In Ted Butler's Archive

Straight Talk On Manipulation

(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)

This article comes as a result of recent conversations with my friend and mentor Izzy Friedman. Our discussions on silver go back decades, to the mid-1980’s. Some may marvel at how two grown men can debate such an apparent narrow issue on almost a daily basis for 25 years. What could we possibly find new to talk about? The truth is that not only do we find new things, the debate oftentimes becomes quite heated. Why this intense continued interest in this metal?

Silver is an interesting topic in itself. Like all world commodities, it’s impossible to study and keep current on all the issues impacting silver without being aware of what is going on in the world. It forces you to be knowledgeable on a host of current events, including economics. It forces you to study history and contemplate the future. It helps make you well rounded. Such thought processes are more satisfying than keeping up on the latest celebrity gossip.

Most important is the financial angle to silver. This is the primary interest of those that read my articles. Silver is an asset that can make people a lot of money, perhaps even provide financial salvation to many. It requires that you buy it in the right form for the long term. Without the chance to score big financially, most people would not be that interested in silver. This big pending silver gain is tied to the hip with my main motivation for the past 25 years – ending the manipulation in silver. Fortunately, we are approaching the flip-side of this manipulation. That’s when the silver price stops behaving as it has for 25 years. This will be the glorious time for the price of silver.

I know that many readers have trouble fully grasping the manipulation issue. Admittedly, it is complex. I know that some believe that such a long-term manipulation is not possible. The CFTC has denied the silver manipulation for so long, that they have no graceful way to change their position, no matter how compelling the evidence. This manipulation is the most important market issue possible. That is evident by the attention that the regulators exhibit when dealing with it. However, it’s never about simple and direct answers, in a timely manner. It’s always a stall and never a fair and open debate. But the evidence of wrongdoing, in the form of a continued super concentration on the short side, has grown so compelling that another whitewash is likely to be as well received as the Iranian election. That’s why the silver manipulation appears to be on its last legs.

Once this manipulation ends we will be able to measure the full extent of the damage. The long-term price suppression is the prime component behind the depletion of silver over the past quarter century. The dangerous predicament that a few short sellers have placed our country and the world in is related to the minimal remaining inventories. We have no buffer to smooth out the coming shortage, except at extremely high prices. The artificial low prices caused by the short sellers are responsible for the depleted inventories. There is no water for the fire trucks to put out the fire caused by a silver shortage. The short sellers have seen to that.

Investors in silver, of course, won’t consider the wildly escalating prices as damage, nor should they. There will be great fortunes to be made in silver, but that still doesn’t excuse the dangerous predicament a few greedy short sellers and lax regulators have created. More people are becoming aware of the real story in silver and are doing what comes natural, namely, getting their share while there is still time. There are certainly no big government stocks of silver remaining in the world. We won’t wake up to any announcement that the IMF or any other official source will be selling silver, like was just announced in gold. How can they, when they don’t own any silver?

In addition to the crime of market manipulation and the pain to producers and their employees that these short sellers have caused, they are guilty of treason. That’s a very strong word, but I think it applies not only to the short sellers, but also to their protectors. That’s because they are placing our country in jeopardy in the manufacture of defense items. The US is dependent on imports for 70% of our silver consumption just like petroleum. We all know the danger in crude oil. That’s why we maintain a strategic petroleum reserve. We have no strategic silver stockpile, just empty vaults, thanks to the big short sellers. The coming world-wide silver shortage places us in jeopardy, not just for defense, but for all types of the manufactured goods produced here and the jobs that go with them. How a US regulator, the CFTC, can stall while this condition festers is beyond me.

Because of the manipulation, silver is a better long-term buy than at any time in the past 25 years. I see us reaching a more extreme shortage scenario with price peaks that are, quite frankly, so astonishing I don’t care to pinpoint them here. On the one hand we should be outraged about the continued illegality of the ongoing price scam, while on the other hand elated over the extreme price escalation that will undoubtedly occur because of it. There will be nothing moderate about the outcome.

One last thing. As I write this, it appears that the “normal” resolution of the lopsided market structure in COMEX gold and silver is unfolding. In other words, the big shorts are ripping the rug out from under the tech fund leveraged longs. When this rug-pulling is completed, it is my strong conviction that this will be, once again, an absolutely perfect time to buy silver and put it away. And if the CFTC ever gets around to enforcing the law, it will be the last time such an opportunity exists.

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