L'enorme manipolazione del prezzo dell'argento sta per finire?
Ms. Blythe Masters, head of commodities for JPMorgan, gave very reasonably-sounding explanations to the allegations of silver manipulation. But they were very simple explanations offered in the blink of a TV sound bite. To those convinced that silver is not manipulated, her words explained all. To those convinced that silver is manipulated, her statements were false and misleading. That’s because the questions and answers in the TV segment were prepared and scripted. But because they only barely penetrated the surface, they fell far short of setting the matter to rest.
The great thing is that this can be resolved with just a little further explanation. You see this is not an instance of he said, she said. This is a case of fact and commodity law and the right questions and answers. So let’s drill down to the answers given to see if they really addressed the allegations.
The main theme advanced by Ms. Masters is that JPMorgan holds no unhedged silver positions and all its short positions are a direct result of offsetting client positions in the OTC or swaps market. Therefore, it matters little to JPMorgan whether the price of silver rises or falls. For the sake of argument, let me stipulate for the moment that JPMorgan has offsetting client positions behind their big net short position on the COMEX. I don’t believe there are truly legitimate client positions backing JPMorgan’s COMEX short position, but let’s set that aside for a moment while I try to show that client offsetting positions or not, JPMorgan’s COMEX short position is still manipulative. JPMorgan claims they are not manipulating silver, but those are just words. Their actions are quite different. What’s more important, words or actions?
The allegations against JPMorgan for silver manipulation are centered on their concentrated short position on the COMEX. Nothing more, nothing less (aside from HFT). Claiming there were some unspecified client positions offsetting the concentrated short position doesn’t alter, in any way, the fact that the concentration still exists. The point is not the nature of what may be responsible for the concentrated short position, but the concentrated position itself. Even if JPMorgan owned every ounce of silver they held short on the COMEX in physical form, holding 25% or so of any licensed futures market would be manipulative to the price, in and of itself. It doesn’t matter what excuse is given for holding an excessively concentrated market share; such a market share would be manipulative.
If a single trader held a 25% share of any other major futures market, say in crude oil or corn, there would be emergency meetings and decrees to break that concentration before the sun went down. Farmers would be descending on Washington, DC in tractors if a New York big bank held a short position equal to 25% of the Chicago Board of Trade’s corn futures market. It wouldn’t matter one wit to the regulators what was behind the position. Such a market share in a major commodity futures market would be unthinkable. But 25% has been JPMorgan’s usual share of the net COMEX silver (minus spreads) since it took over Bear Stearns and often it has been much larger than 25%. JPMorgan can’t deny that market share in silver as that is borne out in government statistics, so it is doing the next best thing - trying to change the issue into what may be behind the position. What’s behind the position doesn’t matter; the position itself matters.
I’ve often said that I think JPMorgan is stuck with their excessively concentrated silver short position on the COMEX. This TV attempt to explain it all away strengthens my conviction. The thing about the concentrated short position is that there has always been one big silver short holder on the COMEX. It started with Drexel Burnham, got moved to AIG Trading, on to Bear Stearns and, finally, to JPMorgan. My sense is that it won’t be passed on again. JPMorgan is the final holder and I sense them knowing that may be behind the attempt to explain it away. Never, in the 25 years I have been engaged in attempting to end the silver manipulation, has there ever been a public acknowledgement from the big silver short. There is one now.
If holding a giant COMEX short position is such a sweet deal, why wasn’t JPMorgan holding such a position prior to Bear Stearns’ demise? If legitimate client positions stand behind JPM’s short position that implies most of the world’s silver hedgers only do business with JPM, no one else. Why aren’t other banks and financial institutions looking to compete with JPMorgan on the short side of silver and edge them out? That’s because no other firm wants to get stuck like JPM is stuck and reduced to offering flimsy excuses to pre-arranged softball questions on TV.
Ted Butler
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