CoT report, we find the following positions assigned to these traders (

    Managed Money GROSS long contracts: 46,135

    Managed Money GROSS short contracts: 53,304

    Managed Money "spreading": 11,851

    Now what is this "spreading"? What does that mean? Again, from the CFTC:

    “Spreading” is a computed amount equal to offsetting long and short positions held by a trader. The computed amount of spreading is calculated as the amount of offsetting futures in different calendar months or offsetting futures and options in the same or different calendar months. Any residual long or short position is reported in the long or short column.

    So, to determine the actual number of NAKED SHORT contracts held by "Managed Money", we need to subtract the spreading total from the gross total. Doing so yields a total NAKED SHORT position for "Managed Money" of 41,453 contracts.

    Again, please let me remind you of the definition of "Managed Money" from the criminally-complicit CFTC...These are trading funds. They have no physical silver to deliver. They are simply speculating in the paper derivative silver futures market.

    At a total position of 41,453 contracts, these trading funds are now NAKED SHORT 207,265,000 ounces of silver, coincidentally almost the same number as above when using the aggregated "Large Spec" grouping. Again, looked at another way, these trading funds are naked short:

  • 23.6% of annual global mine supply
  • 113% of the total Comex silver vault
  • 358% of the total Comex registered vault
  • Now, before you write to me arguing how no one was complaining when these same fund took LONG positions, you must understand that you're missing the point entirely. It's not the speculative trading that bothers me, IT'S THE NAKED SHORTING OF BOTH THE COMMERCIALS AND THE SPECS. The essence and purpose of futures trading is to allow producers and consumers of a physical commodity to either sell or buy forward. The gambling speculators take the other side of these trades. This system DEMANDS physical backing of trades and delivery if it is to have any legitimacy. Remember, "Managed Money" speculators have no metal to deliver. Regardless, they are allowed to naked short metal to whatever extent the cash in their margin accounts allows.

    This is insanity and completely against the rationale for having futures markets in the first place as it places "pricing control" in the hands of speculators who have no connection to the physical markets. Silver miners, their employees and all producers of physical silver metal are being explicitly harmed by this process and they should work diligently to end it. The Comex and all unallocated, paper derivative futures trading should be immediately halted due to the irreparable damage it is causing to silver mining industry.

    One final note, as you can see on the chart below, the extreme size of the Large Spec short position now exceeds by nearly 24,000 contracts the position held back on May 12 which, when panic covered, led to a 10% price squeeze in five days. This makes another squeeze in the days ahead highly likely and, once it begins, it should be spectacular to behold as all of these trading funds rush to cover at the same time. You might want to keep this in mind as you are bombarded with "analysis" that claims that the next move in silver is lower.

    So we close where we began...How is this legal? How can a managed money or hedge fund naked sell silver that they don't own, thereby suppressing price and damaging the businesses that produce the metal and the employees that rely on these companies for their well being? This is the essence of a financial system run amuck, doing more harm than good and operating completely against the rationale of it's creation. Why is this allowed to continue? How can anyone claim that this is a free, fair and honest pricing system?

    We all await the day when this fraudulent and unfair scheme finally collapses.


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    Jun 29, 2015 - 5:40pm

    TRX AGM Presentation

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    The video presentations of the Annual General Meeting are now available for viewing.

    Please click on the following links to start the streaming the videos.



    Peter's Presentation
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    Jun 29, 2015 - 1:44pm
    Jun 29, 2015 - 1:05pm

    Who is paying attention to Puerto Rico's crisis?

    Puerto Rico’s Governor Says Island’s Debts Are ‘Not Payable’

    "Puerto Rico’s governor, saying he needs to pull the island out of a “death spiral,” has concluded that the commonwealth cannot pay its roughly $72 billion in debts, an admission that will probably have wide-reaching financial repercussions."

    Jun 29, 2015 - 11:50am

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    Jun 29, 2015 - 11:26am

    Today's Bill Holter

    This coming week could be very telling. China just ended a disastrous week and finished just whiskers away from entering bear market (-20%) territory . Credit markets all over the world are weakening and yields are rising. Greece will not make their June 30 payment(s) and probably go through a referendum to decide whether or not to flip their creditors the bird in a meaningless vote. In fact, Greece will probably "go boom" this week. Their banks and stock markets may not open Mondaymorning . Two days later, some sort of plan will need to be concocted to classify their bankruptcy as not a "DEFAULT", otherwise a $3 trillion fuse to a $1.4 quadrillion bomb will be lit! These and more will be very important "mid-term exams", any failure will bleed over into derivatives and become "final and terminal exams" with zero chance of a passing grade!
    We have all heard about the Greenspan, Bernanke and now the Yellen "put".
    It has been believed (and for good reason), the Fed would step in and save the stock market should it begin to buckle. Magically, and time after time as the stock market would hit critical levels, panic buying would appear. This has been written about many times by many authors. Would the Fed really buy stocks or even indices? I would ask, "why wouldn't they, it is actually even legal" after the plunge protection team was created in 1988. This is not conspiracy theory, it is FACT! All one needs to do is look at the Bank of Japan, they openly buy stocks and even seem proud of it! As for equities, please ask yourself these questions. How "sound" is a stock market that makes continual new highs on lesser and lesser volume? If you are a large holder, are you bigger than the available exit? What if everyone at once took Ms. Yellen up on her "put offer"?
    Another area where Fed buying looks to be very important is in our credit markets. Unless they step up with some serious buying, and soon, our 10 year Treasury yield will take out 2.5% to the upside. U.S. Treasuries and their "value" are what act as collateral or foundation for everything the world "believes in". Before going further, I do want to mention another aspect of the ultra low rates we live with. When rates are 10%, a 100 basis point move is only 10%, when rates are 2%, a 100 basis move is 50%! In other words, movements in interest rates when rates are low have a hugely magnified impact. When rates rise, collateral "shrinks" very rapidly from a low interest rate base which means margin calls are more rapid and bigger in amounts. Higher rates will make insolvencies that much more likely and will then occur "systemically".
    This topic was suggested to me by Jim, as he put it, I believe this chapter will be described as "The Phantom of the Fed Put revealed." Please understand what is meant here. There is a "confidence" all over the world in not just the Fed but in ALL central banks. This is a misplaced confidence because the markets themselves are far larger than any single central bank or even ALL of them collectively. Yes, The Fed can push, pull, support and suppress ...for a time. They cannot stop a broad tide from going out or prevent a tsunami from coming in over a long time frame. The current timeframe is six years, A LONG time for us Westerners, might as well be six days for those from the East. Does a Fed (central bank) put really exist? Or is it only the "belief" a put exists?
    My point is this, the only thing holding markets together is confidence ...and the only thing keeping confidence from being shattered is the belief central banks are and will provide a "free put" to all markets. Take the three examples I started with up top. If the Chinese market continues to implode, what will that say about the abilities of the PBOC? Or when Greece defaults and triggers others, what will that say about the ECB or IMF? Were Treasury yields to rise through 2.5% amongst the other turmoil, what will that say about the "safe haven" status of Treasuries and thus the dollar? It will be a reflection of Fed impotence. The skeptics who say "they will do this forever" ...can say what they say at their own peril!
    Let me finish this with the BIG BAZOOKA. I am sure you remember Hank Paulson talking about $700 billion TARP as a bazooka? The reality is this amount will not even be a spitball this next time around. There are over $1.4 quadrillion worth of notional value derivatives outstanding. The apologists say "notional" value has no meaning, it is only the "margin" that counts. They are correct during "normal times". Normal times being defined as being "trusted enough" and being able to breathe. Seriously, if you can breathe today you can borrow money. What comes next is a change of thought and a massive phase of global distrust. When trust and confidence break, "margin call" will become a familiar term to nearly all.
    This you MUST understand, when trust evaporates, credit will cease entirely. Without credit, the world will stop spinning. Everything finance and many things real will be gone. The financial house cannot stand with a worthless foundation and distribution of real products will cease as the supply chain breaks. Over $1.4 quadrillion in derivatives is a larger number than "everything is worth" ...not to mention far larger than the money supplies to settle the trades or put up the margin. You see, "putting up the margin" will equate to 100% of all these contracts because in default ...notional and real value are one and the same! Settlement is not an option! It is this $1.4 quadrillion margin call that hangs over the entire system each and every day. Margin calls are almost never issued into calm. They are almost always issued into panics and by definition ALWAYS at the wrong time! The only way to shed all margin is to get G.O.T.S.!
    I have said all along and stand by my statement "when this thing gets lit, it will only take 48 hours to engulf everything". If this is truly the "beginning of the ending sequence", many markets will go no bid while a couple will go no offer! Meaning you will have what you and that's all you will have... I leave you with this horrible thought for the weekend. How better might $100 be spent? A nice dinner with your spouse or on 200 lbs. of parboiled rice?

    Regards, Bill Holter
    Jun 29, 2015 - 11:20am

    Last minute deal for Greece?

    Reading the MSM I get the impression there is the slight, vague prospect of a deal still being done. Maybe that's why PM's are basically unchanged? Manipulation, intervention or truth? I've no idea...

    Jun 29, 2015 - 11:16am

    How much Greece owes to international creditors Reuters 

    Private investors hold 38.7 billion euros of Greek government bonds following a major write-down and debt swap in 2012 that reduced the Greek debt stock by 107 billion euros and the value of private holdings by an estimated 75 percent.

    Jun 29, 2015 - 11:06am

    PPT on lunch break?

    US indices are rolling over. Is the PPT on a smoking break?

    The market is not allowed to fall, don't you know?

    Better watch out for the PMs!

    Silver starting to creep into the green despite Greece defaulting and possible Euro exit, not that that is any big news. Can not have silver green on a day like today.

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    Jun 29, 2015 - 11:03am

    Greece and Ukraine..

    I was putting the pieces together for my father and figured I would share my thoughts (Maybe they are Jim Willies thoughts) on the ties between Ukraine and Greece:

    In Ukraine there is a pipeline conflict. Russia doesn't want to send its energy through Ukraine any more because its an enemy. So, Russia is looking for options to circumvent Ukraine. Greece has become open to the idea. Here is a picture of proposed pipeline ideas to circumvent Ukraine:

    Here is a random article I just found that describes the Putin/Tsipras conversations:

    Not claiming that this paper is wonderful, just showing you that Putin and Tsipras are reaching agreements on a pipeline. It is not surprising that the IMF wont bail out Greece after Greece has become friendly with Russia. Greece doesnt want more debt. The pipieline is an economic opportunity to reduce debt. Bildeberg meeting probably discussed this quite a bit. Being in debt to the IMF means the IMF can destroy your economy if you cross them. Time to overthrow the Greek government using economic warfare.

    Jun 29, 2015 - 10:55am

    @Turd Re: Getting started

    I feel the chagrin revving up already! :^)

    Few things I enjoy more than a good TF rant!

    BTW "there are no markets, just manipulations"

    I think that was "interventions," but same diff!

    Personally, I prefer the alliteration!

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