Ted Butler Commentary - A MILESTONE MEETING

http://www.investmentrarities.com/ted_butler_comentary01-11-10.shtml

As I indicated in my recent interview on King World News, a very important open hearing has been scheduled by the CFTC for Thursday, Jan. 14, 2010 at 1:00 PM. The holding of an open Commission deliberation and possible vote on a specific issue is a very rare event, one that I don’t recall occurring before (although the Financial Times wrote that the last such event was held in 2004). The issue to be considered is that of proposed hard position limits in energy futures and legitimate hedge exemptions to those limits. The public has been invited to observe the proceedings, with the particulars found here - click herel

I plan on observing the meeting and urge you to do the same. If you can’t watch or listen live, I’m sure the CFTC will record the meeting for later review. I’m confident that I will have plenty to comment on after the meeting, so it should be instructive for you to first observe the meeting for yourself, to make sure, at a minimum, that my comments aren’t off-base. I don’t want to create false hopes, but my expectation is that this will be an historic hearing.

While I will have plenty to say after the meeting, let me set the stage for why this meeting is so important and then speculate a bit for what this may mean for commodity regulation in general and for silver in particular. Make no mistake, even if the word “silver” is never uttered in this meeting, I am certain that the eventual impact it will have on silver will be nothing short of profound. Only the timing is in question. More on that in a bit.

This open-to-the-public meeting of the full Commission is both the culmination and potential starting point of a determined effort by Chairman Gary Gensler to fulfill the commodity regulatory reform objectives of the Obama administration.

I confess to growing impatient recently with the pace of position limit reform. My impatience was never about the caliber and sincerity of Chairman Gensler as a regulator, but strictly whether any one man could measure up the extreme nature of the entrenched silver manipulation. I still feel that way, namely, if Gensler can’t do it, no one can (except the market itself). The great thing about the historic open meeting this week is that we should learn more than ever about where Chairman Gensler and the other Commissioners stand on this issue.

This week’s meeting represents an important milestone in a process that began on July 7, 2009, when Chairman Gensler first announced his intention to have the agency review the matter of position limits in the energy markets.
click here

A series of three public hearings soon followed, conducted by the Commission in which testimony was heard from a wide spectrum of industry participants. The Commission’s request for public comment on the hearings led to an outpouring of public reaction (90% of which specifically referenced position limits in silver and gold, although neither commodity was mentioned during the hearings). Numerous follow up speeches and statements from Chairman Gensler and other commissioners have led to Thursday’s meeting.

Let me be clear – this meeting is a very big deal. I believe we will all learn a great deal from the meeting. It should show and record just where each commissioner stands on the matter of position limits, in principle and in terms of what the specific limits should be. It’s important that each commissioner stand up and be counted, either yea or nay. There will be a public comment period after the hearing so that you may weigh in with your feelings. Get prepared to do so. I wish I could press a button and put this process on fast-forward, but no such button exists.

For me, the issue of position limits and concentration in COMEX silver has been a twenty year campaign. I have raised and re-raised this issue with the CFTC and the exchanges continuously, always to be rebuffed. Yet I knew it went to the heart of commodity regulation, concentration and manipulation. I knew then and I know now that the manipulation in silver would end the moment legitimate position limits in silver, as well as the elimination of phony exemptions to those limits, were enacted. I don’t delude myself into thinking that the current CFTC initiative and possible resolution of the issue of energy position limits had anything to do with me or with silver. But I do know that I have repeatedly demonstrated that COMEX silver stands out as the only one where current position limits are out of line with all other commodities and need to be drastically reduced. I have shown where the phony exemptions to the current limits in COMEX silver are absurd, with one US bank holding 40% of the market short.

Even though the historic meeting this week is about energy position limits, no meaningful reform on position limits can occur without addressing COMEX silver at some point. It’s just a matter of time before legitimate position limits are enacted in silver, as well as the elimination of phony exemptions to those limits. If the hearing this week does manage to propose specific energy limits and avoids addressing silver, then we will have hard position limits on energies and agricultural, but not on metals. At that point, I’d like to hear the explanation for why no metal position limits. Presumably, if the Commission does propose specific energy limits, as appears likely, they will also explain the formula they used to arrive at those limits. Whatever that formula may be, when applied to silver, it will show the COMEX silver position limit needs to be drastically reduced.

While we should all have plenty to say to the regulators in the public comment period following Thursday’s meeting, I would suggest there is also something to say before the meeting. Ask the commissioners to be sure to consider and publicly comment on position limits in silver. It’s time for this issue to be dragged out into full view. Tell them that the position limits in COMEX silver should be reduced to 1500 contracts or ask them to publicly explain why that shouldn’t be the limit. Tell them that you find it outrageous that JPMorgan is allowed to be short 40% of the COMEX silver market and 30% of world production and ask them to end JPM’s concentration and dominance.

Many of you have sent me copies of email correspondence you have had with Commissioner Bart Chilton. To his great credit, Commissioner Chilton strives to respond to all who write to him. He has indicated that he believes there should be hard position limits in the metals. Please write to him again and ask him to raise the issue of position limits in COMEX silver at the hearing. Ask him to be courageous and raise this issue publicly, not just in private emails. If the other commissioners are against position limits in metals, that should be revealed for the public interest. Ask all the commissioners, including Chairman Gensler, to fully air the matter of position limits in COMEX silver at this hearing. But please ask in a non-threatening manner. I know the silver manipulation is a crime in progress and, as such, should make you angry. But this is too important of an issue to be less than professional. We just need to get the debate open and allow the matter to be resolved on the merits.

Silver price predictions – silver prices forecast 2010, 2011

November 9th, 2009

http://www.yrth.net/financial-news/silver-price-predictions-silver-prices-forecast-2010-2011

You have to plan ahead to stay ahead. Many sliver price predictions are quite daring. Many insiders forecast silver prices literally going through the roof, soaring in relative terms in the end of 2010 and beginning of 2011, just as they did in the 1970s. Of course, you have heard such prediction before, but the facts and fundamentals remain solidly in place for silver as it remains very undervalued on an historical basis, and is undervalued even against gold. Meanwhile gold has been getting plenty of attention from retail investors, thanks to a concerted push by everyone on TV, Talk Radio and Internet. Even Yahoo! Finance now shows gold prices under Market Summary on its front page. Yet silver remains obscure, the preserve of relatively few contrarian investors with the media and financial press barely covering it. That is why the only response bullish silver price predictions elicit is total disbelief expressed by light facial shock with eyes rolling sky high. All it is now when the silver prices are sitting in the intermediate stage of a bull market that will rival or surpass that of the 1970s.

Silver today is worth less than $17.75 per ounce and was at $20.88 per ounce in March 2008. After an 18 month period of correction and consolidation, silver price looks set to challenge that high in the coming months. Our predictions continue to be bullish on gold (see Gold Price Direction – Gold Prices Forecast 2009 – 2010), and we firmly believe that silver will likely outperform gold and quite substantially. In fact our silver prices forecast for 2010 and 2011 is such that silver will exceed its non inflation adjusted high of $48.70 per ounce and its price can reach $55 to $65 range in the coming years.

Why silver is in a bull market and what is the highest price prediction?
In recent years, gold and silver have outperformed equities and real estate. Due to the very bullish fundamentals, this trend is set to continue in the coming months. The forecast for silver prices in 2010 and 2011 is based on:
– the increasing global macroeconomic, currency and geopolitical risks
– silver historic role as money and a store of value
– the ever declining and very small remaining silver deposits
– significant industrial demand
– significant and growing investment demand

Gold, oil, potash, and other major commodities went over their record highs in recent years because of growing demand and short supply, geopolitical risks and concerns regarding the emergence of inflation and stagflation – all pointing to higher silver prices in the long term.

Silver rose from under $1.50 per ounce in 1970 to nearly $50 in 1980, increasing by some 2,400%. Were silver to replicate that, it would have to rise from $4.37 per ounce in 2001 to $110 per ounce. Such seemingly outlandish silver price predictions make many people laugh, but the silver record high in 1980 adjusted for inflation, according to the US government inflation figures, was around $130 per ounce.

Silver prices forecast considers dwindling supplies
According to commodities-research CPM Group, there were close to 2.2 billion ounces of silver in the world. While it may sound huge, the number of ounces stood at 12 billions in 1900. Today, there is less than 1 billion ounces of above ground refined silver. More than 90% of all the silver that has ever been mined, has been consumed by the global photography, technology, medical, defense and electronic industries.

While the birth of digital photography certainly diminished use of silver in the photo industry, based on current and projected supply and demand trends, the amount of above ground refined silver is to shrink to even lower levels in the coming years as demand has been outstripping mining supply for most of the last 20 years, driving above ground supply to historically low levels. However few in the investment world and almost nobody in retail are aware of this important fact.

Why silver price has not gone up? We do not believe in conspiracy theories. The increased demand has been met by silver ounces from inventories and official government stockpiles, which today are getting close to depletion. Those include U.S., China, Russia and India reserves. Now 80% of silver has been mined as a byproduct of other base metals such as copper, nickel, zinc and lead. In the event of a global stagflationary or deflationary slowdown, you can not expect these base metal miners to increase production for the sake of silver as demand for their core product would likely fall, thus further decreasing the supply of mined silver.

There are only a few pure silver mines remaining, all with depleting reserves. This inflexible supply means that we cannot expect significant mine supply to depress the price rise. All these facts comprise a powerfully bullish picture which is unique to silver.

Increasing industrial demand is bullish for silver
Silver today is used more than ever in traditional applications such as mirrors, batteries, medical devices and electrical appliances as well as more recent ones like cell phones, flat-screen televisions, laptops and other modern high tech devices. Increasingly, silver antimicrobial and antibacterial qualities are being used in many types of medical applications. There are many ongoing research projects on the use of silver based compounds for therapeutic and antibacterial purposes. Increasing industrial demand and application for silver forecast higher prices due to economic growth in China, India, Vietnam, and Brazil. Their growing middle classes are now demanding the quality of life and standard of living enjoyed by many in the West and thus the demand for silver will likely increase.

An important side note – unlike gold, silver is not recycled because of its much lower value. So silver is in a way like oil – as it is consumed and used, it’s gone forever.

Increasing investment demand
With the recent hiatus in real estate and stock market and with gold being very expensive, predictions of increasing investing demand for silver are coming to fruition. There has been a marked increase in investment demand for silver in recent years. The introduction of ETFs that track the price of silver, a new global liquidity bubble, the significant growth in the global money supply, the proliferation of wealthy people, hedge funds and the exponential growth in derivatives. In 2003, Warren Buffet called the latter financial weapons of mass destruction.
Investors in silver bullion coins and bars are hedging themselves against further deflation and falls in property and equity markets. They are further protecting themselves against rising inflation, possible currency devaluations and still very prevalent geopolitical and macroeconomic risks such as those posed by the humongous global derivatives market.

Silver is very undervalued comparing to gold
Silver has gotten grossly undervalued versus gold with the gold-to-silver per ounce ratio at 62:1 ($1,105 / $17.75), which goes against a long term historical basis with average gold-to-silver ratio of 15:1. It has bee estimated that geologically there are some 15 pieces of silver for every one piece of gold. In 1980, this ratio was 17 ($850 / $50) for a short time while the average in the 20th century has been around 40:1. So if the ratio gets close to 40 at today gold prices, the silver price should be around $27.50 ($1,100 / 40).

So silver price predictions for 2010 and 2011 are based on the facts that this is a unique metal in terms of being both a monetary and an industrial metal. Silver is priced at less than $17/oz today. The average nominal price of silver in 1979 and 1980 was $21.80 per ounce and $16.39 per ounce respectively. In today’s dollars and adjusted for inflation that would equate to an inflation adjusted average price of some $60 per ounce and $44 per ounce in 1979 and 1980. Add to this the rising gold prices, geopolitical complications, ever decreasing value of paper money and dwindling supplies, the seemingly insane silver prices forecast does not sound that crazy anymore.

As gold price soars, investors turn to silver

With the international price of gold continuing to climb steadily, many Chinese investors are turning to silver. As with any investment decision, however, experts say there are advantages and risks involved.

Although the international gold price has surpassed 1,200 US dollars an ounce, stores selling gold jewelry are still doing a brisk business. However, the higher price of gold has led many investors to turn to silver.

LINK TO VIDEO :

http://english.cctv.com/program/bizchina/20091212/101184.shtml