Ted Butler: JP Morgan’s Perfect Silver Manipulation Cannot Last Forever

ted butler picture price Silver manipulation – a lot has been written about the subject, not many have grasped how it works exactly. The age of algorhythm trading (best known as High Frequency Trading, or HFT) allows for manipulative tricks to be rolled out in a very clever way. The “intuitive” way to manipulate the price of a commodity to the downside is to go short when prices are rising. Not so with JP Morgan. It is no coincidence that their manipulation strategy is so clever that most do not understand the mechanics; it is a perfect manipulation.

This article brings clarity in the precise mechanics of JP Morgan’s silver price manipulation. It goes to the heart of the manipulative tricks. The author is obviously Ted Butler, with four decades of experience in the precious metals markets, specialized in the paper (futures) market. The mechanics described in this article have been explained in such a way rarely before. It makes it a must read for precious metals enthusiasts, but also for professional and individual investors because the ongoing manipulation must come to an end resulting in much higher prices.

I think the most important comparison of the London Whale case to the COMEX silver manipulation is in the differences. In basic terms, JPM’s London Whale manipulation was a simple price rig in extremely complex securities. In silver, JPMorgan’s price rig is complex in a simple commodity. Let me try to explain.

The London Whale manipulation was simple in that it followed the rigid blueprint of every previous manipulation, including the Hunt Brothers silver manipulation and the Sumitomo copper case, in that positions were added continuously which moved the price to the manipulators’ advantage. Then, because the resultant prices became so out of line with what normal supply and demand forces would dictate, the whole thing collapsed leaving the manipulators with great losses and exposing the manipulative attempt.

In COMEX silver, JPMorgan has behaved differently. Instead of selling short silver at declining prices, as it did in the London Whale case, JPMorgan has only sold short additional quantities of silver on increasing prices. After these additional short sales have satiated all new buying interest, JPMorgan then causes prices to decline (through the manipulative device of HFT) and buys back its short sales at lower prices and great profit.

While the key to the silver manipulation is JPMorgan’s dominant market share or market corner on the short side (same as in the London Whale case), there have been some important outside factors that have contributed to the silver price-rigging. The most important have been in the modern mechanics of trading, from HFT to the presence of technical traders and funds which mechanically and consistently buy and sell on price signals; buying as prices move higher and selling and selling short as prices decline. These technical funds are the enablers which allow JPMorgan to sell high and buy low in silver. These technical funds and traders are important contributors to the perfect market manipulation.

I realize that every time the price of silver and gold get smashed down, the intuitive reaction is that JPMorgan or other commercial traders are bombing the market lower by selling thousands of contracts. But that’s only partially true. Yes, JPMorgan rigs the price lower on those big down days, but not by selling enormous quantities of COMEX silver contracts short. JPM does get the price snowball rolling down the hill by selling a small quantity of contracts short at critical times and prices with the intent of inducing the technical funds to sell much larger quantities of contracts short (which JPM and other commercials then buy).

This is an important feature of the perfect market manipulation in silver and the reason it has lasted so long; JPMorgan can always proclaim it was a net buyer of silver (and gold) on the big down days as is consistently proven in Commitment Of Traders reports. By itself, it is a significant defense against allegations that JPMorgan is manipulating the price of silver, as how the heck can you be accused of manipulation if you buy on big down days? More than any other factor, this has been the prime impediment to ending the silver manipulation. But it doesn’t tell the whole story.

JPMorgan’s real crime resides in its ability to sell unlimited quantities of COMEX silver contracts short on the way up in price to the point of creating unprecedented levels of market share and concentration. In December 2009, JPMorgan held more than 40% of the entire short side of COMEX silver and close to that market share on other occasions. To my knowledge, there has never been a greater market share or corner in any major market in history. These unlimited short sales by JPM inevitably satisfy technical buying interest and then that technical buying turns to selling at some point, with JPMorgan then working to induce the tech funds into selling. The buying back by JPMorgan is the illegal ringing of the cash register and closing out of the manipulative silver short positions sold at higher prices.

What I’ve described today and for many years appears to be the perfect market crime that could last forever – except it can’t. How can I be so sure? Well, for one thing, this London Whale case itself. While JPMorgan’s army of lawyers hammered at the exact wording of the agreement so as to limit additional civil lawsuits, the point is clear – JPMorgan was guilty of manipulating the securities in an important credit market. After the electricity manipulation case by the Federal Energy Regulatory Commission earlier this year, it can now be said without question that JPMorgan is a serial market manipulator. And the manipulations have the same common denominator – an excessive and dominant market share enhanced by dirty trading tricks.

But the most important assurance for the coming end to the COMEX silver manipulation is what the artificially depressed price of silver has done to real supply and demand. The Commission’s order in the London Whale case (above) placed great importance on the impact of price manipulation on legitimate forces of supply and demand. Silver is now ground zero for what can happen if prices are manipulated, now that the COMEX rigging has forced the price below the cost of production for many silver miners. In time, silver prices must rise above the cost of production. But it may not take a long time, given the current circumstances for JPMorgan.

For years, I have distilled the issue down to this – whether JPMorgan adds new short contracts on the next silver price rally as the bank has done on every silver rally for the past five and a half years. More than ever I believe this to be the critical element now. Simply put – if JPMorgan doesn’t add new short positions in silver, the manipulation is over. Someday, JPMorgan won’t add to silver short positions and there are indications that day may be at hand. Yes, I know the CFTC has weaseled out on their silver investigation by not charging JPMorgan, but I am still convinced that was due to concern of the legal liability that would accrue to JPM and the financial system.

This is an excerpt from Ted Butler’s premium service. Readers are highly recommended to subscribe to the service on www.butlerresearch.com as it contains the highest quality of gold and silver market analysis. Ted Butler is specialized in precious metals markets analysis for 4 decades.


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  • Not Flim Flam Sam

    It’s a shame to destroy real production for the sake of paper profits – we’ve become a paper tiger, a demeaning term that was once applied to the Asian tigers – now we’re one of them.

  • Wags

    If you’re right, hopefully their manipulation helped some sound money fans stack on the cheap. When silver was at $49, I never thought we’d be under $20 again.

  • esqualido

    IMO, Butler could not be more confusing if he tried. But in a nutshell, it looks like he is saying JPM drives silver down selling (short) but does not drive it back up in the act of buying (covering its shorts.)Explain that.

  • Mark V

    Esqualito- it is probably in the time span that the trades are exercised; the selling
    Takes places in days while the buying is done at once. Plus, it appears as if
    The CFTC is in their pocket. They are front running… they have an unlimited short
    Sell arrangement, they just keep selling short until the demand is met and price comes down. Normally supply would prevent this. This makes it evident that there it not physical
    Backing these transactions.

    Mark V

  • Jeffrey

    This essay assumes that the primary potential silver longs in the markets are small technical traders, as if JPM is some towering behemoth in the market. In reality, there are some large funds that will be happy to take massive (as in up to 50,000 contracts) long-term long positions in silver once they think there are compelling fundamental reasons to do so. Also, these large funds talk to each other and often move as a herd. These funds would blow JP Morgan out of the short position you describe like brushing a fly off of your sleeve.

    Moreover, the conditions that you describe would only make a long position more attractive to them. When Soros “broke” the Bank of England, he was able to do so because he calculated that the currency lines that he had available exceeded the Bank of England’s remaining foreign reserves. You don’t think that there are some large funds out there that have a sense of what JP Morgan’s maximum trading limits are in silver? Or what the maximum level of loss that JPM’s silver traders will be allowed to endure before they get blown out of their positions by their bosses?

    If what you are describing is happening, it will eventually attract true macro hedge fund managers to blow these knuckleheads out of their shorts. This is exactly the kind of opportunity that these guys live for, and there are not too many of them around these days. The last one was dollar/yen.

  • nji9bhu8

    This essay assumes that the primary potential silver longs in the markets are minor funds or technical traders, as if JPM is some towering behemoth in the market. In reality, there are some large, levered macro funds that will be happy to take massive (as in up to 50,000 contracts) long-term long positions in silver once they think there are compelling fundamental reasons to do so. Also, these large funds talk to each other and often move as a herd. These funds would blow JP Morgan out of the short position you describe like brushing a fly off of your sleeve.

    Moreover, the conditions that you describe would only make a long position more attractive to them. When Soros “broke” the Bank of England, he was able to do so because he calculated that the currency lines that he had available exceeded the Bank of England’s remaining foreign reserves. You don’t think that there are some large funds out there that have a sense of what JP Morgan’s maximum trading limits are in silver? Or what the maximum level of loss that JPM’s silver traders will be allowed to endure before they get blown out of their positions by their bosses?

    If what you are describing is happening, it will eventually attract true macro hedge fund managers to blow these knuckleheads out of their shorts. This is exactly the kind of opportunity that these guys live for, and there are not too many of them around these days. The last one was dollar/yen.

  • http://churchofsmoke.org/ Jose

    It will be all over when the dollar is no longer the world’s reserve currency. Until then, the U.S. can live off the labor of other countries by printing paper in one form or another. If JPM tries their manipulation in China they will get a bullet in their head.

  • AgandPhish

    I do not buy the story with the “technical traders and funds”. They would have to be quite extraordinarily stupid to let themselves be taken continuously to the cleaners by the Morgue since 2008. I agree with Jeffery.

  • polonius

    Jeffrey,
    I worked on the sell side of the Street for many years and used to see things your way. I have been watching and trading silver daily for over three years and must now admit that Butler is correct. What he describes is exactly what I see in the Comex silver market nearly every day. Somebody sells massive supply into every rally, and especially every technical breakout. Furthermore, all rallies are capped in magnitude on a daily basis and usually reversed in the following day or days. The seller appears to have unlimited supply and covers after the technical funds and thinly capitalized longs capitulate and take over driving the price down. I see it every day. It’s real. People need to wake up and realize someone, probably JPM according to the concentration stats, is manipulating silver from the short side and it’s almost certainly done on behalf of the banking system overall, probably with the blessing of the Fed, BIS and UST, which cannot afford to allow silver or gold to be viewed as legitimate safe haven stores of value.

  • k

    irrespective…JP Morgan …Hedge Funds or even Santa Claus…it doesn’t matter who they are…can not allow precious metals to prosper unless it is for there short term or long term gain…the pawn here is the fiat US currency which as we all know is the antagonist to the metals. The point is all Financial Institutions need fiat currency because they are the chips for their casino. So in effect all Institutions need the manipulation to take place and I don’t think they care who does it because its keeping there casinos rolling because they need the Fiat shitty currencies to allow there casinos to operate.

  • twinbeech2

    Same stuff Butler has been saying for what….15 years now? Everything will be over soon, very soon. People actually pay him for this. Forbes was right. The people who sell advice always make more money than people who buy it.

  • AgandPhish

    I don’t know whether Mr Butler makes money for his subscribers or not. I am happy if he does. I do know that Mr Butler lost credibility for me during his King World News interviews in 2009-10 where he adulated “Chairman Gary Gensler of the CFTC” as the saviour of the silver markets. Well, we all know how that turned out.

  • SRVES339

    Thank you polonius… hoping you and your like minded colleagues will offer (anonymously if necessary) your credible opinions to as many authorities (regulatory and legislative) as possible… the situation cries out for critical mass.

  • SRVES339

    “it always fails”… unless it’s government sponsored!

    Profit, in this context, is but an inconsequential (in the grand scheme) perk.

  • Jeffrey

    To be clear, I agree that it is real, polonius. But at the end of the day it is nothing more than noise. So silver bounces around between 20 and 22.50. Big deal.

    Let’s say you are managing a $15 billion macro fund with about $60 billion in nominal positions. You can’t get in and out of meaningfully sized positions very easily. You are not trading off of hourly charts. You are trading off of daily and weekly, if not monthly, charts. You talk on the phone every day to others who manage similar funds.

    There’s a long history of such funds searching out markets in which there is government intervention. Taking the opposite side of government intervention is the closest thing you get to a sure thing from an efficient markets perspective. By definition, the price is not efficient if there is government intervention. By definition, you are getting a bargain. If you have an investment horizon that is at all long-term, you obviously take the opposite side of government if they have manipulated something.

    And the idea that the intervention will be successful just because it is a government with a printing press, well, that goes contrary to the historical record. If that were so, dollar/yen would never have gone to 80. The BOJ tried repeatedly to prevent the yen from strengthening. They too theoretically had unlimited fire power. All the repeated BOJ interventions did was to attract more funds to the opposite side, like bees to honey.

    Or, to take another example, do you think the Fed wanted the 10-year yield to spike to 3% over the summer? They sure failed to prevent that, didn’t they.

    Does anyone really think that any printing press can stand up to trillions of easy money sloshing around in the world right now, much less the tens of trillions in derivatives built on top of it? Even the NY Fed and the BIS are powerless in the face of that.

    It could be days or weeks, but at some point some there will be a critical mass of fundamental data/developments that support being long precious metals, and the real money will move in to arbitrage this mispricing. Maybe we see the velocity of money actually turn up from the base that it has now formed. Maybe we print some inflation. Maybe we see Euro/$ blow through the stops at 1.38 and 140, etc. It will happen, though.

    And at that point, this lame attempt at manipulation — which will ultimately fail like they always do — will just make precious metals prices rise faster and higher.

  • nji9bhu8

    The CFTC is certainly on JPM’s case now, and they now have set a precedent (with the London Whale settlement) for proving manipulation with only a showing of recklessness.

    It would seem to me that JPM’s conduct in the silver market already qualifies as reckless if the percentages stated above are true.

  • Ironman

    The only difference of opinion I have with Ted is that I don’t think JPM ever netted any profit on this. I think they owe thousands of tons of silver to the SLV used in 2011 to squash prices. To this day I believe that they are hijacking any silver that is supposed to be going into that fund. I believe they got a whole bunch of “right now money”. But they owe big debt on their books. I think their entire operation was a colossal F up and they buried it under a fraud. I think they actually took so much in losses that they are not even the Fed’s front anymore. No one that had the Fed’s business in this silver game ever survived. And now I think GS is learning all about that too.
    Those of you bashing Ted, you just don’t understand what he is saying. Silver is going to explode because the situation is at peak fraud. JPM tossed GS a hand grenade.

  • Perry

    It is a valid question. One could answer that they update their algorithms to mimic JPM (if it is in fact JPM). In which case it would be easier for JPM to get the ball rolling. As soon as the pattern emerges other technical traders and funds would jump in doing their work for them. Don’t fight the fed right? ;-)

    esqualido, the idea is that the original trade is done at market on large volume rapidly driving the price lower. As technical levels are breached algorithms automatically start selling driving the price further down. The perpetrator can then slowly buy back using small limit orders which don’t have the same effect on the price. The original order can be covered without driving the price up enough to breach resistance levels and start the process in reverse.

  • Perry

    Actually you could take it a step further and make the trades yourself if you were a large fund. After all there is now president that it is not manipulation.

  • triple-aught

    Thank you Ted for exposing these criminals I read your book in 2002 and bought most of my silver for $4.80/oz and will not let it go until a fair market price is realized. I would sell my house before I sell any of my silver keep up the good work and keep fighting us little guy. All we can do is buy physical, buy often,and hold on long term. Creating a physical shortage is the only way to break the manipulation

  • dave

    You are incorrect sir !! jp morgans silver market influence dwarfs that of all the hedge funds and they have back up from the money machines in bernacke land. It will take all of the world s central banks and all of the hedge funds coming in in unison and demanding physical delivery of gold and silver against jp morgans fraudulent naked short gold and silver positions to create a massive default against jp morgan which in turn will break the back of jp morgan and spell the demise of this criminal enterprise !! Then silver and gold prices will skyrocket to nose bleed levels !!

  • fallingman

    Same thing the mainstream said about those who called the housing crash and the tech crash. Who was right in the end?

    And anyone who followed Ted Butler’s “BUY”15 years ago has absolutely no reason to complain. How much silver did YOU buy at $4.50 an ounce?

  • twinbeech2

    I bought silver in 03 at 4.15 and gold at 5.50. Plus 50,000 shs of SSRI at avg cost of 1.85/sh. How about you? This doesn’t change the fact that Butler has been consistently wrong for the past 10 years.

  • twinbeech2

    o.k.then.

  • twinbeech2

    And Butler has been saying it for 20 years. A clock that stopped 20 years ago has been right 14,600 times more than Butler.

  • fallingman

    Well done. So, you’re a smart guy.

    My father was visionary enough to buy a helluva lot of junk at $1,200 a thousand face bag. Sovereigns too. I bought several more junk bags about where you did. And again at 7ish an 11ish after the Morgan raid back in 2007-08. Gold when it broke through $350.

    I made most of my money on SLW, but I also had a lot of SSRI and others. Lots and lots of debit spreads…literally hundreds.

    I’ve always said, early is the same thing as wrong…for a trader…so you’re right from that perspective, but when you enjoy a gain of 400-500% while you wait, how “wrong” was it?

    And, I’d say a move from the mid fours to $49 is evidence that TB was on the road to being completely right before the price was taken down. I suppose we could argue about whether the market is manipulated or not and by whom, but why bother?

  • esqualido

    That makes sense on the face of it, but if greedy speculators drove the price of beef down to a nickel a pound, non-technical-trading housewives would clear the shelves- and industrial users are well aware that most silver producers are not making any money at levels prevailing before the raid.

  • Meezlemunk

    Just saying I heard Jp Morgan successfully created Gold in a California Lab buy using proton borrowing instead of particle acceleration which is way cheaper and created from lead. they since made 1500 metric tons. Is this true? Do I need to sell? People should really look into this.I found a bunch of articles about it online two weeks ago but they have since disappeared. There was another company that went in on the investment that started with a B, but I cant remember their name. Saying something that they were using lead and calcium proton barrowing. I just hope its not true that would send stocks into chaos. Seems like there covering stuff up