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An Open Letter to the Commodity Futures Trading Commission By Bix Weir March 26, 2008 Attn: David Kass, CFTC Thank you for your latest email response addressing my questions related to the ongoing manipulation of the price of silver on the COMEX/NYMEX. Although your responses are very welcome, I am particularly concerned by your answer to my second question regarding large trader reporting. Here was my question and here was your answer: Question: If it is true that the large trader reporting is the cornerstone of the CFTC surveillance program, why do you allow 4 or less traders to control 310M+ oz of short positions on the COMEX Silver contract? Answer: Your "if ... then" question is a non sequitur ... yes, it is absolutely true that the Commission's large-trader reporting system is the cornerstone of our market surveillance program. I fail to see what the truth of that statement has to do with the positions held by the four largest traders in any market. Apparently, you are really asking about whether four traders should be permitted to hold net short futures positions in the NYMEX/COMEX silver contract that represent over 300 million ounces of silver. You and some market commentators have long held that traders holding large short futures positions are using those positions to manipulate downward the world silver price. I believe we addressed those concerns at length in the 2004 letter to silver investors [available here] and our continued surveillance of that market has not altered the conclusions reached then. David Kass David ... I have been told to reference this 2004 letter from the CFTC dozens of times in email responses as well in conversations with your "expert economists." To this day if anyone calls the CFTC and asks about the silver manipulation issue they are immediately referred to this letter. One rather helpful economist even went so far as to tell me that when they pull up any silver information on their computers they are prompted to direct any silver manipulation questions to the 2004 letter. THIS HAS BEEN GOING ON FOR FOUR YEARS! I am not going to point out all the flaws and misrepresentations in this letter because most of them were addressed by Ted Butler the week of its release. Those arguments can be found here. I am not even going to point out that the silver markets have CHANGED DRAMATICALLY since 2004 and recycling the same letter over and over is an insult to all concerned market participants today as well as your "expert" surveillance staff. (for example…have you noticed the short position held by four or less traders has grown by 100% since the 2004 letter was written?!). What I am going to say is "OK. I accept that the 2004 letter from the CFTC is the official CFTC stance on the manipulation issue." My question now is "HAVE YOU READ YOUR OWN LETTER?" CFTC Official Stance On Manipulation Page 2, Paragraph #1 "What is the CFTC's response to these allegations?" "While there has been a production deficit, there has been no supply deficit. Large silver stocks have existed throughout this period, and have been made available as a source of supply at prevailing prices, presumably by many different and independent holders from around the world. This has had a dampening effect on price. There is no evidence, however, that silver futures prices have been distorted relative to cash silver bullion prices, i.e., prices that represent the value of "real" silver." STOP THE PRESSES! Argument #1 in paragraph #1 of the reason why there is no manipulation is that there is no supply deficit and that prices have not been distorted relative to the value of "real silver." I'm sure you are aware of where I am going here. Last week the price of silver was slammed down $4 in a matter of days out of the blue after nothing but bullish news about the silver market. The market COT structure was ripe for a collusive downward manipulation and the top commercial traders executed another manipulative slam (the mechanics of which have been shown to the CFTC many times by Ted Butler and others). But this time THE PHYSICAL SILVER MARKET FROZE UP WITH ALMOST NO SILVER AVAILABLE FOR PURCHASE AT THE LOWER PRICES! Bullion shops throughout the world could not find product to sell at any price. Hundreds of silver dealers and coin shops from around the world have been contacted and almost all are saying the same thing ... THERE IS LITTLE OR NO SILVER AVAILABLE! The US Mint stopped issuing Silver Eagles. For some unlucky holders, Perth Mint is rumored to be resisting their promise to convert silver in their "pooled accounts" into bullion. For those bullion dealers that ventured to sell product the wait times were extended exponentially. This is what we have been warning you about for over 20 years! The huge drop in prices was accompanied by the disappearance of physical silver for the average investor. This is obviously contrary to any idea of a properly functioning market. Since I know the CFTC traditionally responds to my questions and issues by trying to counter my points in support of the four largest traders, I would like to list the facts and I would like a CFTC response to these facts as they relate to silver price manipulation. 1) The $4 drop in the price of silver was directly in contrast to the availability of physical silver for the majority of market participants. Please explain why the CFTC believes this is a normal market occurrence in line with the physical market dynamics. 2) The silver supply shortage that exists today clearly exposed the manipulative nature of the 310M+ oz short position. Why is it allowed exist and why is it allowed to grow? 3) The CFTC's 2004 letter concerning the manipulation of silver states as its main argument that the reason there is no manipulation by the few large silver shorts is that there is no supply deficit. Now that the silver shortage is very apparent around the world, what is being done to stop the manipulation of the price of silver due to the silver shortage? 4) With thousands of complaints filed with the CFTC regarding silver manipulation, why wasn't the CFTC able to preemptively stop the serious silver shortage that is now clearly deterring silver investors from obtaining physical metal at today's "below market" manipulated prices? What is being done to make sure that the majority of physical silver purchasers are not locked out of the market ever again? 5) Now that the silver shortage has appeared in force, why doesn't the CFTC act to ensure that the true price of silver is being reflected by the silver market? Obviously, this would entail removing the price suppressing 4 largest shorts from their position just as the CFTC did in the 1980's when the Hunt Brothers long position on the COMEX was deemed as manipulating the price higher. Yes, it would disrupt the market but why was this market clearing maneuver ok for ending a long manipulation but not for ending a short manipulation? 6) The 170M oz SLV silver inventories were not purchased prior to the CFTC letter in 2004 and have clearly removed a large amount of silver from the available supplies. Since these silver inventories are no longer available, how can the CFTC justify that the 310M oz short position by the four or less traders does not have a suppressive influence on the price of silver? 7) In 2004 when the CFTC letter was written the manipulative short position was only 50% or where it stands today. Does the CFTC plan on continuing to rely on the 2004 letter as their explanation of silver market manipulation or do you think it is time for a new look at the silver market dynamics? Speaking for tens of thousands of silver investors and free market advocates around the world, it is time for the CFTC to end the silver price manipulation. You told us what your definition of manipulation is. Now do your job and end it. - Bix Weir Home | Products and Prices | Buying | Selling | FAQ | Articles | Forms | Top Website © Copyright J&M Coin & Jewellery Ltd. 2008. All rights reserved. Pricing index programming and site hosting by Sandrix Technologies Ltd. (AXD)