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Silver and Margin Requirements Redux - Page 3
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Thread: Silver and Margin Requirements Redux

  1. #21
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    Default Brokerage positions

    Quote Originally Posted by Matthew Shelley View Post
    Brand new knowledge for you about the markets. You might want to file this away in case you ever participate in them.

    Just because a position is on the books of a futures brokerage house, does not necessarily mean that they are the 'holder' of that position. Just so you know, about our favorite market, the largest Silver producers are likely to gravitate to the largest of brokerage houses to hedge their production and reserves. Which translates into large short futures positions at the large brokerage houses.
    Matt, I apologize for the rather boorish responses of the members who disagree with you. It is really not necessary to resort to insults to show the weakness of your position. Yes, I am sure silver producers do ask their bullion banks to hedge their production. But you always hedge such a position in a way which causes minimal impact on the market. Whatever dumping tens of thousands of contracts on the market in minutes at low volume periods may be, it is NOT hedging! You tend to take the view that the big guys are always going to be able to do that so get used to it. That is like letting a bully beat up little kids in the school yard and saying it is part of life. No, you do not let that happen without response. We don't have to put up with school yard bullying and we don't have to put up with market bullying either. It appears that our regulators are not willing to intervene. Doesn't really matter. This is a global, fungible market and the name of the game is physical. And some governments and regulators are not friendly to the US. If there is an "event" don't count on Global coordination. In fact you can count on global disruptive behavior from some countries who shall be nameless.

    Looks like the December delivery month in silver will be a doozy. The message is slowly getting out that if you don't own allocated physical then you don't own metal, you just join the counter party risk line. At some point the realization goes viral and physical dries up. This is not the Hunts era. This is a global market place. Regulators cannot reinstate order in a market which has gotten away from them. This will be yet another debacle which will leave egg all over the face of the US. We are becoming the role model of how NOT to organize capital markets. What a joke.

  2. #22
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    Apr 2010
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    Quote Originally Posted by Mike Phillips View Post
    Matt, I apologize for the rather boorish responses of the members who disagree with you. It is really not necessary to resort to insults to show the weakness of your position. Yes, I am sure silver producers do ask their bullion banks to hedge their production. But you always hedge such a position in a way which causes minimal impact on the market. Whatever dumping tens of thousands of contracts on the market in minutes at low volume periods may be, it is NOT hedging! You tend to take the view that the big guys are always going to be able to do that so get used to it. That is like letting a bully beat up little kids in the school yard and saying it is part of life. No, you do not let that happen without response. We don't have to put up with school yard bullying and we don't have to put up with market bullying either. It appears that our regulators are not willing to intervene. Doesn't really matter. This is a global, fungible market and the name of the game is physical. And some governments and regulators are not friendly to the US. If there is an "event" don't count on Global coordination. In fact you can count on global disruptive behavior from some countries who shall be nameless.

    Looks like the December delivery month in silver will be a doozy. The message is slowly getting out that if you don't own allocated physical then you don't own metal, you just join the counter party risk line. At some point the realization goes viral and physical dries up. This is not the Hunts era. This is a global market place. Regulators cannot reinstate order in a market which has gotten away from them. This will be yet another debacle which will leave egg all over the face of the US. We are becoming the role model of how NOT to organize capital markets. What a joke.

    This post is excellent, Mike. Thankyou, and well done, Sir.

    "Realisation", Shelley! Did you get that?

  3. #23
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    Default

    Quote Originally Posted by gollumthegreat View Post
    This post is excellent, Mike. Thankyou, and well done, Sir.

    "Realisation", Shelley! Did you get that?
    I too thought it was an excellent post, save for that awful first sentence which prevented me from expressing any enthusiasm for his fine logic.

    The main point goes first, and if so, then the communication missed.

  4. #24
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    Default

    Quote Originally Posted by Mike Phillips View Post
    Matt, I apologize for the rather boorish responses of the members who disagree with you. It is really not necessary to resort to insults to show the weakness of your position. Yes, I am sure silver producers do ask their bullion banks to hedge their production. But you always hedge such a position in a way which causes minimal impact on the market. Whatever dumping tens of thousands of contracts on the market in minutes at low volume periods may be, it is NOT hedging! You tend to take the view that the big guys are always going to be able to do that so get used to it. That is like letting a bully beat up little kids in the school yard and saying it is part of life. No, you do not let that happen without response. We don't have to put up with school yard bullying and we don't have to put up with market bullying either. It appears that our regulators are not willing to intervene. Doesn't really matter. This is a global, fungible market and the name of the game is physical. And some governments and regulators are not friendly to the US. If there is an "event" don't count on Global coordination. In fact you can count on global disruptive behavior from some countries who shall be nameless.
    Looks like the December delivery month in silver will be a doozy. The message is slowly getting out that if you don't own allocated physical then you don't own metal, you just join the counter party risk line. At some point the realization goes viral and physical dries up. This is not the Hunts era. This is a global market place. Regulators cannot reinstate order in a market which has gotten away from them. This will be yet another debacle which will leave egg all over the face of the US. We are becoming the role model of how NOT to organize capital markets. What a joke.
    Mike,

    It is hayfever season and I have a bad habit of getting irritable now. I also get annoyed with people who pretend they know how the market works, and tell us loudly and repeatedly, with no real knowledge. I see the volume on a second by second basis and I have not seen tens of thousands of contracts in almost forever. I regularly see 5 by 6. 8 by 13, 11 by 4, I start to take notice even when I see things over 20. If you watch the ladder, you will often see larger bids and offers from the arbitrageurs, but those vanish whenever the markets tick up or down in an orderly fashion. You and I dearly love the Silver market, but I have to say, that it is very much a small market, and people make more of it than it really is. We will make good use of it, including in disruptive situations, but it still is not a whale.

    December is always the biggest trading month for Silver, but actual deliveries tend to be only a little bit higher than other months. I see lots of problems with the regulators these days in certain areas of the markets such as monitoring their brokerage house regulatory responsibilities, but when it comes down to the basics of the markets such as deliveries and standards, I haven't seen even a sniff of a problem so far. I know that anything could always happen, but in the meantime, I have to stick with the last several decades of experience to judge the risk

  5. #25
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    Default Hedging

    Quote Originally Posted by Matthew Shelley View Post
    Mike,

    It is hayfever season and I have a bad habit of getting irritable now. I also get annoyed with people who pretend they know how the market works, and tell us loudly and repeatedly, with no real knowledge. I see the volume on a second by second basis and I have not seen tens of thousands of contracts in almost forever. I regularly see 5 by 6. 8 by 13, 11 by 4, I start to take notice even when I see things over 20. If you watch the ladder, you will often see larger bids and offers from the arbitrageurs, but those vanish whenever the markets tick up or down in an orderly fashion. You and I dearly love the Silver market, but I have to say, that it is very much a small market, and people make more of it than it really is. We will make good use of it, including in disruptive situations, but it still is not a whale.

    December is always the biggest trading month for Silver, but actual deliveries tend to be only a little bit higher than other months. I see lots of problems with the regulators these days in certain areas of the markets such as monitoring their brokerage house regulatory responsibilities, but when it comes down to the basics of the markets such as deliveries and standards, I haven't seen even a sniff of a problem so far. I know that anything could always happen, but in the meantime, I have to stick with the last several decades of experience to judge the risk
    Matt,

    The number of contracts was not my point. The price dropped by 8% in a few minutes last May in the middle of the Comex night as a result of heavy selling. OK, I have no jdea how many contracts was needed to make that happen. Doesn't matter. My point was that whatever this was, it was not hedging. If you think it was, we would all be interested in learning why a bona fide hedger would continue selling any commodity through that kind of price drop in a few minutes at a period of very low volume. And please don't tell us it was not the commercial shorts who carried out this slam. You claim repeatedly (and frankly rather tiresomely) that you have superior knowledge. Well tell us then why a market participant would do this. Your usual argument that "the big boys do what they want, so get used to it" won't wash. We know the big boys do what they want. That is what this debate is all about. WHY do they do this? What is the logic, if not to manipulate the price for whatever reason? Share with us some of your much claimed knowledge. Seriously, we will listen if you come up with a sensible explanation.

  6. #26
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    Quote Originally Posted by Mike Phillips View Post
    Matt,

    The number of contracts was not my point. The price dropped by 8% in a few minutes last May in the middle of the COMEX night as a result of heavy selling. OK, I have no idea how many contracts was needed to make that happen. Doesn't matter. My point was that whatever this was, it was not hedging. If you think it was, we would all be interested in learning why a bona fide hedger would continue selling any commodity through that kind of price drop in a few minutes at a period of very low volume. And please don't tell us it was not the commercial shorts who carried out this slam. You claim repeatedly (and frankly rather tiresomely) that you have superior knowledge. Well tell us then why a market participant would do this. Your usual argument that "the big boys do what they want, so get used to it" won't wash. We know the big boys do what they want. That is what this debate is all about. WHY do they do this? What is the logic, if not to manipulate the price for whatever reason? Share with us some of your much claimed knowledge. Seriously, we will listen if you come up with a sensible explanation.

    I've always been curious, just how does someone holding a bunch of short contracts, force those holding long contracts, to sell those contracts at lower prices than they would like? I hear people making that claim all the time, but I've never heard an explanation as to how they actually pull it off. I've watched the CME group do it with back to back to back margin calls in rapid succession, by forcing weak handed players out of the game, but I don't see how you can force someone to sell if they are not interested.
    I'm a proud member of Eggshellman's Liar, Shill, and bully club and a new member of the Super Jew Defense League!!!

  7. #27
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    Dec 2009
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    Default

    Quote Originally Posted by Mike Phillips View Post
    Matt,
    The number of contracts was not my point. The price dropped by 8% in a few minutes last May in the middle of the Comex night as a result of heavy selling. OK, I have no jdea how many contracts was needed to make that happen. Doesn't matter. My point was that whatever this was, it was not hedging. If you think it was, we would all be interested in learning why a bona fide hedger would continue selling any commodity through that kind of price drop in a few minutes at a period of very low volume. And please don't tell us it was not the commercial shorts who carried out this slam. You claim repeatedly (and frankly rather tiresomely) that you have superior knowledge. Well tell us then why a market participant would do this. Your usual argument that "the big boys do what they want, so get used to it" won't wash. We know the big boys do what they want. That is what this debate is all about. WHY do they do this? What is the logic, if not to manipulate the price for whatever reason? Share with us some of your much claimed knowledge. Seriously, we will listen if you come up with a sensible explanation.
    There are traders who have enough capital to move the market in order to take speculative advantage of it in the short term. I often hear that called "manipulation" when the move is to the down side, but I never hear that move when the exact same thing happens and moves the price up. If someone thinks they can take advantage of a thin market by lobbing cannonballs at it, as long as they stay inside speculative limits, they are free to do so. Us little mice might not like the fact that large traders can do that, but for us it comes under the category of "Tough noogies.". If someone can't handle that risk, they should stay out of the way of the elephants.

    Hedgers in general, tend to place their trades in an orderly fashion designed to have as little price impact as possible.

    Most people are using the "manipulation" term to refer to the large existing commercial short position as seen on the weekly commitments of traders reports. If they want to use it as a term that applies to anytime a big trader makes a big enough trade that moves the market against them, I don't have a way to explain it any better. I could only guess, but if someone made a big enough trade in a thin overnight market to cause a big price move, they could have done so with the intent to wait for the US and UK to be open so they could liquidate and take profits when the volume was heavy enough to soak up that many contracts without making a significant move that would have erased their profits. There are lots of times when large traders throw orders at the market to touch off stops or cross technical points just to be able to take advantage and take short term profits. That is just part of a free market.
    Last edited by Matthew Shelley; 15th October 2012 at 06:29.

  8. #28
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    Apr 2009
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    Default Thanks

    Quote Originally Posted by Matthew Shelley View Post
    There are traders who have enough capital to move the market in order to take speculative advantage of it in the short term. I often hear that called "manipulation" when the move is to the down side, but I never hear that move when the exact same thing happens and moves the price up. If someone thinks they can take advantage of a thin market by lobbing cannonballs at it, as long as they stay inside speculative limits, they are free to do so. Us little mice might not like the fact that large traders can do that, but for us it comes under the category of "Tough noogies.". If someone can't handle that risk, they should stay out of the way of the elephants.

    Hedgers in general, tend to place their trades in an orderly fashion designed to have as little price impact as possible.

    Most people are using the "manipulation" term to refer to the large existing commercial short position as seen on the weekly commitments of traders reports. If they want to use it as a term that applies to anytime a big trader makes a big enough trade that moves the market against them, I don't have a way to explain it any better. I could only guess, but if someone made a big enough trade in a thin overnight market to cause a big price move, they could have done so with the intent to wait for the US and UK to be open so they could liquidate and take profits when the volume was heavy enough to soak up that many contracts without making a significant move that would have erased their profits. There are lots of times when large traders throw orders at the market to touch off stops or cross technical points just to be able to take advantage and take short term profits. That is just part of a free market.
    Matt, that makes sense. As Comex is a physical delivery market, the proof of the pudding is in the eating. There does not appear to be any problem with delivery. So we can speculate all we like, but until a long, or group of longs, stands for so much metal that it causes a commercial failure, we have to assume the market is clearing and under those circumstances I can see how you would regard it as speculation not manipulation. The other question I have never heard answered satisfactorily, is where the losses have been booked. These gigantic short positions have been held through a period of major strength. I just don't see the losses in the earnings statements of the banks. Why?

    To Valerb's point. Nobody has to sell their long position. Prices drop when sellers prevail. But at the end of the day, no matter how the price moves, there are always the same number of sellers as buyers. But as a long, if you stand, then you pay for the metal at the price at which you contracted, not the prevailing price. So one assumes that if the price you bought is higher then the delivery notice day price, then you will not take delivery and lock in an immediate loss. The exception is if you believe that you will not get good delivery if you roll your contract to a future delivery date. I.E you really want your metal NOW and are prepared to pay a premium price for it. That is when backwardation occurs and it implies that the market players expect delivery problems in the future. So we shall see what happens with December. There are people who say December delivery will put a strain on the Comex. If so, an early straw in the wind would be a backwardation in Comex silver. That has not apparently occurred yet. So we have to assume that delivery will be made or participants will either cash out or roll to a future month. Time will tell. I personally think the market is manipulated, but I accept I have no grounds but gut feel to support that view. It does look like a lot of people are buying physical. I truly think this message is starting to get out and if gold and silver become a material part of personal and institutional portfolios, then there will be a big increase in price. Right now investors are still in a funk, but the decision to hang in with cash or T Bonds is looking more and more moronic as markets rise. The housing market is already showing signs of this recognition. One thing is for sure, there is so much liquidity in the system, once the dam breaks, there is a lot of water behind it and ALL tangibles will be the beneficiaries. We have not seen this kind of monetary base driven asset increase in our lifetimes in this country. And we are now so connected, virality makes "tulip mania" look pretty pedestrian. Eventually printing money always leads to asset inflation. It is inevitable. The only unknowns are when, how much, and how fast.

  9. #29
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    May 2007
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    Default

    Quote Originally Posted by Mike Phillips View Post
    Matt, that makes sense. As Comex is a physical delivery market, the proof of the pudding is in the eating. There does not appear to be any problem with delivery. So we can speculate all we like, but until a long, or group of longs, stands for so much metal that it causes a commercial failure, we have to assume the market is clearing and under those circumstances I can see how you would regard it as speculation not manipulation. The other question I have never heard answered satisfactorily, is where the losses have been booked. These gigantic short positions have been held through a period of major strength. I just don't see the losses in the earnings statements of the banks. Why?

    To Valerb's point. Nobody has to sell their long position. Prices drop when sellers prevail. But at the end of the day, no matter how the price moves, there are always the same number of sellers as buyers. But as a long, if you stand, then you pay for the metal at the price at which you contracted, not the prevailing price. So one assumes that if the price you bought is higher then the delivery notice day price, then you will not take delivery and lock in an immediate loss. The exception is if you believe that you will not get good delivery if you roll your contract to a future delivery date. I.E you really want your metal NOW and are prepared to pay a premium price for it. That is when backwardation occurs and it implies that the market players expect delivery problems in the future. So we shall see what happens with December. There are people who say December delivery will put a strain on the Comex. If so, an early straw in the wind would be a backwardation in Comex silver. That has not apparently occurred yet. So we have to assume that delivery will be made or participants will either cash out or roll to a future month. Time will tell. I personally think the market is manipulated, but I accept I have no grounds but gut feel to support that view. It does look like a lot of people are buying physical. I truly think this message is starting to get out and if gold and silver become a material part of personal and institutional portfolios, then there will be a big increase in price. Right now investors are still in a funk, but the decision to hang in with cash or T Bonds is looking more and more moronic as markets rise. The housing market is already showing signs of this recognition. One thing is for sure, there is so much liquidity in the system, once the dam breaks, there is a lot of water behind it and ALL tangibles will be the beneficiaries. We have not seen this kind of monetary base driven asset increase in our lifetimes in this country. And we are now so connected, virality makes "tulip mania" look pretty pedestrian. Eventually printing money always leads to asset inflation. It is inevitable. The only unknowns are when, how much, and how fast.

    December is always the big month to look forward to, but the largest December that I can remember was in 2008 when they delivered 30 million ounces. I don't know how to access the records for past years to see when that number was topped, but it would take a lot more than 30 million ounces to turn COMEX on it's ear. We know there are almost 37 million ounces available for sale in the Registered class, but we don't know at what prices they would become available. Then there is another 104 million ounces in the Eligible class, which is spoken for so to speak, but some unknown quantity in there most certainly belongs to short contract holders. What no one knows about is the amount in those warehouses that is not in either category and is available for delivery. Anyone that follows the delivery reports and the COMEX warehouse reports, knows the amount leaving the COMEX Registered warehouse inventory is always a fraction of the amount actually delivered. Although I don't know if that could hold up today if another 30 million ounces or more were to be delivered this December. I hope not!!!

    Damn I want to see that $50 wall knocked down in my lifetime!

    $75, $100, $300 and $3,000 are great numbers, but if Silver can't get past $50, those other numbers are meaningless.
    I'm a proud member of Eggshellman's Liar, Shill, and bully club and a new member of the Super Jew Defense League!!!

  10. #30
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    Default Comex Inventory

    Quote Originally Posted by valerb View Post
    December is always the big month to look forward to, but the largest December that I can remember was in 2008 when they delivered 30 million ounces. I don't know how to access the records for past years to see when that number was topped, but it would take a lot more than 30 million ounces to turn COMEX on it's ear. We know there are almost 37 million ounces available for sale in the Registered class, but we don't know at what prices they would become available. Then there is another 104 million ounces in the Eligible class, which is spoken for so to speak, but some unknown quantity in there most certainly belongs to short contract holders. What no one knows about is the amount in those warehouses that is not in either category and is available for delivery. Anyone that follows the delivery reports and the COMEX warehouse reports, knows the amount leaving the COMEX Registered warehouse inventory is always a fraction of the amount actually delivered. Although I don't know if that could hold up today if another 30 million ounces or more were to be delivered this December. I hope not!!!

    Damn I want to see that $50 wall knocked down in my lifetime!

    $75, $100, $300 and $3,000 are great numbers, but if Silver can't get past $50, those other numbers are meaningless.
    Taking the data from your own post in December 2008, the registered inventory at that time was just under 81m oz; over double what it is today. The monetary base was $800bn, now it is over $3 trillion. So, in macro terms there is now about three times the potential liquidity chasing ANY asset, never mind one which has halved in supply and is seen as a hedge against money printing. Interest rates were much higher. Another difference is the perceptions of investors. In 2008 institutional portfolios had no allocation to precious metals. Now they are starting to buy. Central banks were sellers of gold, now they are buyers. Individuals are starting to buy. Asians, particularly Chinese, are joining Indians as significant buyers and the Chinese Government is officially encouraging individuals to buy metals. In 2008 it was prohibited. In 2008 the Enforcement Division investigation into silver began. It is ongoing after four years. The price has also risen, but IMHO not nearly enough to reflect these fundamentals. The issue is not whether the shorts can get together enough silver to make a big December delivery. But what next? And is the game up?

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