by Bill Holter, Miles Franklin:
Over the last weeks, a great debate has erupted regarding silver. More to the point, Ted Butler claims JP Morgan has accumulated at least 350 million physical ounces. Some pooh pooh this and say it is not possible while others who may believe it are scared witless because they are afraid Morgan will dump the metal and destroy the silver price.
Taking first things first and then later expanding, I believe it is possible for Morgan to have accumulated this silver. If you look at the bleed from both COMEX and SLV inventories and add in the purported movements on the LBMA, I do believe it is possible that JPM has amassed a silver war chest. From a “dollar” standpoint, this is only about $5 billion which wouldn’t even need to come from their equity as they have a direct pipeline to the bowels of the Fed and Treasury for credit.
To answer the question of “fear” propounding this silver will be used to destroy the market, I would first remind you that “devious” and “stupid” are two separate descriptions. No matter what anyone believes, JP Morgan is not stupid, devious may be another matter altogether with each fine they have paid as proof. JP Morgan has had a huge short paper position in silver for many years dating back to at least 2007 when they inherited Bear Stearns positions. The position has been so large in fact, they could never possibly “push a button” to cover it because the metal simply never existed to cover it in a short period of time. Any attempt to cover would have created a panic of demand and a minimum price of $100 per ounce for starters!
This leads us to one of several theories and the most obvious, JP Morgan has been amassing physical silver and is now actually a hedge against their short position as opposed to the other way around. It makes zero sense to me that Morgan would dump a physical position because the accumulation was so difficult to acquire in the first place. As I said above, JP Morgan is not stupid and they understand the logic of where the macroeconomics are headed. They know the game is either inflate or die and can surely make the judgment as to whether or not they want to be net long, or short silver. And trust me, they also know the difference between paper contracted silver and the real thing in their vaults.
It also occurred to me, what if the short position is “used” to revalue the long position? We have seen so many times where naked contracts were “sold sloppy and sold BIG”, what if JPM decided to actually cover their short by buying “sloppy”? They effectively could use the short position as a springboard if you will? What would stop them from covering the short to become flat and just keep on buying sloppy in the futures pits and running every short on the planet? They must surely know the upside pressure is there not only technically but fundamentally because of the supply being knocked off stream by below production prices? This is an easy trade for them if truly have built a physical long, thus making their short to unwind the “sloppier the better”! This makes more sense to me than dumping the physical long which everyone is so afraid of.
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