Silver in Backwardation. 30% premium on physical.

[TXBullion]

ill undercut jff at 18%

JFF any indications of where the markets heading, i predict is going to fluctuate

[Jonflyfish]

ill undercut jff at 18%

JFF any indications of where the markets heading, i predict is going to fluctuate

If I didn't know any better I'd say this is how a market is made!

As for the nonexistent future- as always, I do not know.

Cheers!

[theo]

a) To re-state Theo's comment in my words. Ponzi schemes work brilliantly for those that aren't the last out. Clearly money can be made in them, by some, for a time. They are real, for awhile. They always work well, until they stop working. You don't want to be the last one looking for a chair when the music stops.

b) There is a misconception that some of us have misconceptions. No, I think mostly just a difference of opinion. I'm fine with that.

c) (to pmbug) Actually Sprott had already finished buying his first batch of silver well several months before the Feb 2011 run-up. Though perhaps the shortage of physical from that led to the run-up? Dunno. Not sure how one would find out.

a) I'm cool with that- especially since the COMEX is NOT a ponzi scheme. It is a marketplace, an auction clearinghouse.
You bid, I offer, the exchange matches and crosses = zero sum. Price changes, one account is debited and the other credited.

b) misconceptions can happen when people make assumptions about things that they don't have working knowledge about. I'm cool with that too.

c) Agree. There is no way to know and it wouldn't matter if we did. Truth in price.

Cheers!

Just as we can't say for sure that the COMEX is a ponzi scheme, you cannot say for sure that it is NOT. Unless, of course, you can guarantee that there is an ounce of physical silver backing every once of paper silver. Debits and credits? Really? Enron had beautifully balanced books. Of course a lot of their debits were phantom receivables. However, to be fair, Sprott's 30% premium could be, in part, due to a successful P.R. campaign. I believe its healthy to be sceptical of all parties.

To be clear, Jon, I value your contributions and a big part of me hopes you are right. Afterall a COMEX default would be a disaster. I admit that I don't have your experience and understanding of these matters, but my instinct tells me that the fix is in. Throughout the economy far more promises have been made than can be kept. Why should the COMEX be any different?

What is it that they say? "If you are not at the table, you are on the menu."

[everything]

I see silver selling, not trading at 30% premium on ebay. I feel honored to have someone trading/living off the Comex 20 years posting here. I'm a little jealous because whatever pile you started with must have grown to immense proportions by now. Especially if your taking piles of hundreds on your Comex payday's to LCS, etc. You have to agree the paper market works when someone, probably many can literally just live off one continual paper play, because they know it inside and out, and essentially cannot lose at the game, even looking towards larger risks and bigger payoffs with a hearty laugh knowing your risk is probably near zero in your dealings. I don't know how many coin shops I've had to walk out of, silver might be say 28 but eagles are 35, all the silver is priced differently!, just more added confusion. And, they can say sorry we don't have to sell to you if we don't want to. I can see how the paper market has become such an animal, the physical PM market can be as much, if not more a sham as paper gold and silver and John is on to that.

[Jonflyfish]

a) I'm cool with that- especially since the COMEX is NOT a ponzi scheme. It is a marketplace, an auction clearinghouse.
You bid, I offer, the exchange matches and crosses = zero sum. Price changes, one account is debited and the other credited.

b) misconceptions can happen when people make assumptions about things that they don't have working knowledge about. I'm cool with that too.

c) Agree. There is no way to know and it wouldn't matter if we did. Truth in price.

Cheers!

Just as we can't say for sure that the COMEX is a ponzi scheme, you cannot say for sure that it is NOT. Unless, of course, you can guarantee that there is an ounce of physical silver backing every once of paper silver. Debits and credits? Really? Enron had beautifully balanced books. Of course a lot of their debits were phantom receivables. However, to be fair, Sprott's 30% premium could be, in part, due to a successful P.R. campaign. I believe its healthy to be sceptical of all parties.

To be clear, Jon, I value your contributions and a big part of me hopes you are right. Afterall a COMEX default would be a disaster. I admit that I don't have your experience and understanding of these matters, but my instinct tells me that the fix is in. Throughout the economy far more promises have been made than can be kept. Why should the COMEX be any different?

What is it that they say? "If you are not at the table, you are on the menu."

Theo- Thank you for the kind remarks. I appreciate your many contributions and valuable ideas as well.
The exchange is not a ponzi scheme because it is simply an auction house. It does not set prices. Only buyers and sellers in a free market do that. Unlike equities and bonds, futures markets are a zero sum and are marked to market at the settlement price daily. Your account is credited or debited by the amount the position fluctuated from one settlement to the next. If the market moves up and I'm short, my account is debited by the amount the person who bought the contract is credited.
Debits and credits? Accounting 101 friend. Particularly in trading any physical or financial market. Comparing debits and credits to Enron is like comparing an IRS 1040 form to Nicholas Cage.

Who said contracts are supposed to be backed 100% with physical? Again the COMEX is an exchange, not some secretive Freemason society like the Fed and Fort Knox with or without gold. How could an auction house that does not make the market nor set the price be expected to somehow hold an unknowable (do to Open interest) amount of gold and silver to magically offer folks like a bullion bar storefront? They do not represent to do so. Mechanically it is impossible. Example- I sell a contract and you decided to buy it. We have increased the open interest by one contract. Do not believe for an instant that I am going to deliver 5 1000 ounce bars (per contract) to NY if you decide (and I have no idea why in the world you would) want to take delivery at that time with 100% good funds in your brokerage account. My broker would be the responsible party with the exchange to deliver these bars. Do you think my broker wants to take that risk for a $5 round turn commission? They won't even allow it. They will exit my position at the close of the last trade date before expiration.
Imagine if they had to deliver WTI grade crude to Cushing Oklahoma because you decided to sell 100 contracts. Now consider live cattle, cotton, lumber, orange juice, barley etc.
Do you believe any financial broker will take delivery risk for these commodities because a client decided to sell contracts for any or all them? No way! If not already, they are closed out at expiration.

Again I think the argument by folks here is that somehow the COMEX is a physical dealer when in fact they are a financial auction clearinghouse. Some few contracts are EFP for whatever reason that would rarely if ever make sense due to transaction cost, location basis, transportation cost, inflexibility of unit of measure delivered i.e. 5 1000 ounce bars/contract vs wanting 5000 prospectors or 50 100 oz JM bars or industrial shot etc. If you live in Newport Beach California do you really want to buy COMEX bars in New York, paying all the fees etc and securely ship them across the country or would you buy the size of bars, rounds ASE's etc that you want/need from a primary dealer who would have local supply?

The derivatives markets are financial markets. They do not work for procurement. If they did people would transact accordingly.

Cheers!

[TXBullion]

although I still don't fully understand the whole merry go round, thanks for your insight jon. Its always different hearing about someone who is i the trenches and what you are saying makes sense. Your logic coupled with Rays conspiracies are very good to balance out my perception , I like them both!

[Jonflyfish]

I see silver selling, not trading at 30% premium on ebay. I feel honored to have someone trading/living off the Comex 20 years posting here. I'm a little jealous because whatever pile you started with must have grown to immense proportions by now. Especially if your taking piles of hundreds on your Comex payday's to LCS, etc. You have to agree the paper market works when someone, probably many can literally just live off one continual paper play, because they know it inside and out, and essentially cannot lose at the game, even looking towards larger risks and bigger payoffs with a hearty laugh knowing your risk is probably near zero in your dealings. I don't know how many coin shops I've had to walk out of, silver might be say 28 but eagles are 35, all the silver is priced differently!, just more added confusion. And, they can say sorry we don't have to sell to you if we don't want to. I can see how the paper market has become such an animal, the physical PM market can be as much, if not more a sham as paper gold and silver and John is on to that.

Thank you for the very kind remarks. This forum has a lot of great members with so much diversity and life experience to share. I'm thankful to learn new things everyday from all that they share.

Cheers!

[Jonflyfish]

although I still don't fully understand the whole merry go round, thanks for your insight jon. Its always different hearing about someone who is i the trenches and what you are saying makes sense. Your logic coupled with Rays conspiracies are very good to balance out my perception , I like them both!

Thanks for the kind words. It is like Yin-Yang except that I like Ray's conspiracies more than my boring market mechanic dissertations.

Cheers!

[theo]

Jon

Thanks for making the effort to explain your reasoning. You've made some interesting points. If I understand you correctly, there are so many paper options flying around, it is impossible for the physical holdings to mirror them ounce for ounce. Therefore is it incombent upon the COMEX to have enough physical metal available to satisfy those contract holders who stand for delivery. If these conditions are met, the interested parties (investors and users) accept the market price as valid. I'm still not sure I totally trust this system but I am trying to better understand it.

BTW. If there is corruption in this system, it is not necessarily due to some 200 year old conspiracy theory. It would come from something much older, human nature.

[camtender]

All that you need to know is:

Fractional System
The current system is a fractional system. If there is a run on the system, just like a bank, there is going to be a big problem when the amount needed to satisfy is not enough and we have what is called "settlement defaults". How soon we forget the LME 2006 issue with nickle http://www.lme.com/4670.asp

LME Chief Executive said:

“Nickel stocks are at historically low levels and we now have a genuine material shortage. Our first priority is to ensure that trading remains orderly and to prevent the risk of settlement defaults.

“The Special Committee has been constantly monitoring nickel stocks, the effect of those trading for the nearby prompt dates and conditions in the nickel market. The Committee will keep this under constant review and will remove the backwardation limit and reintroduce Lending Guidance as soon as it considers it prudent to do so.”

Lack of Integrity in the System
There is a lack of integrity in the system, Gerald Celente represented that he was standing for delivery on his silver contract, and lost via MF Global. I suspect that there are more players in the system that will fail.

You don't have to be part of the commodities/derivatives industry to see this.

I suspect that many of us have never been mortgage brokers, realtors or on Wall Street packaging RMBS - but we saw that the residential real estate marked was going to crash. You don't have to understand the nuances of an industry, you just have to understand fundamentals. In fact, I think many are at a disadvantage within an industry because their personal bias blinds them to such fundamentals.

Stick to fundamentals and you will see that all the rest is noise and personal bias. God gave you discernment, trust it...........and may the Force be with You!

[Sheikh_yer_Bu'Tay]

An ETF trading at a premium to NAV is hardly a novel concept.
Spot, prompt and second forward are all trading without arbitrage.

Cheers!

"A Government which robs Peter to pay Paul can always depend on the support of Paul" ??? Hmmmm, I always heard it said another way.

A Government which robs Peter to pay Paul can always depend on having a sore peter!

[68Camaro]

It's been a good discussion, again - though off-topic - worthwhile to me. I understand and actually agree (mostly, if not fully) with Jon's points. The area of disagreement we have, which others have done a better job of expressing that I have, is that the comex is not "just" an auction house. It's an auction house where people don't have to actually present their items being sold. Therefore it runs on the presumption of good faith and honor, which we all know doesn't last long in any system that has loopholes. Any system that can be abused will be abused - that's just a fact of life. Fractional reserve banking has a similar limitation - we have to rely on the good faith of the US government to believe and trust in it -and many of us have even lost faith in that. I don't think I need to enumerate the most recent abuses of the US government itself to this group. Ultimately what is lacking in all of this is honor.