In Ted Butler's Archive


I’ve been speculating for some time (six months or longer) that JPMorgan had amassed upwards of 300 million ounce of physical silver since April 2011 (mostly in the form of 1,000 ounce bars, but also as much as 60 -70 million ounces in Silver Eagles). I estimate that JPM is picking up silver at the rate of 5 to 10 million ounces a month. It now appears that JPMorgan has accumulated up to 350 million ounces or more of silver.

My theory as to why is that Bear Stearns got into financial trouble is because they were short millions of ounces of silver. When the price of silver skyrocketed they were crushed. JPMorgan took them over at the government’s request. Subsequently, JPMorgan has been forced to pay close to $20 billion in fines and penalties for wrongdoing at Bear Stearns in mortgage dealings. They intend to use the profits they earn on silver to even the score.

When the penalties began rolling in due to past infractions at Bear Sterns, the CEO of JPMorgan, Jamie Dimon, consistently denounced them as unfair. So, JPMorgan no doubt feels betrayed being dragged through the mud by regulators, for the sins of Bear Stearns. Mr. Dimon has been adamant that he wouldn’t do the Bear Stearns deal again if he could turn back time.

JPMorgan is among the smartest and most well-connected financial institutions of all and it is impossible to think it wouldn’t know the implications of holding a dominant and manipulative market position. JPMorgan knows the details and nuances of market manipulation better than anyone, including the CFTC. As such, JPM would have demanded an ironclad indemnity for any future shenanigans in silver and gold.

I’m convinced that JPMorgan did not recognize the investment potential of silver in March 2008. For this reason, the bank was content to milk hundreds of millions of dollars out of the COMEX silver market on the short side until April 2011. Only then, when it saw a runaway market to the upside did it investigate the fundamentals of silver and decide to accumulate the largest private hoard of physical silver in history. It is easy to imagine the upward price journey that can commence when they decide to cash in.

This may also provide a hypothetical formula for gauging how high the price of silver may run. The out of pocket dollar amount of the penalties to JPMorgan for Bear Stearns is $20 billion. If the bank is angry at being stabbed in the back add another $10 billion or so. Assuming that the bank holds 350 million ounces at a likely cost basis ($7 to $8 billion), that suggests a silver price at somewhat higher than $100 an ounce. Of course, JPMorgan could shoot for a higher price to recover much more than it paid out on the mortgage penalties since it holds the controls in silver. A possible shortage and wave of investment buying would add to the price. A buying panic by industrial users would make anything possible.

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