Coincidence or Confirmation?

[webmaster]

Subject:Coincidence or Confirmation?
By: Theodore Butler

Overview: What would be the effect on a small market, like silver, if several traders bought back, or tried to buy back many days of world production, perhaps a hundred days or more, in a very short and compressed time frame, such as was just experienced by SemGroup in oil? My back-of-the-envelope calculation would be silver would move up by double to triple the amount just seen in oil, on a dollar per barrel/dollar per ounce basis. In other words, if oil was moved by $10 to $20 per barrel by SemGroup’s buying, silver, in comparable circumstances, would move by $25 to $50+ per ounce.

Link: http://news.silverseek.com/TedButler/1217265595.php

[duneyman]

This is the very first time I have read or heard about SemGroup's huge loss in oil trading. I really don't know whether Ted Butler is right or wrong about oil or gold or silver or actually anything but I do enjoy reading these types of articles. He does present a ( seemingly ) good case for his view of the markets. For our sake I sure hope he is right and we all can benefit from silver's rise ( or even possible explosion ) in the coming years.


Bill

[pkrebaum]

Or, those who make the rules never have to play by them.

There's just one small problem in comparing the Gold and Silver shorts with shorts in other commodities. Private companies like SemGroup have limited financial assets. They either have to buy back their positions to limit their losses or go belly-up trying to make margin call. Ted has indicated before that many of the shorts probably are the bullion banks...... members of the FED, or with very close ties to the FED. This means they have, essentially, an unlimited access to cash to fund margin calls. Actually, the margin calls might not even come since they're working both sides of the fence and make the market.

What I'm saying is that the shorts will never be FORCED to sell.

They can't go bankrupt because they own the printing presses.
And they make all the trading market rules.

If any REAL Silver shortage developed (industrial users couldn't get silver at a reasonable price), Silver would be declared a "strategic national asset" and private ownership would be banned, though not necessarily confiscated. Along with the ban would come price controls for the "official" (not free-market, "black-market", or ebay price) price of Silver, and you can bet your sweet bippy that at first the official price would be set artificially low.... say $6 per Oz. ..... so that the shorts could "officially" buy back all their positions. Then they'd all go LONG Silver at $6/Oz. (remember PRIVATE ownership would still be banned so you wouldn't be getting any....) and then the price controls would be allowed to expire so they could make tons of money on the guaranteed-to-rise price.

[Sloy]

I agree with your theory. If the bullion banks owned by the government are the ones shorting the silver market, they can change the rules to fit the circumstances. Although I agree with Ted Butlers analysis, Silver is extremely risky because either A) the government will change the rules or B) the market will default. I believe some will profit on the way up but it will be bad for the last men standing at the top of the run up. If we really wanted to bring this to a close, we would agree to provide notice for physical delivery. I do not think they could come up with 217 days of production in one month.

[hiyosilver]

Originally Posted by pkrebaum

If any REAL Silver shortage developed (industrial users couldn't get silver at a reasonable price), Silver would be declared a "strategic national asset" and private ownership would be banned, though not necessarily confiscated. Along with the ban would come price controls for the "official" (not free-market, "black-market", or ebay price) price of Silver, and you can bet your sweet bippy that at first the official price would be set artificially low.... say $6 per Oz. ..... so that the shorts could "officially" buy back all their positions. Then they'd all go LONG Silver at $6/Oz. (remember PRIVATE ownership would still be banned so you wouldn't be getting any....) and then the price controls would be allowed to expire so they could make tons of money on the guaranteed-to-rise price.

I too have considered this. My question pkrebaum, with this in mind, what do you think our alternatives are?

[skijake]

The end take down won't matter. If the dollar craters big time, no one is going to turn silver in at a ridiculous price. So those that own physical will have real value and won't trade it for anything except what they perceive to be equal value. Paper Silver is of course at risk as discussed widely. If you are just looking at an asset that appreciates 20%+ a year, silver is risky. They can change the rules and the game at any time. I think the bluff will be called when just 1 billionaire gets spooked about his assets made of paper and looks to protect it like we are doing. He doesn't fool around with futures and just takes physical delivery big time. Month after month. Then the game will change. How it plays out?---I'll pay to watch that.:wink:

[pkrebaum]

The Alternatives

"what do you think our alternatives are?" -hiyosilver

If I really knew I'd probably be ultra-rich, sipping pina-coladas on my own private island somewheres.......however.....
so far PMs seem to be the best way to preserve wealth in uncertain economic times, and the next year has plenty of uncertainty ahead. Note that I said "preserve wealth" and not "get rich", my hopes aren't that high........ but if I do get a little richer then all the sweeter ! And actually I'm hoping that nothing big happens with the economy, as detailed below:

Let's say you've got 40K in an IRA/401K, 20K in the bank, and 30K in Silver/Gold. Total is 90K, with 30% in PMs..... enough to weather the storm .....even if the other assets go to zero the PM gains should cover you.
Now let's make things a bit more real: you're a homeowner with two cars and a house full of "stuff", or "contents" as your insurance policy calls it. We'll leave the subject of children out entirely and value the house at 200K, the cars at 20K combined, and the "stuff" at 50K (along with other formentioned assets of 90K).
Now your total assets are 360K, with 30K in PMs or 8.3%. With your PMs "leveraged" 12 to 1 against your other assets, what will happen if they lose half their value ? (and we now know that real estate can lose value, especially if everyone else is being forclosed upon.....and autos with gas at $12/gallon might be worthless too) Economic meltdown doesn't seem so rosy or profitable now. If it's just you in a tiny apartment with a bicycle and a big pile of Silver then things might be O.K.. A lot of the people in this forum probably have between 5 and 50K worth of PMs and to them it probably seems like a lot........... but the true picture might become a lot less fun if you add up the value of all your assets and compute your "PM leverage ratio".

If T.S. really does H.T.F., then............ well...... here's an idea from a long-past post:

But all hope aside, we should try to think ahead of the curve .... assume the PTB stay the PTB.... and ask ourselves " how can I survive in a hyperinflationary or post-dollar world". We would need to make something that everybody either absolutely needs or desires very much. Preferrably something that lends itself to trade by barter. If the three ways to create wealth are mining, manufacturing, and agriculture... then we should think of a job we can do in those sectors.... or better yet own a means of production in one of those sectors. Manufacture something that needs to be used locally (like bread), so it's immune from foreign competition. Grow crops in a totally self-sufficient (zero-cost basis) manner, like the Amish do. Anyone want to go prospecting with me and stake out a claim on a Silver mine ????

************************************

Probably some investments in energy stocks would be a good idea...... there's one company I really like called "Nanosolar". If they ever go public I'm going to buy 30K worth because I think it's going to be the next "Google" of energy (and Google is one of their big private investors already...).

[peri1224]

Originally Posted by pkrebaum

...at first the official price would be set artificially low.... say $6 per Oz. ..... so that the shorts could "officially" buy back all their positions. ...

That is a very cynical opinion, but of course, entirely possible. If it really happened, the $6 price would only apply to the paper market. No investor or industrial user would be able to buy any physical PM at that price. So, how realistic is this scenario... or that they would keep control over the physical market after that little stunt?

[pkrebaum]

"That is a very cynical opinion, but of course, entirely possible. If it really happened, the $6 price would only apply to the paper market. No investor or industrial user would be able to buy any physical PM at that price. So, how realistic is this scenario... or that they would keep control over the physical market after that little stunt?" -peri1224


A very SIMILAR (not exact, but close enuf to show U what they can do...) thing has already happened, during the infamous "nickel default" on the LME. see:

http://news.goldseek.com/GoldIsMoney/1181314860.php


And a similar thing could happen to anyone with Silver in the COMEX, LME, SLV or a PM IRA. Always take physical delivery of your stuff. Remember, posession is 9 tenths of the law ! See this thread:

http://forums.silverseek.com/showthr...=nickel&page=2

[hiyosilver]

Originally Posted by pkrebaum

Probably some investments in energy stocks would be a good idea...... there's one company I really like called "Nanosolar". If they ever go public I'm going to buy 30K worth because I think it's going to be the next "Google" of energy (and Google is one of their big private investors already...).

Do countries like China, Taiwan, or Indonesia have to comply with our patent laws?