Friday, September 17, 2010

Two banks still net short 24% of total COMEX O-I silver

Silver is knocking on $21.00/oz, up a clean 15% over the last three weeks. This is happening despite the continued operations of two "undisclosed" commercial banks (ach-hoo! JPMorgan and HSBC!) which are still holding onto documented massive short positions. As Harvey Organ points out, last month's (July 2010) Bank Participation Report revealed that these two banks continue to stubbornly maintain their massive positions. How massive? How about an amazing 31,803 contracts, or 26.5% of the entire COMEX open interest on silver, massive?

And what direction massive? Well, you know the answer--26.5% of the entire COMEX OI silver in short positions--the shining relic of Bear Stearns' March 2008 position. This is just some of the valuable and perhaps frustrating information we can extract from the BPRs which the CFTC still (relunctantly?) releases. But, of course, this is old news--its from July! Things are totally different now! Since this last BPR, silver is up over 15%. These banks can see that as clearly as you and I--they're losing dough shorting contracts! They must be onto this, too---right? So what are these banks doing this month?

Well, of course--they're increasing their short positions!

That's right--the JPM-led duo (JPM likely holds 90% of these shorts with the balance in the hands of HSBC) increased its short positions by over 5% from 31, 803 to 33,431 contracts in the face of this 15% move up. Here's the BPR, see for yourself. And if you're not clear about the historical continuity of the JPM/Bear Stearns COMEX silver story, here's a previous post on the subject.

Not surprisingly, overall OI has increased since the July report to a current 139,522 contracts, as the rather small silver market has gained considerable attention lately. Therefore, while the JPM-led short position has increased 5% to 33,431 contracts, it actually represents a slightly smaller chunk of the OI pie: it is now "just" 24% of the entire COMEX OI! (Yo, CFTC: why are we paying you, anyway?) Of course, if JPM would not have increased the short position by 5%, this overall increase in OI would have further reduced their presence: in fact, if they would have just held the previous month's amount of 31,803 contracts steady, their chuck of overall OI would have been reduced to under 23% (which is still ridiculously large, granted). It doesn't look like there is an easy way out of this massive short position for JPM, and that should make us all very uncomfortable.

Don't trust these rascal for a femtosecond. We really do not know what is going on right now. Things are rarely as they seem, especially in rigged economies like ours.

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