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 The following letters about silver short sales are self explanatory.

November 16, 2001

James E. Newsome, Chairman
Commodity Futures Trading Commission
Fax 202-418-5533

Dear Mr. Newsome:

As a silver futures and options buyer I am perplexed by the large degree of short selling in silver by dealers in October.

The selling of 200 million ounces is greater than the known world supply and at least one-third of the annual production of silver. I can’t imagine anyone being allowed to short one-third of the world’s corn or petroleum. In other words, the extent of this silver shorting dwarfs anything that transpires in other commodities.

I don’t believe even the Hunt Brothers traded such large amounts of silver and they, of course, were thwarted. I also understand there were brakes put on the Buffett purchase. I hope that the definition of manipulation in the silver market is not predicated on who is doing it.

My company sells physical silver. We have 10,000 to 20,000 customers worried about the silver price and willing to write letters to the exchange or to their representatives and senators. That’s why I’m asking for an explanation on how the sale of so much silver in only a few weeks is not considered to be price manipulation. Please let me hear from you.


James R. Cook


February 25, 2002

Mr. James R. Cook
Investment Rarities Incorporated
7850 Metro Parkway
Minneapolis , Minnesota 55425

Dear Mr. Cook:

This is in response to your letter of November 16, 2001 to the Commodity Futures Trading Commission (CFTC) in which you expressed concern about “the large degree of short selling in silver by dealers in October,” and suggested the possibility that this involved price manipulation.

The CFTC places the highest priority on the prevention of price manipulation in all U.S. futures and option-on-futures markets. The CFTC monitors trading activity in commodity markets in order to detect and prevent market manipulation and other forms of market abuse. The Commodity Exchange Act makes it unlawful to manipulate or attempt to manipulate the market price of any commodity in interstate commerce, or for future delivery on or subject to the rules of any contract market. In order to prove a manipulation, it must be shown that a trader intentionally caused the price of a commodity to become artificial or, in other words, intentionally moved the price of a commodity away from a level reflecting the legitimate forces of supply and demand.

The CFTC receives daily reports identifying the holders of all long and short positions (above certain reporting levels) in each futures and options market. Using these reports, CFTC economists monitor trading activity in the silver futures and options markets. In addition, our analysts monitor prices and price relationships and other data in the silver cash and futures markets. Based on our routine review of the silver market, we are not aware of any evidence to conclude that the silver price has been, or is being, manipulated.

I hope this information is helpful to you.


John Mielke
Market Surveillance Section


March 11, 2002

John Mielke
U.S. Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, NW
Washington , DC 20581

Dear Mr. Mielke:

Thank you for your letter. I’m exasperated that it took over three months for you to respond, but I’m sure you are busy.

Your letter states that manipulation exists if someone “intentionally moved the price of a commodity away from a level reflecting the legitimate forces of supply and demand.” It appears that four trading companies have shorted almost 200 million ounces of silver. That’s about 1/3 of the world’s annual silver production. It’s far greater than all the known silver in the world. How could such concentrated and enormously large short sales be legitimate forces of supply and demand? What would the price of silver be without such overwhelming short sales?

By any historical definition silver is cheap, physical demand is great and for fifteen years there’s been a deficit. Given these facts, short sellers would logically be timid. Only by a concerted and massive effort on the part of a small group of well-capitalized companies in tacit agreement or concerted effort, would such actions reasonably occur.

Please explain to me how the exorbitant shorting of silver contracts with its price capping effect is not intentional or artificial and is not an illegitimate force in its effect on supply and demand?

I’d appreciate it if you could get back to me faster than before. My company has over 10,000 buyers of physical silver. I would like to be able to provide them with a rational explanation to the short selling dilemma. I’m sure you are aware of the growing level of publicity focused on these short sales.


James R. Cook

cc:        James E. Newsome
Commodity Flutures Trading Commission
Three Lafayette Centre
1155 21st Street, NW
Washington DC 20581


Here is another letter from silver analyst, Theodore Butler:

The Honorable James E. Newsome March 11, 2002
Commodity Futures Trading Commission                         VIA FAX and E-MAIL
Three Lafayette Centre
1155 21st Street, NW
Washington DC 20581

Dear Chairman Newsome:

I wrote to you (via e-mail and fax) on February 12, 2002, about the alarming and concentrated amount of net short sales of silver futures contracts held, by 4 or less traders, on the Commodity Exchange, Inc. (COMEX), and how this uneconomic short-selling was manipulating the price of silver. I even offered a constructive solution. Unfortunately, the situation has grown worse.

In your Commitments of Traders Report (COT), dated March 8, 2002 , for positions held, as of March 5, 2002 , these same 4 or less traders have increased their net short position in COMEX silver futures to 34,784 contracts, or almost 174,000,000 ounces of silver. This concentrated net short position is 50% greater than all known world silver bullion inventories. It is greater than the two leading silver-producing countries, Mexico and Peru , can mine in a year, combined. Never, in the history of US commodities trading, has such a concentrated, manipulative position existed, except in COMEX silver. How can you allow these 4 or less traders to continue to manipulate the price of silver?

When the Enron Corporation went bust, your agency was caught flat-footed and unaware of their true condition. You did not warn the public or the markets. Your defense was that Enron kept their true condition secret and there was no transparency. The manipulation of the silver market, by these 4 or less traders, is many times more significant than the Enron debacle. But, as your weekly reports indicate, this uneconomic and unprecedented short-selling is no secret. The only thing that is a secret is the identity of these 4 or less traders.

By protecting the identity of these 4 or less traders, the CFTC is, effectively, aiding and abetting these manipulators, because you are preventing other regulatory agencies and the private sector from taking action against an obvious manipulation. It is bad enough when a government agency fails to fulfill its mandate and terminate a criminal enterprise for which it is responsible. It is intolerable for that same agency to prevent others from ending that criminal activity.

If the CFTC won’t end the silver manipulation, at least make public the names of these 4 or less traders, so that others might. It is all about transparency. And if there is no manipulation in the silver market, as your agency has contended all along, these 4 or less traders will be able to prove that and the result will be more confidence in them, your agency, and our markets.
Ted Butler

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