Silver: Past, Present & Future Part II
THEODORE BUTLER'S SPEECH AT THE PHOENIX SILVER SUMMIT 2009
Early March 2009
I want you to do me a favor. I want you to play a little game of imagination with me. It may sound silly at first, but try to play along, as I want to make the central point of the day. I want you to imagine that in this room, right there, in the space between you and me, is a giant elephant. Not a regular elephant, mind you, but the biggest elephant ever documented. A 26,000 pound African Bush Elephant, 14 feet tall in the shoulders, with absolutely massive tusks. I looked this up, so I'm not misstating the dimensions. Not only is this the biggest elephant ever recorded, it's loud, agitated and it stinks to high heaven, flapping its ears and swinging its giant trunk. And it's right there and has been right there the whole time. I want you to imagine that you've been sitting there, listening to me talk about silver with this 13 ton elephant right there, interrupting my speech all along and scaring the dickens out of you. And the kicker is that we're all trying our best to ignore the elephant. Pretending it's not there, speaking around it. We're all trying to act like it's perfectly normal to be in a room speaking about silver with this giant elephant and trying to act like it's not there, when it clearly is there.
The African Bush Elephant in the room is the silver manipulation. But whereas the elephant is imaginary, the silver manipulation is as real as rain. But like the imaginary elephant, most are doing their best to pretend that the silver manipulation doesn't exist. Not me, of course, as the manipulation is the most important pricing factor in silver, and I write on it continuously. I sense I have convinced many thousands of readers that silver is manipulated and maybe many in this room. But it is absolutely amazing to me how so few analysts and industry people publicly speak out on the manipulation.
I'm talking of people working for the financial firms and banks whose job it is to follow and write about silver. I'm speaking of those in the mining industry and in particular the Silver Institute. I'm not complaining about this lack of manipulation talk. Maybe at one time it upset me to be so alone, but not anymore. Now it's just amusing. I read everything there is to read on silver and 95% of what I read never refers to the manipulation in any way. I find that bizarre. I find that to be the real life equivalent to my previous imaginary exercise of the elephant and pretending it's not in the room.
I'm not demanding that anyone agree with me about silver being manipulated. I'm human and I reserve the right to be wrong. Besides, it's better for me to be the only one making this the main issue. In the past, many did challenge and attempt to refute my allegations of manipulation, especially those in the mining industry, which never made much sense. But as the issue has become so specific as to the documented facts about the concentration, I'm not even hearing lately anyone explaining why I am wrong or answering simple questions, even on the Internet. If there is one thing I have learned about the Internet, because of its shield of anonymity, many love to tell you why you are wrong and they are right, and in generally a rude manner to boot. But I've asked the question for 6 months for how can one or two U.S. banks being short 25% of the world silver production not be manipulative, with no response. I was seriously considering running a contest with a reward for every legitimate answer.
Stranger still in the collective avoidance of even talking about a potential market manipulation is that the prime regulator, the CFTC, has initiated a formal investigation into my allegations of manipulation in silver. This is the third silver investigation in less than five years, and the first by their Enforcement Division. This has never occurred in any other commodity. Regardless of the outcome of the investigation, the fact that there is another investigation is extraordinary, in and of itself. Nothing could be a more important issue than whether any market is manipulated or free. You would think that there would be wide discussion on the potential outcome or the merits, pro and con, on the investigation itself. Instead, mum's the word. That so many establishment analysts and mining and industry people can pretend that everything has been completely aboveboard in silver is more bizarre than my elephant in the room example. Especially now that the CFTC has stated that they are investigating.
Like all manipulations, the silver manipulation has resulted in an artificial price level. Unlike most manipulations, the one in silver is a downward price manipulation. Admittedly, that does make it harder for folks to grasp the issue. But the saving grace to this manipulation is that those not involved in the manipulation can take advantage of the artificially depressed price. The special essence of this manipulation is that outsiders can profit from it in a simple and easy manner. All you have to do is buy and wait.
Like all manipulations, the silver manipulation will end suddenly and the price must move sharply in the opposite direction of the manipulation. In this case, the price of silver will explode upwards, once the manipulation is terminated. Those holding silver when that occurs will be rewarded. This is not complicated.
But what happens if the CFTC's investigation ends with them, once again, finding that no manipulation exists in silver? It doesn't matter. The silver manipulation must end, suddenly and violently, to the upside, no matter what the CFTC says or does. I wouldn't be so naïve as to depend on the CFTC for doing the right thing. The price, having been depressed so low and for so long, must result in a shortage. The shortage has been clearly evident in the retail market for more than a year. Not as clearly, but present nevertheless, are strong signs of a wholesale shortage in the unreported shorting of SLV shares and other wholesale indications. When this shortage hits in earnest, no one will be able to stop the sudden demise of the silver manipulation.
You might further ask, "If the manipulation in silver will end regardless of what the CFTC may or may not do, why do you (meaning me) persist in focusing on this issue? Why not just sit back and let it happen? Well, I have no choice in waiting to let it happen, so I guess the question is whether to keep quiet about it. The answer to that is while the manipulation presents the strongest reason for buying silver, it is a market crime of the highest order. There is no more serious market crime than manipulation. It is the equivalent to Murder One, Treason or kidnapping.
In addition to providing the most compelling reason for buying silver, the manipulation is a crime in progress. As such it offends my sense of what is right and wrong. Being the best reason for buying silver and being a crime in progress are not mutually exclusive. Just like recommending that people buy silver and write to the regulators and lawmakers complaining about the manipulation is mutually exclusive. And I am gratified that so many have taken the time to contact the regulators, as it has really made all the difference in the world.
In conclusion, the supply/demand set up in silver, which has evolved over an incredibly long period of time, has been one continuous process promising to culminate in an explosion in price at some point. Quite simply, we are rapidly approaching that defining moment when there just won't be enough physical material to go around at anything but rapidly escalating prices. Those escalating prices will encourage and drive others, including industrial consumers, to enter what should become a buying frenzy. Superimpose upon that the sudden destruction of a decades-old downward price manipulation and you have all the necessary ingredients for price event that will be referred to forever.
Thank you and I'd be happy to take any questions you might have.