The Phaserl


The Royal Flush – Ted Butler

by Ted Butler, Silver Seek:

In order to make a point, I’m going to address a very popular question, by giving the answer first and then providing the question. The answer does involve a bit of imagining on your part. I ask you to picture yourself at the highest stakes poker game imaginable, where quite literally many billions of dollars are at stake and in which you have just been dealt the indisputable best hand possible – a royal flush. Please accept that you are guaranteed to win.

It’s the last deal of the game with winner take all. The pot is enormous and all the other participants have been dealt very high and normally winnable hands and are flush with funds and every player is intent on raising and re-raising as each new bet is made. You have plenty of betting funds left and know that you must win in the end; so it is obvious that you will sit back and enjoy the circumstances and hope the raising and re-raising will continue for as long as possible, making the once-in-a-lifetime pot as large as possible – tens and hundreds of billions of dollars.

The most popular question in silver and the one I ask myself daily is when will JPMorgan finally decide it holds enough silver and let the price rise? The answer is only when it has to. By virtue of its massive physical holding of silver, which is more than 550 million oz (and growing), JPMorgan has as much incentive to rush the price resolution as you would have to end early the imaginary poker game. JPMorgan has been guaranteed to win the real silver game of a lifetime ever since its physical holdings came to exceed its COMEX paper short position, a threshold it crossed in late 2011 or early 2012. Ever since then, JPM has sat back, content to add to its physical silver holdings at decreasing prices, because it knew it must win in the end.

As much as a royal flush in poker, silver is guaranteed to be a huge winner for JPMorgan for the simple reason that the bank controls the market. Don’t believe me? Then try explaining how it is possible, since acquiring Bear Stearns in 2008, that JPMorgan has never taken a loss, only profits, on every COMEX short silver position it has ever taken, all while being the largest short holder? Not only does JPMorgan have a perfect record on the short side of COMEX silver futures for nearly nine years running; for the past nearly six years, making paper profits (in the billions of dollars) by shorting paper contracts was not even the bank’s greatest achievement. That honor must be reserved for JPMorgan’s accumulation of more than half a billion ounces of actual metal, all on price declines it rigged itself. Based upon those two circumstances, is it possible for any entity to demonstrate greater control over any market than JPMorgan has done in silver?

What‘s most remarkable about what JPMorgan has achieved in silver is that it occurred in full view. Certainly, a review of JPMorgan’s financial performance in shorting COMEX silver futures, based upon Commitments of Traders (COT) data, reveals the bank never took a loss or bought back short positions at prices higher than originally shorted. Normally, holding massive short positions on a volatile commodity like silver would be thought to be very risky and lead to losses at some point – at least once in a while. Except, of course, if the game was rigged. As the largest and most successful short seller in COMEX silver futures over the past nine years, JPMorgan was the unquestioned primary silver price rigger.

But JPMorgan is so smart and powerful (and crooked) that it figured out an even better means of enriching itself, apart from the billions of dollars it made in shorting COMEX silver futures cumulatively since March 2008. The successful and profitable short selling campaign that JPMorgan orchestrated in COMEX silver is predicated on declining prices. There’s no way massive short selling can be profitable if prices rise, instead of falling. Further, even if you succeed for years in successfully rigging prices lower (as I claim JPMorgan has done), sooner or later prices will fall to such ridiculously low levels that they then must rise, most likely in the same ridiculous manner in which they fell. At some point, the jig would be up on the downside rig job. This is so basic, that it would be foolish to think it would be lost on JPMorgan – the smartest player of all.

JPMorgan knew, when it started to acquire physical silver in April 2011, that this was the only way it could successfully conclude its wildly profitable long term shorting campaign in COMEX silver futures. The only thing it couldn’t know was how much physical silver it could acquire before the COMEX paper shorting scam ran its course. But there was no way the bank would ever pull the plug on its control of the COMEX price discovery process while there was physical silver still to be acquired. Not while it was holding the best Royal Flush ever. No one would end the game early in these circumstances and it is unreasonable to expect JPMorgan to do so.

Therefore, silver investors are better advised to focus on the “what” instead of the “when”, although I will admit this falls into the do as I say and not as I do category. Besides, since when can anyone ever know the “when”? The “what” is easy – silver is as cheap as dirt because it has been paper shorted into the ground and on top of that there is compelling evidence that the premier world financial institution has amassed more of it on a physical basis than any private entity in history.

Over the past few years, I’ve tried to outline from where JPMorgan has accumulated its historic hoard of physical silver. Conversions of shares to metal in the big silver ETF, SLV (of which JPM is the custodian), led the way, but there were important sources of supply from skimming the highly unusual COMEX silver warehouse movements and direct purchases of Silver Eagles from the US Mint. Interestingly, all these sources of actual physical supply to JPMorgan began around the same time – April 2011.

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