Is JP Morgan really short 3 Billion ounces of silver??

[FCharlie]

So, first off, I've done very little research on this one and I'm sorry if I'm missing something obvious, but has anyone out there spent any significant time studying the JP Morgan situation where they supposedly are short 3.3 billion ounces of silver?

 

My gut feel is that there has to be something to this story that the conspiracy guys aren't acknowledging. 

 

Any thoughts?

 

 

[berkshiremystery]

So, first off, I've done very little research on this one and I'm sorry if I'm missing something obvious, but has anyone out there spent any significant time studying the JP Morgan situation where they supposedly are short 3.3 billion ounces of silver?

 

My gut feel is that there has to be something to this story that the conspiracy guys aren't acknowledging. 

 

Any thoughts?

 

...no thoughts at all... yet. Only that I'm trying to verify your claims by googling...

But it seems as some interesting shift of gravity fields.

 

http://seekingalpha.com/article/797711-silver-net-short-positions-rising-prepare-yourself-for-a-coming-silver-bull-market

 

http://moneymorning.com/2012/08/08/cftcs-chilton-assures-silver-price-manipulation-probe-not-over/

 

CFTC Commissioner Bart Chilton Reveals "One Trader" Controls 40% Of Silver Market, As Silver Holdings Of SLV Hit All Time Record

http://www.zerohedge.com/article/cftc-commissioner-bart-chilton-reveals-one-trader-controls-40-silver-market-silver-holdings-

 

The Arguments Against a Silver Manipulation

http://www.silverseek.com/commentary/arguments-against-silver-manipulation-6656

 

Has JP Morgan placed a massive bet on physical gold and silver?

http://www.mining.com/has-jp-morgan-made-a-huge-bet-on-physical-gold-and-silver-25310/

[ItsAValueTrap]

They could be doing any of the following:

A- Proprietary trading.  Making an outright bet on silver prices going down.

B- Commercial hedging.

 

With the commercial hedging you might have to guess what JPM has on its books.  Nowadays banking is competitive so you usually can't make nice profits unless you are doing some (mildly) risky type of hedging.  Investment banks will act as counterparties to their clients and help their clients to "hedge" their risks.  The bank might have some risk that isn't easy to hedge.

 

For example, maybe they sell a forward contract for the next 1-10 years.  To hedge that, the bank could go to the futures exchanges and sell silver there.  On the exchange, there isn't volume for long-dated silver contracts.  So the bank would have to continually roll over its silver short position.  On rolling these contracts over, there will be profit/loss based on contango/forwardation in the futures.  There is minor risk there.

 

The exchanges require its participants to put up margin.  There is margin risk.  Probably not a big deal for big investment banks.  (But there were silver mining companies that had huge financial difficulties when the Hunt brothers squeezed the price of silver.)

 

Sometimes the exchanges do BS where they screw over one set of market participants unfairly.  Some might argue that the margin changes screwed over the longs (and benefited prop traders who had speculative short positions).  But personally I think that there is a lot less BS going on with the futures exchanges than the stock exchanges.

 

The exchange could theoretically go under.  The exchange's clients would have to walk away from losing buy/sell trades.  Then the parties clearing the trades have to cover the losses.  If that fails, then the exchange could go under.  (This is extremely unlikely to happen, though could happen for a CDS exchange.)

 

There is minor risk in the delivery location for the commodity.  Since silver doesn't cost much to ship, this is not a big deal.

 

The investment bank's counterparties can go bankrupt.  A silver producer can have some catastrophe that causes their production to go to 0.  This happens while silver prices go up.  The bank is no longer buying silver at a low price from the producer and has to cover losses on its hedge.  It has to eat the losses on its hedge.  This is probably the risk that the investment bank is MOST concerned about.

[Liberty]

IIRC, it was a Bear Stern position that JPM supposedly inherited. Not sure how to verify its existence, though..

[ItsAValueTrap]

Basically... if JPM was doing prop trading then they would have a reason to try to manipulate silver.  If they are simply doing commercial hedging then it's possible for them to need to have a huge short position in the silver futures market (which is offset by a long position in their deals with their clients).

 

With commercial hedging I don't think that they really have a motive to manipulate the market.  If they bought silver options from their clients then they would have a motive to increase volatility.

 

2- If you were actually doing prop/speculative trading and were shorting silver, you would NOT want others to know what your true position is.  So you'd rather not talk about it.  Being involved in commercial hedging helps and others will have a hard time figuring out your true net position.

 

And if you weren't doing prop trading, you might not talk about it either.

 

3- It may be unusual to see prop trading done on long timeframes (e.g. longer than a month).  It would be too hard to manage risk / know that you are actually making money.

Some prop traders never hold overnight positions.  In a year they would have 365 different bets and it would likely be statistically significant.

 

4- You could look at publicly-traded silver companies and see how much hedging they are doing???

[berkshiremystery]

IIRC, it was a Bear Stern position that JPM supposedly inherited. Not sure how to verify its existence, though..

 

I found it.... ;)

 

-----

 

JP Morgan Covering Silver Short Position

Dec. 14, 2010

http://inflation.us/jpmorgancoveringsilver.html

 

NIA, along with the Gold Anti-Trust Action Committee (GATA), has been at the forefront of helping expose JP Morgan's silver price suppression scheme. Over a year ago on December 11th, 2009, NIA declared silver the best investment for the next decade at $17.40 per ounce. NIA said in its December 11th article, "It's not a coincidence that the day silver reached its multi-decade high of over $21 per ounce in March of 2008, was the same day Bear Stearns failed. Bear Stearns was a holder of a massive short position in silver."

 

NIA went on to say, "The reason why we believe the Federal Reserve was so eager to orchestrate a bailout of Bear Stearns, is because Bear Stearns was on the verge of being forced to cover their silver short position." NIA then said, "JP Morgan still holds the silver short position they inherited from Bear Stearns" and "JP Morgan will have to cover this short position or it could jeopardize their existence."