Bart Chilton on Silver, oil etc May 6th 2011

These are brief excerpts from Bart Chilton, head of the CTFC,  interviewed on Squawk Box this morning. In most cases I am paraphrasing because I'm a horrible typist and brevity. He is talking about commodities in general and not necessarily just Silver.

"There is more going on than mere speculation"
"HFT traders are a problem. (Cheetah traders)"
"We need to make sure prices are based on fundamentals"
"Silver was up to $50 and is now around 35" We re going to be taking a look at this.
Speculative Dollars are coming in especially in Crude. 60% increase in Crude and 20% in metals
Speculation having an impact on the way up and down.
Very concerned about manipulation
These markets effect everyday life. Large influx of speculators.
You can't say last week these commodities are going up because of an easy money policy and then we crash this week on a bad jobless report.
Flash crash last May was from algorithmic trade.
Very concerned about speculation. It's our job to make sure markets are based on fundamentals.
BQ :CME hiked margin requirements. "Necessary move to remove some of the speculation and to protect against excessive speculation as some of the speculators may not have the money to back up their speculation.
Cascading effect on back to back margin hikes and I agree that it was necessary as some of the longs may not have had the money to pay if they are called upon.

I'll put up the video if I can locate it.
Jobs report today: Expect some bullshit number followed by a revision.

Edit: Harvey Organ and others in the bug community consider Bart to be one of the good guys.  I personally think he is as well.

Personal Opinion:
We might be seeing some sentiment shift here. Only a blind man could look at the Silver chart right now and say; "Meh! it's perfectly normal". Even a blind man could see the current beat down is over done. People will be skittish and probably trade Monday and dump Friday until we reestablish the uptrend. Anyone looking at Oil has got to be thinking the same thing. 
CNBC etc crowing about the beat down just puts it on everyone's radar IMO. In other words talking about it is going to backfire. Silver is now considered cheap.
Those that were waiting have got be nibbling at this point. The recent sell off and loss of NAV in PSLV only makes it juicier once the whole story came out that Sprott didn't sell everything. Just a fraction of his holdings and only to recycle those dollars into the miners.


flaunt said...

What do you think of an s&p short here? Stupid idea?

Louis Cypher said...

Is it worth the risk? I mean what's the expected return versus loss if it goes against you. Personally I wouldn't only because it's Friday. I would sit tight and wait until you distill all the info over the weekend before making a decision. There have got to easier trades.

The easier trade IMHO right now is watch Sprott and Rogers. What are they doing?

flaunt said...

Just seems like this NFP report was particularly full of shit this time. it should be obvious pretty soon.

Louis Cypher said...

I think everyone knows it's full of it but look at the dollar chart before you place your bet.
Looks a little over done no?
The market is up even on a rising Dollar right now. You could be right and the S&P will roll over at the end of the day but ....
Just my personal preference to never place bets on a Friday. I try to stick with Mondays only as it forces me to pick and choose my battles wisely after a weekends consideration.

Yukon Cornelius said...

Hey LC,

I'm not sure I'd say silver is cheap here. I've been in nibbling and a bite yesterday, but it still feels like silver has some more weakness to show us. I've been planning on a short term pop with another solid drop. But I'm sticking to my buying plan which really kicks in at the low $30's.

Bart Chilton is telling it like it is and people just weren't (and still aren't) ready to listen. The amount of speculation in silver was absolutely crazy. I mean CRAZY crazy. The silver bull psychology hasn't really gotten the frothiness stomped out of it and until it does we're going to see even more margin hikes. The recent margin hikes were a pretty clear warning that they're not playing around. If everyone goes and runs silver up again then they're going to really turn loose the hounds - you watch.

I'm looking around the "poker table" to see what everyone else is doing here. I'm quite tempted to change my buying scale to account for a lower bottom possibility.

Louis Cypher said...

I typed up a long reply but it just disappeared into the bit bucket.

I nibbled on some silver today on my way home. Just some low premium bars as a way of introducing myself to the local coin guy. Up until this point I have been buying online.

When I say "cheap" I mean it's at a $15 discount from just a week ago. The public are dimply aware of Silver and it's rise and fall. CNBC have been screeching about it's parabolic rise and bubble and now they are simply shocked at the beating it's taken.

Even the paper bugs are taking notice of the oddity of Silver and Oil taking such a beating.

GM Jenkins said...

Speaking of Chilton, a thought occurred to me. Harvey Organ and SGS and others were talking pretty confidently that Chilton would carry the day and position limits would be imposed (remember when the CFTC was taking comments from the public? lol) ... but the fuckers postponed the matter, were supposed to meet again to discuss it, and i havent heard anything about it. Now, maybe this crash is a reaction to that - just delayed enough so it didnt look obvious- in other words, jpm realized they would have a free rein to knock down the price with unbacked paper to eternity, so they let the price go up to 50 (their fingerprint was conspicuously absent in the market throught april, as silver really shot up from 40 - 50, whereas mining stocks during that time didnt move).

GM Jenkins said...

Or it could be the opposite thing going on - at least acc to captain benny, a zero hedge commenter who supplied this link... I wonder where he gets the data and if it's accurate?

Louis Cypher said...

Interesting link. You can figure out exactly what Apmex has in stock if you are patient or you write something to scrape the site.
Example; if you put in an order for 1000 2011 monster boxes it will change your order cart to whatever they have in stock.

For a while there it looked like JPM had given up the struggle.
Did you watch the interview?

If/ when you do is your impression he wants to say more but is holding back?

Louis Cypher said...

I spoke to Harvey a couple of months back and he was pretty sure Bart Chilton was going to do his best on those position limits.
I guess the reality is he might have the title but the real power is in the hands of others or he is wasted on this b.s. and should be on Broadway.

Robert Leroy Parker said...

Okay so I've got a tin foil hatter for you guys. Lets see if beetlejuice, I mean Brian O'Flanagan shows up and shuts me down. Here's the rundown:

On April 25th, SLV inventory hit an all time high of 11390 metric tonnes. Since then until day end today, 9 trading days, SLV has lost 1137 metric tonnes of silver or 36.5 million troy oz.

Now, say WB is real, and the billionaire (Russian guy rumor) they had on board is ready to get in on the action. Take all the reported 1st days notice and 1st day data from the comex and throw is out the window for this to be plausible.

Say WB stands for all 6600 contracts necessary to drain the eligible inventory of 33 million oz from the comex in hopes of a cash premium of a billion+ dollars. Maybe its even higher but just stick with that for this theory. They figure they will be paid off or the comex will show its been depleted or even failed to deliver sending physical to the moon.

But the short (blythe, whoever) has been draining SLV to the tune of nearly the exact amount that would drain the comex eligible. At the same time as delivering WB slv silver, they hike margins, crush silver, and leave WB and the rest of the silver market in tatters. They can now cover a shit load of their shorts (4200 contracts as of Tuesday, maybe a lot more now). And because WB has lost the billionaires money, they no longer have large backing, and can only make small moves again in the future. Otherwise neutralized for quite a while. Especially with SLV still having over 10000 tons.

All very implausible, but where is the slv silver going? Am I unaware of some sort of inventory release mechanism that corresponds with price drops? Who is stepping into redeem this physical and why start when silver is so high? As of the 29th, before the crash, 11.5 million oz had been drained. By day end the 4th, 30 million oz. Is industry swooping in on physical at cheaper prices? Why aren't they waiting longer in what appears to be a exponential blowoff. Is the bottom in? Lots of questions about this SLV business.

GM Jenkins said...

Watched the video. Becky Quick is hot. I didn't really pick up the vibe that Chilton was holding back. Could be, but regardless, he doesnt strike me as the most effectual guy to have on your side. I'd prefer an angry super-energetic piss and vinegar guy. I think turd said it best: "This string of 5 consecutive margin hikes is as cruel as it is unprecedented. The central planners are taking great pains to cover their policy mistakes and blame the evil "speculators". Even that worthless, empty suit Chilton has finally shown his true colors. Just another bureaucrat hack."

but jesse's cafe americain is more forgiving
Bart Chilton has indicated that the CFTC should look into the recent market action. To what end? They never release any of the pertinent data, and certainly don't do anything about it. And I suspect they won't until that aftermath, when something breaks. I like Bart, and think he wants to do the right thing. I have also been in management situations that I think are like the one he is in now, so he has all my sympathy and good feelings.

GM Jenkins said...

I don't have the expertise to comment on the feasibility of RLP's scenario, but it is my strong suspicion that when the fog clears up, the WB mystery also will. Right now trying to grasp the truth means being in a continuous mental state where foreground and background shift back and forth: are we being duped or is KD, B O'Flanagan right and things are not 'different this time.' Same with the Osama shit: the 10% sunday raid of silver on a day when Asian traders were on vacation and 2 hrs BEFORE th eosama news: could that really be coincidence?

Louis Cypher said...


Becky does have that predatory look about her :)
On Chilton ... it's got to be tough fighting against decades of control by people who we can assume are sociopaths. My guess is he wants and orderly retreat. Who wants to be known as the guy who broke the Comex and sent the world into a melt down?
Yeah the timing was perfect. You have to hand it to these guys. They orchestrated a perfect storm in Silver and the trade off I am guessing was smashing oil down as well. The OPEC boys were happy enough as Gold was almost unmolested. Status Quo almost preserved. I am referencing "Another" or was it "FOA"? on the Gold / Oil trade.
There are simply too many moving parts now and the wheels are coming off.

The Warren is planning on adding to his database to include Sprott etc. At some point we will be able to track where this stuff goes but it requires more participation from the community with SQL skills and dedication. We are trying to get the word out there for more participation.
I am thinking about asking SGS, Harvey, Yukon, Brian Flanagan, KD and everyone else who is willing to post a help wanted. I will wait for Warren to get back from vacation and run it by him first of course.
There have been a number of projects started in this area and The Warren has consolidated a lot of work and added to it but there is a lot more to do.

GM Jenkins said...

Ah that's a good point about Chilton, not wanting to be the guy to bring down the COMEX and start a meltdown. If it's indeed the case that the COMEX is in danger, and the ramifications would be (as Harvey has said) a worldwide currency meltdown (though again, amazing how two totally mutually exclusive scenarios go back and forth from being certain to improbable depending on what I read and my mood, like a shifting optical illusion), then I can see what you mean about his "holding back." He was quick to point out that "manipulation" was a main problem, vs. speculators and other stuff, which he didn't have to do since that wasn't what the interview was about.

Re: Warren's project, can Warren or someone explain to me what exactly is the goal? It sounds ambitious and important, but I don't really follow what th eupshot is. Also, maybe we should keep it at the top of the blog for awhile.

Warren said...

Vegas!! What a blast.

Hi GM, the database project is to collate enough data to shed some light on the SLV inventory. If it is fraudulent then this should be evident in the historical data. Public access also lets others check the data independently so any graphs I come up with can be verified or they can also do their own mining. The large outflow of SLV could use some scrutiny for example.

I have a few theories I want to test which are along the lines of Bix Weirs theory about the moly bars (Russia & China?), but ultimately i am looking for a model of the markets which includes the SLV inventory being real. In this light, you ought to read Costata's latest here .. I have been monitoring his opinions for a while and he has now laid out all his thinking in this post (which is a guest post at FOFOA). He outlines a good case for SLV which includes large amounts of silver being immobilized for the purpose of market manipulation. It is compelling and may be the model I seek.

Pretty much all of my posts from now on will be tests of the database - new graphs and charts and data, and I'll put links back to the original article so that it can all be found. I expect it will take a good 12 months to get the level of public participation which I want but that's okay we will have lots of material by then. :)

Robert Leroy Parker said...

I think if Costatas article indicates a possible truth, then based on the latest price action the WB group is not going to be demanding premiums from anybody ever sgain. Thats assuming costata is correct and that WB even exists.

All the speculation of Giants behind the scenes, international conspiracies, and hooplah in general is making me think that investing in MSFT sounds pretty good about now.

Warren said...

RLP, our path appears the same - one thing is certain for me: the information I had initially about the silver market is incomplete though I had not realised it prior. The complexity to create a new model is taxing, reflected in your own observation of MSFT being an equivalent (easier by comparison) buy-and-hold strategy.

I wont rest until I've got this one figured out. The SLV stockpile is part of the key. Cracking the true nature of WB is another. I have been pondering the movements within SLV and I have realised (yeah i'm slow) that a bar serial number going missing from the list doesn't necessarily mean it's getting redeemed but being removed from the baskets via ledger entry. This would make sense of that bar which did the houndini style appear-disappear-and-reappear trick and there may be others.

I would assume that most of the 20M oz which 'dissapeared' will 'reappear' in the coming weeks and with my database I should be able to prove that.

Louis Cypher said...

Tulving has capitulated and is having a silver sale.I wonder how long it will last?
This will give us a good idea of retail demand. Watching closely.
As you guys know they usually jack the premiums when price is falling

Looks like the asians decided it was cheap enough to start running the price up again. This is it as far as I am concerned. This is the point where you decide in or out.

Robert Leroy Parker said...

In with some 2013 near the money leaps on SLV, but a small dollar amount. I think that maybe how I start to play things so I don't have to worry about short term volatility so much.

Still holding physical.

Louis Cypher said...

Smart man. I am going to do the same on SLV and PALL.

Robert Leroy Parker said...

Is PALL optionable? I looked at hedging with some puts on it a while back but had to settle for PAL puts.

Louis Cypher said...

I dunno. Any Palladium play will do for me.