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  • Abandoning Precious Shorts? 5 comments
    Jul 25, 2010 1:50 AM | about stocks: GLD, SLV

    President Obama has now signed the FinREgs bill into law. The CFTC now has a mandate to impose position limits of shorts within 180 days. What those limits will be remain to be seen. 

    In Friday's Commitment of Trader's Report, JP Morgan reduced their net silver short position by 3,254 contracts. The eight bullion banks led by JP Morgan, hold 76.6% of the entire gross commercial silver short position.

    The total commercial net short position in gold, fell for a second week in a row - down 32,684 contracts, to 21.6 million ounces. Which is a bit over 100% of the gold commercial net short position by the '4 or less' bullion banks.

    Could it be that the decade long holders, of the majority of commercial net shorts in gold and silver, are abandoning their precious shorts in advance of a ruling by the CFTC mandate? If this be the case, then the prices of both gold and silver will rise dramatically, when freed from the constraints of these grotesquely large concentrated short positions. All eyes are now on the CFTC and what transpires within the next 180 days.
     

    Disclosure: Long physical gold and silver.

    Disclosure: Long physical gold and silver.

    Stocks: GLD, SLV
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  • John Lounsbury
    , contributor
    Comments (4050) | Send Message
     
    Donald - - -

     

    Thanks for posting this timely heads-up. I wasn't paying attention to this. Now I am.
    25 Jul 2010, 08:46 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
     
    The commitment of traders figures show that the small investor is the party usually holding short positions at the wrong time. As a small investor I can verify that is true, unfortunately. But this vast body of investors is one of the most useful "tools" used to pump the market higher with little cost to the manipulators. With a relatively small injection of capital the orcs can set off a self feeding buying spree, effectively driving the markets higher with "other peoples' money".

     

    The small player puts on short positions in expectation of lower prices (good luck with that). But when the bullion banks are holding vast short positions, their agenda is quite different. That agenda is to "hold back" prices from rising at the very least and to drive prices lower when needed. Whether there is truly inflation happening at the current point in time, or deflation, is almost a moot point. What matters most to the bullion banks is that rising precious metals prices at the very least give the "illusion" of inflation. And that's enough to make Bernanke's job a whole lot more difficult when it comes to his argument for holding rates so low.

     

    In reality, Bernanke really isn't the slightest bit afraid of inflation, it's deflation that horrifies him. Inflation... he can take care of that by raising rates if he wanted to. Deflation... he has absolutely no control over that. And if there's anything central bankers detest it's anything they have no control over.

     

    In any event, if the banks are stripped of the right to hold the precious metals markets back, the metals would most likely do a pretty impressive moon shot. Particularly silver since it's been held back more than gold has as evidenced by the relatively high (and increasing slightly) gold/silver ratio. It makes great sense to me then that the banks "ease out of" their short positions well early in order to mitigate the natural tendency for the metals to react by rising in price. Reduce the impact as it were.

     

    Ultimately though, if we're really in a severe deflationary world I'd expect gold and silver to have a limit to the upside as long as the bond market is rising. There has been much talk about the "bond market bubble" but as long as there are credit risks in the world (and there are many, many enormous ones), the bond market (American) is not likely in any danger of collapsing anytime soon. I think it makes sense then that if gold and silver were allowed to trade without the criminal manipulation that has been rampant for decades now, the initial outburst in PM prices could be turned back once the initial euphoria has run its course.

     

    Deflation first... it has to happen that way unless none of the larger banks in the world are in danger of a credit crisis and as long as they are lending wildly into the global economy. Are they doing that? I think not.
    25 Jul 2010, 11:17 AM Reply Like
  • Matthew Green
    , contributor
    Comments (457) | Send Message
     
    Donald and/or John,

     

    I've had some trouble finding the final text of the bill. I need to double check that this link has the bill in its final form. The house and senate websites had the bill in all its stages, mostly the original Chris Dodd version from earlier this year. Is this it? #6 on the list.

     

    thomas.loc.gov/cgi-bin...:
    25 Jul 2010, 11:57 AM Reply Like
  • John Lounsbury
    , contributor
    Comments (4050) | Send Message
     
    Here is what I found: frwebgate.access.gpo.g...

     

    This has only 848 pages and I have read that the final bill was passed with over 2300 pages. Maybe we haven't found the bill as passed?
    25 Jul 2010, 12:38 PM Reply Like
  • Zmartmoney
    , contributor
    Comments (1233) | Send Message
     
    It's all that open-ness and transparency that we know exactly what the bill says and where to find it...
    26 Jul 2010, 02:43 PM Reply Like
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