Showdown Time?

[webmaster]

Subject:Showdown Time?
By: Theodore Butler

Overview: The spirited price rally in silver and gold carried further in the past week. In silver, the rally in May was the best in 22 years, and the price has reached its highest level in ten months, as foretold by the nice market structure set up back in April. From the price depths of last fall, to the recent highs, silver has climbed 75%. Relative to gold, silver is at its best price ratio since September. This means that anyone who did buy silver, instead of gold over the past ten months has had a better return.

Link: http://news.silverseek.com/TedButler/1243963795.php

[canbyte]

It’s common in all markets for the dealers to be selling and selling short when speculators buy, and vice versa. This is how all markets are structured. There must be a short for every long in every derivatives contract, including futures and options. No problem here. And it doesn’t matter much in derivatives if the shorts are naked, namely, that they don’t actually own the commodity that they are selling short. That’s also how the markets operate. So, no real problem there either.

Many folks cannot be so sanguine as you are about "how markets are structured" with all this shorting and naked shorting that cheats honest people out of their savings, destroys companies/ jobs, markets, even whole economies, distorts markets and market information, dishonestly fabricates duplicates/ phoney shares, borrows without notice, and gives perverse incentives to distort, manipulate and deregulate. Shorting undermines trust in the entire system.

Readers can do their part to abolish shorting at
http://www.petitiononline.com/shortNOT/petition.html

follow links therein for info

[Rich Vermillion]

Originally Posted by canbyte

Many folks cannot be so sanguine as you are about "how markets are structured" with all this shorting and naked shorting that cheats honest people out of their savings, destroys companies/ jobs, markets, even whole economies, distorts markets and market information, dishonestly fabricates duplicates/ phoney shares, borrows without notice, and gives perverse incentives to distort, manipulate and deregulate. Shorting undermines trust in the entire system.

Readers can do their part to abolish shorting at
http://www.petitiononline.com/shortNOT/petition.html

follow links therein for info

Very interesting point. I agree with Ted Butler that shorting is a normal part of market function, but I certainly agree that naked shorting (i.e. without the underlying commodity to back it) is harmful to the system.

If I am not mistaken, I believe GATA.org pointed out that shorts in the COMEX are required to have 90% on hand to cover, which none of the market manipulators likely do. The fact that this provision is already within the regulations means that the key issue is enforcement of the regulations--which is Mr. Butler's exact point...they are not enforcing the existing rules of trade.

Thus, I agree in-part with the principle of the petition, but it seems to be a hollow in practice. If the current laws are not enforced, and the regulatory agency in charge is complicit and/or negligent, then the agenda of the petition is somewhat moot...is it not? Nonetheless, I agree that naked shorts are especially dangerous in the commodities markets because it grossly distorts everything.

Personally: I would (in the short term) consider it more advantageous to focus our efforts on pressuring the CFTC to do their job, or even on legal action against the CFTC. This would seem to me to have a more immediate and substantive affect on the situation at hand, rather than fighting to gain more laws only for the CFTC to fail to enforce them too.

-Rich Vermillion