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It has
now been over two months since the CFTC hearings on the COMEX metals and Ted
Butler reports this week an Impressive Result of
over 3,000 comment letters about the hearings of which apparently 95% or more
were Butler copycat comments urging the commission to limit silver positions
to 1,500 contracts. Alas, I fail to see anything impressive about this given
that the only position limits the commission would consider changing are
speculative limits. Unfortunately the big bad bullion banks are not holding
their short positions as speculators but rather as commercial hedgers. To
hope the commission would limit hedging positions is beyond silly, it is
seriously deranged. Doing so in COMEX silver and/or COMEX gold without
setting similar limits in all other futures markets will never happen.
What
Ted Butler and others concerned about silver price suppression should have
done, instead of making an ineffectual plea for across-the-board position
limits in silver that includes commercial hedgers, was to ask the commission
to institute robust compliance review and enforcement over the hedging
designation of commercial positions. By their own admissions during the
hearings, neither the commission nor the SRO (the exchange itself) have spent
a lot of time or effort historically on reviewing hedging designations of the
commercials. This means that the bullion banks are largely taken at their
word that their positions are legitimate hedges. Shining a bright light at
the bullion banks by instituting thorough periodic policing action would
surely result in some commercial short positions being disqualified, and such
shorts would likely be closed permanently.
Alas,
Ted Butler and some silver bugs are so enamored of the silver market that
they believe it is special and unique above everything else. Sorry buckos,
silver has some great investment and industrial qualities and it is very
shiny as well, but the reality is that very few people in the world care a
whiff about it. Silver might be everything to you, but to the bullion banks
silver is a tiny profit center hardly worth the effort. That implies the
possibility of rogue trading desks manipulating the silver market (probably
both up and down) but precludes high level collusion between the banks. If
the banks are going to collude, it would certainly be in a market bigger and
more profitable than silver.
So,
congratulations for derailing a potentially positive outcome by shifting the
commission’s focus to your demand that silver and gold are to be
treated as special markets deserving of special rules. Let’s hope the
commission is able to do the right thing by instead announcing regulatory
reviews of commercial designations. Sometimes you are your own worst enemy.
Tom Szabo
Silveraxis.com
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