In Ted Butler's Archive


I was recently asked to more fully explain the term “concentration.” Of course, I’m referring to the concentration on the short side of COMEX silver futures which is at the core of the price suppression of silver that has existed for nearly four decades. A simple definition of concentration is a large market share held by only one or a few participants operating in concert. The question of concentration is of utmost importance to the functioning of free markets. A more familiar term for market concentration is monopoly – which lies at the heart of antitrust law. Think of the four or fewer traders on the short side of COMEX silver as a monopoly or cartel whose existence is solely dependent on keeping the price of silver contained. One of the keys to a monopoly’s continued existence is the willingness of the members to operate in concert. In the COMEX silver monopoly, this can be seen in the big shorts never breaking ranks, only buying after prices have fallen.  This is completely borne out in COT reports going back 40 years.

In the most recent COT report, for positions held as of July 27, the concentrated short position of the 4 largest traders actually exceeded the total commercial net short position, something that has happened on past occasions. What this means is if the 4 biggest shorts didn’t hold this excessively large short position there would be no net commercial short position at all.

In selling short to buyers of silver futures contracts, the large banks and financial institutions have taken it to extremes. They dominate the short side of the market. These large short sellers also learned they could game the technical funds and many of the small buyers by rigging the price lower at times. This would induce selling by other traders (the longs) and enable the concentrated shorts to buy back short positions at a profit – a practice that exists to this day, nearly 40 years after it started. You’ve seen this very thing in the price smash of silver in early August.

In the COMEX silver monopoly there have been a succession of top dogs, starting with J. Aron, on to Drexel Burnham, then AIG Trading, on to Bear Stearns and then to JPMorgan. It is somewhat interesting that the three prior top dogs up until JPMorgan, all went bankrupt, although only in the case of Bear Stearns may it have related to being short silver (and gold). Since JPMorgan is no longer short in COMEX silver or gold, there has to be a new top dog on the short side, but I’m not sure who that might be. Whoever it is, its days of continuing the monopolistic control of silver prices appear numbered, based upon the public record.

It is the explosion of the buying of physical silver that the big short monopoly on the COMEX is fighting against. It is the 4 big shorts against the world. But the motive of the big shorts has changed as radically as have the conditions of the silver market over the past four decades. Where the original and long-running motivation for the big silver shorts was to profit from their control of the market, which was incredibly successful up until the last year or so, the motivation has changed.

Now, it appears to me that the big silver shorts on the COMEX are fighting any rise in silver prices, not for profit, but from the fear of what a failure to contain prices might entail. An explosion in the price of silver would threaten financial ruin for some of the big shorts. For most of the past 40 years they were motivated by greed, but now the motivation is fear. Their current losses are $10 billion so we are not talking about small change.

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