Thursday, April 12, 2012

CrossTalk: China's Century

Apr 11, 2012 by

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Capital Account - A look at how Central Banks are Steering our Society off an Economic Cliff

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Silver Smoke Screen

From Theodore Butler via

There was a very interesting and potentially significant development dropped into the silver equation this week. I’m speaking of the appearance of the head of commodities for JPMorgan, Blythe Masters, in a short interview Thursday on CNBC. There has already been widespread reaction to the clip and I must admit that it touched off a whirlwind of different thoughts in my mind. Quite frankly, I’m glad I’ve had a bit of time to sort them out before commenting.

If You Haven’t Had The Opportunity To View The Segment, Here’s The Link.

I first Discovered And Revealed that JPMorgan was the big concentrated short in COMEX silver in the fall of 2008 (having inherited the position from Bear Stearns). Since then, Ms. Masters has become somewhat of a lightening rod in the silver manipulation discussion world. Although I don’t believe I have ever mentioned her by name, she has been, more often than not, vilified in most Internet quarters. While I can empathize with the extreme sentiments that can arise from the outrage over the lingering silver crime in progress and the damage that it has caused to many, I don’t see much benefit in personal attack. Now, more than ever, we need to focus on the facts.

Since my thoughts are varied, let me see if I can put them into some semblance of order. First, let me give you my visceral feelings and then settle into a more measured and objective analysis. There were quite a few important statements that did come from the interview that go to the very heart of my allegations of manipulation in silver by JPMorgan. I won’t dwell on my knee-jerk reactions, but I do feel I should make them known.

There is no doubt that this wasn’t a spontaneous event. The presentation wasn’t accidental. I’ve watched CNBC fairly religiously for as long as it has been in existence (but with the sound muted for much of the day) and the last firm recollection I have of any mention of a silver manipulation was more than three years ago, when Joe Kernan commented on the Wall Street Journal article on Sep 25 2008 about a CFTC investigation into silver. I remember him joking about some new Hunt Bros plot to drive prices higher. Never again have I heard the silver manipulation mentioned on that network. CNBC has never seriously broached the subject to my knowledge. So I was taken back when the reporter specifically asked about the allegations of manipulation in silver, as if they were widely recognized as common knowledge. I got a special kick out of the reference to all these allegations coming from the “blogosphere.” (As opposed to the mainstream media, I suppose).

It would be safe to say that the interview tried to present JPMorgan as a contributor to worthy causes, who would never dream of manipulating silver and as a strong proponent of financial regulatory reform. All of JPMorgan’s positions in silver were claimed to be non-directional and only transacted to accommodate legitimate client hedging needs. To the typical CNBC viewer, who has little interest in silver to begin with, I would imagine that the segment appeared little more than a puff piece on an obscure topic. But I doubt that this was all that it was. There was an intent and purpose to this presentation, as many have already suggested.That’s what makes it so potentially significant.

$8,250 Silver and One Bank

The silver markets are rigged. Every day. Every trade. Every option. Every derivative. The silver markets have been rigged since the early 1970's when Alan Greenspan introduced computer market trading systems to the world beginning the long term commodity market rigging operation.

Since that time there has not been a day when the silver markets have been "freely traded". Nobody, and I mean NOBODY, knows the true "Fair Market Value" of silver!

But like all price suppression schemes, the silver manipulation must come to an end and we are on the brink of that moment. The only remaining question should be "What is the true value of silver in terms of money?"

First a little background to set the stage.

Computer Commodity Trading

Beginning in the early 1970's, computers were introduced to control the order flow in financial markets. Order processing was drastically changed with the New York Stock Exchange's "designated order turnaround" system (DOT, and later SuperDOT) which routed orders electronically to the proper trading post to be executed manually, and the "opening automated reporting system" (OARS) which aided the specialist in determining the market clearing opening price (SOR; Smart Order Routing).

Today we have algorithmic trading, auto trading, algo trading, black-box trading, robo trading…and the list goes on. Algorithmic Trading is widely used by pension funds, mutual funds, and other buy side institutional traders, to divide large trades into several smaller trades in order to manage market impact, and risk. Sell side traders, such as market makers and hedge funds, claim to provide "liquidity to the market", generating and executing orders automatically. In "high frequency trading" (HFT) computers make the decision to initiate orders based on information that is received electronically, before human traders are even aware of the information.

Over the years computers have played an increasingly important role in everything related to our "free and open market system" such that today's financial markets CANNOT function without computers. The Federal Reserve, US Treasury, Wall Street insiders and the Exchanges were all instrumental in the integration of computers but they also gained access to secret trading information before the order hit the open market. This information coupled with the fastest computers on earth made market manipulation easy.

This power, the power to control markets, was too much for anyone to resist. Over time those who were given the official key to the back office operations have used and abused their position to its manipulative fullest. Although some of the time they used this power in an official capacity (for the good of the country), more often than not it was used in an unofficial capacity… for the good of themselves.

Bernie Madoff, the ex-head of the NASAQ, was a great example of this public to private transition as his private trading firm was all computer algorithm based market rigging operations. There are many other ex-Exchange/Wall Street officers that went on to open computer trading operations. Many continue to thrive such as EWT, LLC which became a dominant trading/market making firm using "state-of-the-art technology and algorithmic models". EWT was founded by Vincent Viola (ex NYMEX Chairman) and David Salomon (reported to Robert Ruben at Goldman Sachs) and are also an "Authorized Participant" in the iShares Silver ETF (SLV).

Are you beginning to see the problem? He who has the biggest, fastest and smartest computers (or programmers) can set the price and will ALWAYS WIN! No longer is there any kind of true supply/demand factors related to commodity exchanges or prices. Computer trading should be outlawed…the convenience and efficiency it provides does not offset the detrimental effects and potential for total and complete market manipulation.

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on Apr 11, 2012