Precious metals analyst Ted Butler returns to the podcast this week to discuss the long-suffering silver price.
Will the beatings continue? Or is there finally reason to believe that, after seven painful years of languishing, silver may finally see a brighter future?
Butler predicts a turning point is nigh. And ironically, he thinks silver’s savior will be the same cultprit responsible for keeping the price suppressed for all these years:
Every time we’ve had a rally in the last 10 years, ever since J.P. Morgan took over the investment bank Bear Stearns, J.P. Morgan has added aggressively to its paper short division on the COMEX as speculators, technical funds and what-have-you come in to chase rallies higher. J.P. Morgan has always been the seller of last resort, and they sell whatever is required to satisfy all buying. And, ultimately, after that buying is satisfied, the prices roll over and come back down. This is the “wash, rinse, repeat” cycle that many people have become aware of. J.P. Morgan adding short positions has stopped every rally in silver — and gold, for that matter — over the last 10 years.
J.P. Morgan never sells on the way down. They only sell and add short positions on the way up. So, the manipulation in essence takes place on the rally. And, when J.P. Morgan adds short positions, once they’re done selling and the buyers are done buying, the price stops going up and people turn to sell. That’s when J.P. Morgan rings the cash register and buys back all the shorts that they’ve added at lower prices than where they sold, meaning they always make a profit.
J.P. Morgan has never taken a loss in 10 years when adding short positions in silver like I just described. They’ve only made profits — to varying degrees, but never a loss. This is the essence of the manipulation.
When is their stranglehold of paper control on the price ever going to break? The answer to that important question gives me tremendous reasons for optimism. In fact, it’s the mirror image of the pessimism that is naturally generated by these prices that do nothing but go down for no legitimately explainable reason. J.P. Morgan by virtue of its giant physical silver holdings now, has positioned itself and may be done positioning itself — we won’t know that until after the fact — but, the same causes that have driven prices down in a bewildering, unexplained fashion, are going to cause those prices to explode.
The thing that’s going cause that explosion when it occurs – while I can’t tell you when it’s going to occur, I can tell you it will occur – the lynchpin to that is that one of these days, and I think real soon, J.P. Morgan is not going to add to their silver short positions as they have on every single rally over the last 10 years. If they don’t add to short positions and cap and control the price, the price of silver is going to explode.
There’s really getting to be very little reason for J.P. Morgan to add to short positions in the near future. They’re positioned perfectly. They’ve been buying back as many short positions as they can, paper short positions as they can on this decline. It’s all in the CFTC commitment of traders documentation. They reached a critical point where they can’t really buy any more, because there are no sellers on the other side. When prices start to turn up and all the technical funds and managed money traders that have been selling so aggressively, just because prices have been going down, these same traders will start to buy, simply because prices are going up. If J.P. Morgan doesn’t add short positions, silver will explode in price.
If you put a paper to pencil and start to calculate how much J.P. Morgan will make on a significant price rally, just multiply 750 million by $1 for every dollar that prices may go up. If silver runs up $100/oz, and I don’t see any problem in that, that will mean J.P. Morgan stands to make $75 billion. That’s serious money, and that’s the only reason that they’re in this. They’re not in this to control the world, or enslave us all, or to save the dollar, or anything like that. J.P. Morgan is in this to make a buck. And they’re going to make the biggest buck ever when silver and gold take off to the upside.
Click the play button below to listen to Chris’ interview with Ted Butler (43m:34s).
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Author: Tyler Durden