Letter to COMEX Oct 8th 2001

October 8, 2001

Vincent Viola Chairman J. Robert Collins, Jr. President New York Mercantile Exchange, Inc. One North End Avenue World Financial Center New York, NY 10282

Dear Mr. Viola and Mr. Collins:

This is to inform you that there is a serious and dangerous problem in the silver futures market on the Commodity Exchange, Inc. (COMEX), according to the just-released Commitment of Traders Report (COT). The COT of Oct. 5, 2001, for positions as of Oct. 2, clearly indicates a manipulation in progress. The amount of net short contracts held by the large commercial category (normally considered COMEX insiders), is obscene and preposterous in regards to market concentration and compared to silver in the real world. There is no way, that a reasonable person would not conclude that the commercials' silver short position is both manipulative to the silver price, and an extreme danger to the very existence of your exchange.

In the past three weeks, the large commercials have increased their net short position by 175 million ounces, or 350%, to 225 million ounces net short. Last week alone, the large commercials sold net short over 90 million ounces of paper silver futures contracts. Large commercials now make up 80% of the entire futures short position. The price of silver would be materially higher, were it not for this manipulative and uneconomic naked short selling. The additional 175 million ounces sold short, in just three weeks, is more than any country can produce in two years or much longer. It is more than all known silver stockpiles in the entire world. It is not possible for the short selling of 175 million ounces of silver, in a three week period, not to manipulate the price.

Worse, the concentration of silver short positions among the large commercials is troubling. Four or less traders hold 130 million ounces net short. That's also greater than all known silver bullion in the world, and more than any country produces annually. Unless these 4 or less traders own all the silver in the world, and then some, then this is a starkly naked short position. To claim it might be a mining hedge, considering the trading history of the large commercials, would defy logic. To claim that it might be a hedge of metal inventories would be silly. Did someone just come into 175 million ounces of real silver in the past three weeks? It is obvious that the large commercials are masquerading as hedgers - they are speculators, pure and simple. By pretending to be hedgers, these large commercials seek protection from basic commodity law which proscribes that speculators not influence prices unduly. To be clear, the four or less traders in the commercial category are manipulators, or represent manipulators. There is absolutely no economic purpose to their naked short position, save to depress the price of silver. You must put an end to this manipulation.

On top of all the above, the Sep. 11 horror buried the 30 million ounces of silver in the Scotia Mocatta warehouse, rendering it unavailable for a long time. This 30 million ounces makes up 30% of the entire COMEX silver inventory, the largest in the world. In fact, the buried and unavailable silver comprises 25% of total known world silver bullion inventory. One quarter of all known silver bullion in the world is made unavailable overnight, and COMEX insider commercials rush to sell short obscene amounts, on a 50 cent rally? Who do these insiders think they are?

I am a silver analyst who has consistently recommended COMEX silver warehouse receipts as the best method for holding physical silver in size. Many people have taken my advice, and have purchased these receipts. But, I must tell you, I am troubled by what I see. First off, I am troubled that the COMEX has not been forthcoming with public assurances that all the silver involved in the WTC 4 warehouse is fully insured and that the owners will be protected. All the insurance companies came forth, with great fanfare, to proclaim there would be no attempt to invoke war or terrorist exclusions in any WTC-insured losses. The COMEX's silence, on this matter, is conspicuous and disturbing. Second, the sheer mismatch between the extreme and concentrated commercial naked short position, jumping 350% in three weeks, and the suddenly-reduced available physical silver inventory, is most alarming. Inventory is effectively sharply reduced, and the insiders short position explodes 350%. A reasonable person would contemplate default. This is your notice, that if we do have a default in COMEX silver, or any market emergencies related to restricting the rights of bona fide long contract holders, it will be because of the concentrated commercial COMEX- insider shorts.

No other market in the world, just COMEX silver, has such a large, concentrated short position, where a few traders are allowed to be short more than, literally, all the known material in the world. Given the magnitude of the concentrated naked short position and the condition of the Scotia Mocatta facility, I call on you to rectify this outrageous situation immediately. It is your responsibility to end the clear short side manipulation in silver by these insider crooks. I understand that you are new to COMEX leadership, and your backgrounds don't indicate a close association with the commercial insider manipulators. If you don't end their crooked activities, you will be sanctioning those activities.

I have no other way of ending the silver manipulation, aside from notifying you or writing about it in the public domain. It is not my intent to inflame the situation. I would prefer you reigned in the out-of-control insider manipulators - that's what self-regulation is supposed to be about. However, if you choose not to address this issue, or tell me why I'm off-base, I will have no other choice but to publicly present the facts as I see them, and let people make up their own minds. If I don't hear from you by my next publishing deadline, close of business Wednesday, Oct. 10, 2001, I'll assume you have aligned yourself with the insider crooks.

Ted Butler

cc: N. Wolkoff C. Bowen B. Purta

-- meg davis (meg9999@aol.com), October 15, 2001

Answers

I wonder when we will learn that the WTC was really destroyed to cover up the theft or disappearance of the $120 million of silver and billions of gold supposedly "stored" underneath the rubble.

-- neil r (nmruggles@earthlink.net), October 15, 2001.

Please inform us when you have confirmation on that conspiracy theory.

-- Martin Thompson (mthom1927@aol.com), October 15, 2001.

My Commodities Broker just advised me to go long March silver at $5.00 an oz. Sure makes you wonder, who is conning who? The manipulators are having a field day. That has been apparent (to me, at least) over the last year, by depressing the price to just above $4.00 while the supply / demand equation dictated otherwise. Now the question emerges: are the commodities brokerages in cahoots with them--urging their clients to go long? Or, are they trying to drive the manipulators out of the market by making them cover their shorts?

Ordnarily I do not believe in conspiracy theories. But, this one smells to high heaven. Can't begin to figure out what's going on, so am staying on the sidelies.

-- JackW (jpayne@webtv.net), October 16, 2001.

From: Larry Edelson Subject: I used to love silver. But I'd hate to be in the silver business today! Date: Monday, August 13, 2001 11:01 AM

I used to LOVE silver. I was once the biggest silver trader on the Comex, in New York. But I'd hate to be in the silver business today. The price has been falling like a rock for 10 years, and there's still so much silver around that its price is going to fall in half again -- to $2 an ounce. Look, I know the silver dealers hate me for stating this publicly. There are chat rooms and newsletters devoted to denouncing me.

But the proof is in the pudding. If there really and truly had been shortages of silver over these past 10 years, the price of silver would have gone up, not down. How can you argue with the facts? They've been wrong. They've been wrong for 10 years. If you've bought from any of the silver dealers in the last 10 years, you're getting killed.

3 COSTLY MYTHS OF THE SILVER MARKET

MYTH #1: "Digital photography is not cutting into silver consumption." I don't know how any sane person can believe that. Kodak -- and every other major photographic manufacturer -- are actively changing their business plans to make the leap into digital. Any time you see a digital camera, just think of how many rolls of silver-halide film are NOT going to be bought. Indeed, Kodak just announced: "Sales of traditional products, including analog [silver-based] film, equipment, chemistry, and services declined 4% year over year." And while sales of its silver-halide products are down, Kodak also announced that sales for its digital cameras and equipment jumped as much as 100%. So you have silver-based photography declining and digital photography doubling in a year. That's a pretty clear picture, isn't it? Now, keep in mind that traditional photography is, by far, the largest single consumer for silver. You're talking about 60% of the industrial demand -- and it's disappearing. This is a death blow for silver.

MYTH #2: "Once silver is consumed, it's gone forever." Baloney! It's not gone. Outside of about 1,000 ounces which were shot into outer space, every single ounce of silver ever mined from the beginning of time is still right here on planet Earth, ready to come to the market. It's in the form of silver coins, silver scrap, electrical contacts in old appliances, sterling flatware, silver jewelry -- whatever. It doesn't evaporate. It starts to pour onto the market whenever silver has a little blip up. Three years ago, when Warren Buffet foolishly tried to corner the silver market, I said that even Buffet himself could never get silver back up to $10 an ounce. I said that even $7 silver would bring tons of the metal back on the market from secondary sources -- and that Buffet would get creamed. That's exactly what happened. Hundreds of millions of ounces of silver came pouring back on the market out of places like Bangkok, India, and Pakistan. Those supplies whacked Buffet (along with the other silver bulls) like a 2-by-4 between the eyes. Again, the proof is in the pudding: When an investor as wealthy and savvy as Buffet tries to corner the market -- and fails because floods of supply come on to the market -- there's no shortage. Buffet lost almost a hundred million dollars learning that lesson. By contrast, my subscribers doubled, tripled, and quadrupled their money on three different series of put options.

MYTH #3: "Comex warehouse supplies are down to dangerously low levels." Gosh, what a bunch of tired, old, worn-out b.s. that is. The so- called "shortage of official warehouse supplies" is just a shell game practiced by the silver bulls since the silver panic of 1906 when an early attempt to run the silver market failed. The modus operandi is always the same. The people trying to move the market take the silver out of exchange-approved warehouses that publish their figures and move it to private storage where they don't have to publish figures. Voilá -- the bulls are able to con the public into believing there's a "shortage." What a pity: The innocent silver investors take one more plunge and get caught in the trap. You'd think that, after all the buying from investors, the exchange- approved supplies would decline further. But no. Mysteriously and suddenly, new supplies appear. It's the same old silver being moved back to exchange-approved warehouses, where it's reported again. The rally ends. The dealers in on the con take big profits. The investors who bought into the hype lose another bloody fortune. Show me one investor who bought silver in the last 10 years who's made money, and I'll eat my hat. The proof is in the pudding.

Copyright Weiss Research Inc., Fair Use for Educational and Research Purposes Only

-- Robert Riggs (rxr999@yahoo.com), October 16, 2001.

I am one of the moronic silver dealers who cannot yet see the bright wisdom of Larry Edelson's genius. Just for starters, I would like to know exactly WHEN he was the "biggest trader on the Comex." I know people who used to manage floor trading for Mocatta & J. Aron, and they never heard of "Larry Edelson." How DID he keep it such a big secret?

-- Franklin Sanders (moneychanger@compuserve.com), October 16, 2001.

I am one of the moronic silver dealers who cannot yet see the bright wisdom of Larry Edelson's genius. Just for starters, I would like to know exactly WHEN he was the "biggest trader on the Comex." I know people who used to manage floor trading for Mocatta & J. Aron, and they never heard of "Larry Edelson." How DID he keep it such a big secret? Next, his argument about digital is just a decade or so too soon. In spite of gains in some sectors of the photographic market, digital is not about to push out silver halide technology in any time material to today's argument. Mr. "Biggest Silver Trader on Comex" apparently believes that 100% of silver used in industrial applications is re-cycled. Like all those photographs in Aunt Sue's attic. Like all those printed circuit boards with, WOW, thirty cents worth of silver on them. Like all that Silvadene ointment people put on burns. Sure, some silver is recaptured and recycled, but vast amounts are not. Ten years at a price of $5.00, eleven years of 15% average deficits. Maybe it is possible in nature. Maybe there are HUGE hidden hoards of silver out there. But I can't find them, and people with far better resources than mine, like GFMS, can't locate them either. Sure, there's a mystery here: where's all the silver coming from? Either there is (are) giant hidden hoard(s), or, just as plausible alternative explanation might be that the supply shortfall has been PAPERED over with PAPER silver -- derivatives. VERITAS FILIA TEMPORIS: Truth is the daughter of time. Time will reveal either the shining efflorescence of Mr. Edelson's sparkling genius, or a large short over the silver market. -- Franklin Sanders Editor, The Moneychanger Author (with Jim Blanchard), Silver Bonanza (1993)

-- Franklin Sanders (moneychanger@compuserve.com), October 16, 2001.