Market Curiosity: Exploring Markets And Systems

March 6, 2011

Cheeky fictional story of silver suppression unwinding

Filed under: Editorials — Tags: — Jeff Fitzmyers @ 3:49 pm

[This is just for fun. There are a bunch of holes and omissions in it. ]

“NBNMLS” posted the following at the open of COMEX silver trading a few days before First Notice Day: “The longer a thing is suppressed, if the fundamentals remain the same, the more costly the suppression efforts until the dam breaks. By historical measures, silver’s spring has been wound up about 200 times. It will likely be unwound hourly starting at 6:25 by 1,500.”

Of course nobody saw the post, and few would know to care even if they did, due to ignorance. That would change, rapidly.

At 6:25:00 PST NBNMLS posted, “Much of the fringe physical silver has been used or purchased by stronger hands. We are buying today because the COMEX reports it has plenty of silver. If not, then we are buying today, transparently, to show we are following the rules and documenting that it’s not “speculators” that cause price to go up a smidgin today. It would be bullion banks that say they have silver, but really don’t: Isn’t that fraud?” No one had ever seen a sliver ladder like this:

Traders all over the world took notice at the apparent anomaly: “Scary” fake asks are usual, not bids. But it wasn’t fake because every minute it would rise a penny and eat all the bids. Everyone watched as the limit bid took 10 minutes and 10 cents to get filled. Not a big deal really, the active silver contract can easily handle that type of demand. It was the way the demand was presented. People started to talk.

At 7:25:00 NBNMLS posted, “We wonder what will happen today? We doubt there could be a problem anyway for people who follow the rules? Commercials are net short over 50,000 contracts. We only want 9,000 of those offered. We are sure the “regulators” have done a good job and make sure that the commercials can deliver, right?” Traders really paid attention to the ladder:

People were a bit excitable when they saw that this time the bid was jumping up 5 cents / minute. It was fun to watch, if not short. The posts from NBNMLS were found and studied. Prudent entities started to reduce size and short exposure: everyone could see that 1,500 per hour, if extended the rest of the day, equaled all the reported available warehoused silver. The price suppressors mobilized resources and confirmed they could not end the bid on rule violations: The bids were from different entities all apparently playing by the exchange rules. Silver was up $0.50. Silver stocks were ticking up.

At 8:25:00 NBNMLS posted, “If the exchange closes, won’t that be an admission of not enough silver? Or will the exchange can stay open and try to paper things over? And no, we don’t want a federal reserve notes in exchange for not taking delivery. They are not federal, nor reserve, just debt. And the world is awash in debt. A successful strategy is to sell what is abundant and buy what is rare.” The 1,500 bid ate 3/4 of existing asks, and repeated that every minute.

Traders contacted loved ones: “SOS, spend 1/2 of bank account to get silver online, immedaite delivery only. then in coin shops. now please. no joke.” Silver stocks started to run. Although this could still be a rumor, NBNMLS was creating a believable track record. Hedge funds that were not long started to cover and go long. The price suppressors conferred with superiors, and got authorizations to short more. Volume rose, volatility rose, and price rose $2.00. CNBC had yet to mention anything about some apparent group(s) just having contractually claimed delivery on half supposedly available warehouse silver.

At 9:25:00 NBNMLS posted, “Did you happen to see this video about SLV anomolies? The silver community is very small since fait seemingly demonized demonitized the metals. There are only a handful of major silver stocks to choose from. Why choose? Multiple entities bought multiple 9% stakes in them all. They were all on sale in 2008.” The 1,500 bid ate all of showing bids .

The price suppressors had a hidden ask of 1,500, but since traders started front running The Bid seconds before 9:25 the hidden ask was only 1,100 when the bid hit. It was quickly filled by the price suppressors with a price $0.50 higher than it was at 9:24:58. The front running was getting active. Few were willing to sell for the next 59 minutes. Price rose another $2. Other markets were reacting and the news was reporting. Any stock with the name silver was up at least 20%, including Quiksilver which makes clothes and has nothing to do with silver the metal. Option prices rose to quite expensive levels. Traders made bluntly serious calls again to loved ones: get silver online and then in coin shops, yesterday. The loved ones said everybody was out but they were targeting wholesale jewelry. Silver stocks went up another 10% in 5 minutes. Exchanges were conference calling but did not really know what to do as the buyers were legal and not really buying that much. It was the shorts that were the problem and there was already a lot of publicity about this situation.

At 10:25:00, the close of pit trading, NBNMLS posted, “Why? We want the silver, and we don’t want the consequential soul crushing poverty resulting in the malinvestment and fraud that fractional fait engenders. You can’t say we cornered silver. Apparently there is none for us to corner here. The suppressors already cornered it by keeping the nominal price low enough to invoke Grishem’s law. We like transparent free markets and since there is 5 times more gold than silver above ground, as soon as we take delivery, we will set asks for 5 times the cost of gold for at least the next month. That’s currently 7,300 frn’s/oz.” Again, a few seconds before the 10:25 there were hundreds of contracts of front running that drove price up $5. Then The Bid hit and would jump up $1 per minute, many times being out paced buy front running. The suppressors decided to wait hoping traders would sell at the end of the day.

After 3 minutes, a wave of profit taking hit as many traders booked a very profitable day. But after that $3 drop, price started raising again. What happened today in the silver market would not have happened just a few months ago — it’s just not that much buying volume. It seems like a tipping point has past and enough people just “realize” that against a back drop of severely rising tensions world wide, debt implosions, food and fuel prices rising smartly and leaders acting like Larry, Moe, and Curley, they better have some buffer.

But the day continued on, and major metal stocks closed up 40%. Some juniors doubled. Gold was tagging along. Electronic silver closed at $45/oz. And the wanton printing of money just continued as if innocent of the whole debauchery.

Meanwhile…

Suppressors: Hi, we would like to pick up the silver now.
Ag holders: Oh sure, working on it. Small glitch in the paperwork, ah, just like your mortgage gate. (snickers in background) Are you really Suppressors?? Haha, just kidding.
Suppressors: Look. 5 million ounces of Silver. Now.
Ag holders: Paperwork please.
Suppressors: Here it all is. Give us our silver or we will make a big fuss.
Ag holders: Okay, pull your trucks up to the dock please. (much laughter in background)
Suppressors: Here, fill them up.
Ag holders: Sure! (lots of forklifts moving boxes about.)
Suppressors: Hey, these aren’t the normal boxes?!?!?
Ag holders: Of course not, needed water tight packaging.
Suppressors: Why?
Ag holders: Just in case 🙂
Suppressors: Just in case of what?
Ag holders: Rain.
Suppressors: Silver does not care about rain!
Ag holders: True!
Supressors: Open this up!
Ag holders: Happy to oblige.
Suppressors: Ack! (lots of running around in little circles) This is freaking paper! (hysterical laughter in background)
Ag holders: Oh heavens no! It’s mighty SLV shares and bonds!! SOP, Standard Oppressing Procedure. Frequently, when we took “delivery of silver”, this is what we received. Did you know that Tit-For-Tat is a scientifically proven cooperation method? The internet says SLV has tons of silver, right?!? Read the prospectus! It’s legal, as we found out the hard way.
Suppressors: We have too many bonds already!
Ag holders: Well, you know: “Good as gold.” “Reserve currency.” Backed by the full faith of parasites taxing slaves not quite to death. “Easy to unload since everyone wants them.”
Suppressors: We will never do business with you again!!
Ag holders: Good! We now only do business now with those who follow The efficiency and prosperity manifesto…

A few days later was First Notice Day. Any entity wanting to take delivery had to have their account funded. At 9:25:00 NBNMLS posted, “We will close all our longs if live news cameras are allowed into each vault purporting to house silver, everyone gives their names, responsible parties sign a writ that the metal is unencumbered or else they will give half their assets to local charities in 10 days, and all the silver is counted and a random small sample are cut in half, live.”

Silver had risen up to 60 frn’s /oz by now with growing alarm about counter party risk.

The CEO’s of CEF, PSLV, PHYS, and GoldMoney were proudly helping reporters count the bars within an hour. After a few hours, the COMEX, SLV, and GLD cited a privacy policy and said no further comment. SLV’s and GLD’s prices started to crater.

To the dismay of those wanting to see the suppressors crash due to not being able to deliver silver, it didn’t. They had a ton of Over The Counter protection and hedges in copper and in mining shares. They made a lot of money, on paper. To the dismay of the suppressors, counter parties of those OTC contracts and hedges said, “The contracts were based on fraud and so were null and void. And even if they weren’t we will not do business with you anymore, ever, starting yesterday.”

At 10:25:00 NBNMLS posted, “Isn’t transparency fun? Where to now? We will relocate to the first jurisdiction that allows hard, competing currencies denominated in mass, not fiat, without embossed royalty. Good day! ps. Nothing, but nothing, moves like silver.” Once the electronic markets closed with silver at $600 frn’s/oz, it never opened again. The repercussions were not as painful as imagined. Speculation suggested that due to the acceleration of innovation, the new systems was growing so fast it was cannibalizing the old system before the huge stagnate status quo parts could hit the ground and rot.

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