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Silver Wheaton Corp. Message Board

  • silverisgold88 silverisgold88 Feb 19, 2011 3:16 PM Flag

    Is the Coming Silver Accident That Ted Speaks of Upon Us?


    By Theodore Butler

    The primary factors mandating a silver accident are excessive naked short selling and leasing. Silver has the largest short position that’s ever existed in anything. This is the key component to the coming silver accident. The total naked short position in silver measures into the billions of ounces and towers over real world supplies. This combined short position includes the COMEX, all other exchanges, forward selling and leasing, the cumulative issuance of unbacked silver bank certificates, unallocated storage programs and pool accounts. No other commodity has such a huge naked short position.

    It is, basically, this bloated short position that’s at the heart of the coming silver accident. It is this same excessive short position that guarantees a financial windfall for your family. A naked short sale is the sale of something you don’t own. While common in financial markets, more than 99% of the world’s population will never sell short anything in their lifetimes. That’s because it’s an unusual and unnatural financial transaction.

    Unbridled short selling can artificially depress the price. That is why we have restrictions on short selling that date back to the great stock market crash of 1929. In commodities, there must be a short for every long on every futures contract. Regulations are supposed to preclude excessive long and short speculation via speculative position limits, but these regulations have been abandoned in COMEX silver, despite the efforts of many of us to correct that.

    There is one other aspect about short selling that is important to grasp. Whereas the word “sale” means closure or finality in all the billions of daily world business and financial transactions, a short sale is always an open or incomplete transaction. A normal sale marks the end of a transaction. A short sale makes the beginning of a transaction. A short sale must be completed at some point, in some way. There is no exception to this rule. Either the short sale is repurchased and closed out, or that which has been sold short is actually delivered and the open short sale is closed.

    Precisely because all short sales must be closed out guarantees a silver accident. When I say that silver has the largest short position in history, I am also saying that silver has the largest number of incomplete transactions in history. Forget, for the moment, the manipulative and depressing effect this monumental short position has had on the price.

    All short sales must be closed out in someway. With silver, could it be by delivering silver? Against the billions of ounces of silver sold short, how much do we have to deliver to close out these incomplete transactions? In the COMEX warehouses there’s 100 million ounces. That represents most of the known silver bullion in the world, but it’s mostly owned by investors other than the short sellers. Maybe there are a billion ounces of silver in the world, in coins, small bars and silverware, but that’s not eligible for delivery against the silver short position of billions of ounces. Not only is all the world silver in existence woefully insufficient to cover the monstrous short position, but most of this insufficient quantity isn’t even owned by the short sellers.

    That’s why I’ve made such a big deal about the uniqueness of a silver short position that’s larger than existing world inventories. It eliminates one of the only two legitimate ways in which a short sale can be closed out. That’s why we’ve never seen any other commodity with a short position greater than what actually exists. How can you have a short position in anything greater than what actually exists?

    ( part 1 )

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    • Keep In mind Ted has been talking about a silver accident, manipulation, shortages, crimex. Etc for years. This is his entire life.

    • My concern is FED-Government intervention. We know the investment bankers ( JPM ) controls the politicians in this Country.

      • 3 Replies to dalerobin777
      • Fear of government intervention is a legitimate concern. The bankers have a staff of psychologists and computer programs tracking the greed/fear factor of the herd. They know when to raise and crash the price to their maximum advantage. The way to make money is to buy low and sell high. When the fear runs high is the time to buy. When the herd runs wild with greed it is the time to sell. I bought 2,000 shares 3 weeks ago at $30 & 4,000 at $31. Friday I sold at $39 for over a $50,000 profit in 3 weeks. I am very happy with that transaction. If SLW goes higher I will still be happy and still have my $50k profit. I will not count money that I could, would or didn't make as a loss. On the next opportunity I hope to do as well. On the next dip somebody will lose the $50k that I took off the table. I hope it is not anyone on this list.

      • I agree. As crooked as everything is, the CFTC will most likely give them a Force Majuere(to big to fail). Another hiccup for the bankers calling the shots. The thing that bothers me is the part of the eqaution that nobody talks about. That being ,they have and do control the silver market. They no doubt make the most money when they let it run up as well as when they reign it in. As long as they control the market it will be a pittance what they may lose compared to what they make when its rising. In short, the ones making a killing for years with their illegal, naked shorts stand to be the biggest winners when they let it finally operate as a free market.

      • I believe companies that use Silver in their normal course of business are also buying to stockpile or looking for alternatives to Silver?
        When the Silver is gone from coin shops, online, and businesses that use Silver for their biz are hurting, etc., then, the king will totally be without clothes.....naked, so-to-speak!

    • The silver market is a crooked game and everybody knows it is crooked. The crooks know that everybody knows and wants the people to play anyway. The only way that can happen is if the crooks can make people believe that the crooks will lose and people have a chance to win. This whole squeeze scenario, that is to bust JPM, just sounds like it was made up to get people to play in the crooked game. If the rumor did not exist then JPM would have started it.

      JPM's total derivatives are 750 times that of their silver derivatives. Silver is a very very minor part of their overall business. It cannot crash JPM.

      Anyone playing in a crooked house and thinks that the crooks are dumb and they are so smart is going to lose. You are playing the house's game and the house makes and changes the rules whenever and however they want.

      Silver may go to $100 before it is back at $20. On the way there will be many peaks and valleys where the greedy and fearful herd gets sheared.

      Silver Wheaton has a very profitable business plan and it is being well executed by a knowledgeable management team. They will succeed at $100 or $20 per ounce. They do not need a silver squeeze to succeed.

    • yes, gov't can print more dollars. can't print hard assets.

    • Every Banker and his brother hate's silver.

    • Hey guy,that was an excellent and most informative post on this bord,and when ted speaks ,people listen,he's the king,the guru the boss hocho of silver if there ever was one!!!!your lucky just to read his letter,be thankfull.jmo jim

    • ( part 2 )
      The only remaining legitimate way a silver short position can be closed out is if it were bought back by the short sellers. From whom are these short sellers going to buy hundreds of millions and billions of silver ounces from? Or more correctly, at what price? Since actual delivery is out of the question, the only way the short sellers can buy back their bloated silver short position is to get every owner of real silver and every owner of paper silver to sell out. The price that would be necessary to accomplish that feat would qualify in any reasonable definition as an accident.

      While there is no way to determine when the silver shorts will spook and rush to cover, time is not on the shorts’ side. They must try, at some point, to buy back and cover the silver they can’t possibly deliver. It is not important to know in advance what the actual trigger for the silver accident will be. All you need know is that with the critical and long-term physical deficit in silver, the short selling charade must end. Since we can’t determine when, don’t focus on the timing, focus on the inevitability of a delivery crunch.

      From 2000 to 2004, the silver price averaged between four and five dollars. Since then, the silver price has been six, seven or eight dollars. Does this increase mean that the price has finally responded to the law of supply and demand, and therefore eliminated the chance of a silver accident?

      Normally, a price increase of 50% or 100% in a commodity should be sufficient to balance any consumption deficit. That’s a big move in any commodity. But not for silver. That’s because the consumption deficit in silver is unlike any other commodity deficit. Silver has been in a structural deficit stretching back for more than a half-century. You don’t undo the damage of 60 years with a 50% or 100% gain.

      There is zero evidence that production or consumption has been impacted by the price, or that the silver deficit has been cured. There has been no worldwide rush to find new silver mines in response to higher prices. Silver may have increased in price, but there has been zero effect on near-term production increases or substitutions in demand. No one has switched to gold or platinum jewelry because silver is up in price. The law of supply and demand hasn’t been affected one bit as a result of the recent price increases. The first prerequisite for the coming silver accident is very much intact. However, it takes more than a bullish supply and demand equation to cause a violent price event. Bullish fundamentals point to higher prices but not necessarily a price accident. In the silver short position, we have the needed reason, in spades, for an accident.

      As a result of the 60-year structural deficit, we have exhausted just about all the world’s previously existing silver inventory. That includes just about all world governments’ silver inventory. When the unavoidable silver accident occurs, there will be no one to douse the price fire. This can’t be said about any other commodity.

      This fact distinguishes between a gold and a silver accident. In gold, in a financial meltdown or currency crash (popular reasons given for a gold price accident), world governments own enough gold to extinguish a price explosion. In silver, they don’t own enough silver to put out a fire.

      It’s rare to be presented with an unavoidable financial accident that you can personally benefit from. If you find my argument has merit, then position yourself in silver before the coming accident. If you wait until the accident happens, it will be too late.

26.11-0.32(-1.21%)Jul 31 4:04 PMEDT

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