manipulating precious metals without owning actual precious metals

I spoke perfectly clear. It is your misunderstanding. Most contracts are offset, thereby the person making them does not need to physically deliver the product.

My description of the difference between trades and open interest were a separate matter. Your lack of being able to cognitively comprehend that is not my concern.

 

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We give them that "power", they were not asking for it Inflexion. Their markets are all about their customers, and their needs. They are not asking to be the price setter for physical trades at your local coin store, yet are pilloried by many saying they are trying to manipulate the price you have to pay locally. A large part of the presentation they go over is basis, and the fact they know what you pay locally will be different than their market prices.

Again, we do not pay them money, so they do not design their markets for our interests. They are a free marketplace, free to set the rules that are designed for their customers. The do not ever try to benefit buyers or sellers, but both, since all the CME is concerned about is volume. They need to please both sides in order to get volume. The CME group last year controlled 8 quadrillion dollars in trades. Its this volume of money, (and the short term interest from it), that provides the profits for the whole thing.

 

People speak perfectly clear all the time, but this isn't an indication they are correct. Personal anecdotes and insults don't prove much either.

You originally stated that 1% or less of the futures contracts for corn are delivered which is what started this discussion. Clearly this is wrong. The only reason that I think that someone might make such a statement is to somehow equate gold and silver to corn and pork bellies. They are not the same. The reasoning has been posted by me and others above which you have decided to ignore.

In regards to offsetting a contract, do you understand what this means? It means you purchase exactly opposite of your current position back to the exchange. It terminates your position with the exchange but it doesn't change the total number of futures contracts. The total number of contracts stays the same and in the case of real commodities, are go to 100% delivery. i recommend that you study up on the matter.

 

Can you provide a source for this statement, or is it opinion?

 

Already discussed by me and others above. If you haven't read the preceding I recommend you do so. If you didn't understand some of it, then I will be glad to provide clarification on any specific thoughts that you have on the subject. If you don't know how the commodities markets work then I assume you can google up some info on that so I won't provide that information.

 

Not to beat on you, but it would've been more productive to just write, opinion.

 

I do not give them that power, nor do I wish them to have it. I understand their customers have done so on my behalf, however to allow their customers to speak for the rest of us is unjustified. I am not accusing them of power grabbing, because their functions were born out of necessity. They are certainly welcome to operate how they wish within the confines of their own market. However since they do use basis points there's really no reason for them to be the price setting mechanism for the rest of the market. I do not know who ever though that was a good way to go, but IMO that needs to be reexamined.

 

I have done a little digging and JPM acquired the largest short position in silver from Bear Sterns when silver was right around $20. Do you think it needs to go back there before they will unload it and go long? Obviously they can get free Fed money as needed, but they don't seem eager to do that just yet, and JPM/MS is losing a lot of money right now between the London Whale and the margin calls from their downgrades. I have been wondering whether they might just unload it now.

 

I never said it was "right" either sir. Btw basis is simply the assumed premium you have to pay to buy it locally, so the example would be if a farmer can sell corn for $6.50 locally but the futures was $6, his basis is $.50. If the market goes to $7 but he can sell for $7.50 then his basis has not changed. Physical hedgers need to pay attention to basis, because you can win on a future but still lose if your basis changes. Why this is important for PM is the premium for physical silver, (basis), usually goes up when the market is low. This can cause collectors to not be able to buy at CME prices.

Like I said, the CME is not in the business to set PM prices, they earn no money from collectors by setting their PM values at the local store or on Ebay. I believe we use it since its the closest to a "market" we have for physical PM. I don't think its right, the CME does not care if its right, but its used. If we don't use it, what would the alternative be? That is the problem.

Anyway, I thought it was just interesting what I learned, and could, if not change minds, allow us to view the "evil" CME in a somewhat different light. I believe they are truly befuddled why they catch heat for the physical PM prices when they literally don't want anything to do with it, they simply want to run a market for their customers.

 

I don't think they will ever go long. I do not view their position as a "position" but rather a function of them "making the market". They are creating securities to make the market liquid. Selling short is how the contracts are physically created.

 

The question that you should be asking, is how many contracts JPM still have short as they do expire. JPM has not been known as a long term holder of futures. If they got them in 2008 and we don't know their expiration nor exactly how many have already expired or covered during the intervening time, there may no foundation to this rumor that mainly is perpetuated by bullion sites. If you wanted to buy the farthest expiration date now in June , 2012, you could get futures out to Dec, 2016. There are some specialty brokers who might offer longer expiration, but I doubt Morgsan Stanley would have gone to them. The majority of those futures most likely have expired or settled, or if JPM still believed in them , they may have rolled them over as the months go by, but that is perfectly legal. IMO.

 

According to SilverDoctors.com JPM increased their silver short position in May of this year. However, I can't find hard numbers to support that, and it's not broken down by who bought what in the COT Reports or the Bank Participation Reports. So the jury is out on that one unless someone can point me to the right data.

As to what we would do without the CME, what did markets do for thousands of years before that? People will pay what they are willing to pay. Markets are self regulating. The assumed level of dependency upon the CME is unwarranted IMO. I do not believe one way or the other on their motives. Most anybody would take advantage of a system that allows them to do so. I am much more concerned about the SEC and the CFTC not doing their job. Ultimately I don't see why the CME can't just continue to do what they do, but not at the expense of giving them control over broader pricing.

 

Lol......I don`t either, as that would be unethical, but yet here we are...... http://jessescrossroadscafe.blogspot.com/2010/11/new-jpm-hsbc-silver-manipulation.html

Has anyone heard the latest on this lawsuit? This was all I found. The media hardly said boo about this back in 08 when it first came about.

 

Ok, great. So, the question is, what do we use to price PM? Its all well and good to turn your back on the CME, but how iwll you establish a price you are comfortable buying at? What will dealers use?

 

What did dealers do before the CME? That's what I would point to. I don't know the answer to that, but I might suggest one of any number of other metal exchanges, or a weighted price considering all of the exchanges. Any exchange would be fine if it had a 1:1 paper to physical ratio really, CME included. Otherwise I suppose it would have to be a dealer run database of past deals that other dealers can use.

 

One thing that is fairly sure, is that the companies report to the SEC all legal litigation they are currently involved. If you google JPM 2011 10-K , you can look them up. Pg 291-299. There are many related to Bear Sterns and others involving mortgage derivatives and retirement funds, etc. ( if they lost all of them, they would be in for 5.1B), But no mention at all about the alleged silver shorts. Check out the other years if you wish.

 

Every dealer that I've ever dealt with uses today's spot price and not futures pricing.

For Gold, the US Mint uses the afternoon average of the London Gold fix and not CME activity. IMO, the gold fix has a bigger influence on spot price than anything going on at the CME.

For Silver, I do believe the CME has a greater influence on silver prices which is why I have constantly warned people on this forum to never assume silver will follow gold movement or be influenced by industrial and/or other demand, mythical ratios, etc. Whether JPM or not is manipulating the market via this mechanism I have no idea and it's irrelevant. It's pretty clear that it is taking place, the government is turning a blind eye to enforcing rules, so it doesn't matter which TBTF bank is doing it. (Who has been sent to jail for the MF Global debacle? It's been almost a year now. )

 

I have to disagree with the idea that they literally don't want anything to do with it. The CME sets physical pricing because that is just the nature of the beast. The CME may sing this song but this is where the producers, buyers and users of commodities go to create their hedges and it is these hedges that drives the physical price. if the two markets become so detached that these hedges become useless then the CME loses their market.

 

Typical response to dodge the question. This is what you always do - make a statement then claim you already proved it by making the same statement earlier. I would recommend to everyone to be aware of this fatima technique of doing the same thing he accuses others of doing. And never expect a clear resonse - you won't get one.

 

Yes that's fair. I guess I am saying that I don't see customers of the CME complaining here. Its only those who participate in the market that the CME listens to. You are right that if there is too severe a decoupling they would lose their market, but we do see basis change like I described more severe in PM than in many other markets when prices are at extremes. To me, this is dealers effectively putting limits in place the extent they even follow the CME, which is bad for buyers.