Regarding that $10Bn silver trade...

It went down in less than a minute.  Hundreds of people jumped on the 'computerized trading scam' bandwagon.  Most of the comments were to the effect that there could not possibly have been someone sitting there waiting for $10Bn in silver to be offered - so it was obviously a case of pre-arranged insider trading; that computers have ruined the the market and that we need to go back to the old system.

You pilgrims don't know about the 'old' system of calling in an order to a broker who writes it on a piece of paper and runs it to the communications room which sends it by Telex to the broker's comm room in New York, who copies it off the telex and sends it by vacuum tube to his trader on the floor - who then starts yelling out what he has to by or sell and at what price and takes orders from other floor traders until he fills the order, and at what price they agreed to - and all of them can be different.  Then he sends that back up the tube to the trading room and they send a Telex back to the original broker who calls his client.  I was an assistant back-office manager for Merrill Lynch, Pierce, Fenner and Smith when it was done that way and it was a circus.  About one trade in ten was wrong and had to be unwound.

I don't tell this to many people because it makes them crazy, but there are dirty little secrets in the commodities markets. Then a friend sent me this.

"Actually, you don't have to own a commodity to sell it, or when you buy to take possession. It's a fact, look it up. This allows for all the conspiracy theories about price manipulation and hiding price discovery to have their justified day in the public forum."

And off I go again....

No, you can sell short if you can make your margin call.  But the day the trade closes, someone coughs up 40,000 lbs of frozen cut-and-trimmed pork (pork bellies) - contracts are for  February, March, May, July, and August.  If you are still short when the trade hits, your chair will buy you in at market and make the delivery good to the buyer.
Or 40,000 lbs of lean hog carcasses (lean hogs) per contract. Those contracts close in February, April, May, June, July, August, October, and December.  Same thing.  The person on the long end of the trade has already paid for them. Delivery is pre-arranged and automatic - it was part of the original contract 

All commodity contracts are standardized by a futures exchange as to quantity, quality, time and place of delivery. Only the price is variable. That's the advantage of trading on an exchange.   Exchange-traded options form an important class of options which have standardized contract features and trade on public exchanges, facilitating trading among independent parties. Over-the-counter options are traded between private parties, often well-capitalized institutions that have negotiated separate trading and clearing arrangements with each other.  OTC contracts are not reported anywhere.  

That's why the world's economy is going to explode.  There are (my estimate) a quadrillion dollars in Credit Derivative Swaps (CDS) which have been bought or sold OTC to hedge against everything imaginable - but mostly against sovereign default.  People bought worthless paper and then insured it against being worthless.  That's great, except none of those CDS can be paid.  There isn't enough money in the world.  So when Greece, Portugal, Spain, Italy, Cyprus, the UK and FRANCE begin defaulting, the creditors will want their CDS to pay up.  Most of that shit was written by companies like Goldman Sachs - which made billions.  But they don't gave enough money to pay off that worthless paper they sold. So THE UNITED STATES HAS MOST of the exposure to European sovereign nations tanking.

Goldman isn't worried because the UNITED STATES GOVERNMENT agreed to make them whole for any losses. Nice talk in 2008 but it can't be done. There isn't even enough POTENTIAL money in the world to cover all that toilet paper. The BEST that can be done is to raise the debt ceiling another $900BILLION dollars to cover the INTEREST on the money the US is going to have to borrow, off the books, to cover that. But all that will do is allow a lot of bankers and politicians to retire before the whole thing blows up.

If you think about it for one minute, you can understand that.  And you won't believe me.  But when is the last time you saw any soverign entity buying silver futures - or even US paper in the market?  Never?  Correct. You never have.

You can still be long or short a contract, or have put or call options in PM, but anyone doing it is stupid. That market can be manipulated.  All of them can - but the pork bellies ARE going to be delivered because people have to eat.  Silver is different.  All governments have back room deals going on to make sure defense contractors have all the PM and rare earth metals they need.  They do it OTC through brokers and it never shows up in any market. It's like uranium. You can buy uranium futures, but you can't specify where you want it delivered and, except for small amounts for 'approved' purposes, you can't have much of it or process it. 

So 'investors' really have no idea what PM is doing.  The ticks on the board are meaningless.  The price of PM on COMEX is meaningless.  If the government wants silver, they don't go to COMEX.  But if they grab all the back-room silver and still need more, they can most certainly toss $10B into the pot and "Bang!" That sale goes through in one minute without any worries about who is on the other end - and you can't find out.  Even if you could, it would be some bullshit front company. 

So all these noob pseudo-investors who have never been traders and are effing clueless, babble about things they no nothing about and make assumptions based on nonsense.  In point of fact, someone WAS laying in wait with $10B for that trade. There was no electronic trading back and forth.  It was a straight sale.  One of Bernanke's assistants or someone at the CIA called the back-room guy and said get me $10B in silver, now. The fact that it affected the price of silver surprised exactly no one.

Things like that are what affect the market.  You cannot know in advance- and you cannot predict ANY performance of PM. I hope everyone's silver investment works for them but if the end of the world doesn't occur on Tuesday, people are going to start taking profit and they are going to continue until we hit the next wall.