In Jim Cook's Archive

JPMORGAN AND SILVER

The following article was sent to the Wall Street Journal Editorial page. I doubt it will be printed, but it was worth a try.

Has one of America’s biggest banks become the largest private silver hoarder in history? We know from public records that JPMorgan (JPM) currently holds 139 million ounces of silver in its COMEX approved warehouse. That’s more silver than the Hunt brothers accumulated in 1980 and more than Warren Buffet acquired in his foray into silver in 1998. Since December, JPM has taken delivery on over 6,000 silver contracts on the COMEX. That’s more than 30 million ounces in 10 months. Numerous clues exist that JPM has accumulated far more silver than meets the eye.

The mainstream media has shied away from mentioning the big bank and its silver acquisition. It sounds somewhat conspiratorial, but if you think the topic is neglected, Google “JPMorgan silver” for an eye-opening look into the topic’s popularity. To understand fully how JPM acquired its vast silver hoard, we have to go back to 2008 and the failure of Bear Stearns. In August 2008 the Bank Participation Report published monthly by the federal Commodities Futures Trading Commission (CFTC) indicated a massive increase in the silver short position of a U.S. commercial bank. When questioned by several congressmen, the CFTC wrote that this short position was taken over through an acquisition of an investment bank. The only significant acquisition at that time was JPMorgan’s takeover of Bear Stearns. It was safe to conclude that JPMorgan had assumed Bear Stearns’ short position.

Much of the detective work that followed was initiated by Theodore Butler, an independent consultant and silver analyst. He claims that JPM has now accumulated 750 million ounces of physical silver. By ascertaining the amount of short contracts JPM held in the futures market from the weekly Commitment of Traders Report (COT) published by the CFTC, Mr. Butler was able to form a startling conclusion. JPMorgan was manipulating the silver market. It held the price of silver down in the futures market while at the same time buying physical silver. Every time the price would climb, JPM would thwart the rise by selling futures contracts. This process has been going on for almost ten years and according to Mr. Butler, JPM has made hundreds of millions of dollars while never suffering a loss, something he calls impossible without a fix.

Mr. Butler has brought his claims of market manipulation to the attention of the CFTC on numerous occasions. However, the regulator has never offered a satisfactory explanation. Furthermore, he has sent weekly copies of his newsletter to JPMorgan accusing them of illegal acts. These notices of what he calls serious wrongdoing have regularly gone to JPM executives, board member, and lawyers. Normally when you besmirch the reputation of a major corporation in public, you are quickly threatened with legal action. However, Mr. Butler has never heard a word from JPM. It’s easy to conclude that where there’s smoke, there’s fire.

Mr. Butler, who has an extensive background in the futures market, has written frequently on how JPMorgan has been able to accumulate so much silver without driving up the price. In addition to taking delivery on futures contracts, he suspects they are skimming silver from the millions of ounces of silver that go in and out of COMEX-approved warehouses on a weekly basis. He further suggests they regularly remove silver from the silver exchange-traded fund SLV whenever their ownership position approaches 5%, which would require reporting to the SEC. He has articulated other possible methods they have used to acquire these billions of dollars of silver. At some point Mr. Butler and other silver investors hope that JPM will relax their hold on silver and let the free market set the price. This would get to the nub of why JPM has accumulated so much silver. When the price of silver rises they stand to make a truly mind-boggling amount of money.

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