Interesting interview with Ted ButlerFound this interview with Ted Butler in the Arian Silver thread. Enjoy!Here’s an interview with Jim Cook of Investment Rarities,Inc. on April 8, 2010.
Years ago, Jimmy Stewartplayed the lead in a movie titled, Mr. Smith Goes to Washington. In this case, it was Mr. Butler goes to Washington.
Q: Who did you meet with?
A: I met with the seniorstaff responsible for regulatory matters for about an hour and a half.
Q: Was the Chairman ofthe CFTC, Gary Gensler there?
A: He stopped by tointroduce himself and chat briefly.
Q: What, in a nutshellwas discussed?
A: Basically my long-held premise of amanipulation in COMEX silver via the documented concentrated shortposition. They asked an awful lot of on-the-moneyquestions, to which I replied directly.
Q: Did you have reasonto believe they agreed with your arguments?
A: Since they didn’toffer any challenges to what I said, and their follow up questionsdidn’t seem argumentative in the least, I sensed they were in basicagreement.
Q: What stands out about the meeting?
A: The seriousness withwhich they approached the issue.
Q: The following day,the public hearing took place. What did you thinkof that?
A: I thought it was great. Herewe had a public meeting that revolved around the very issues I havepetitioned the CFTC on for 20 years. Much to theCommission’s credit, the fact that they had rejected my contentions inthe past didn’t deter them from addressing the issues openly.
Q: What issues wereraised?
A: Whether we should have position limits in silverand gold.
Q: What else?
A: Why there is such abig concentrated short position in silver.
Q: What about whetherthe price is manipulated?
A: Yes, all of that.
Q: Whowas on the other side?
A: Thebig banks, the exchange and all others from the silver “establishment”were opposed to hard position limits.
Q: What was theirargument?
A: That is would drive liquidity and business from theCOMEX to markets overseas.
Q: What were theyangling for?
A: To preserve the status quo of allowing the biggesttraders to continue to control the market. Thebig banks and the exchange are certainly not interested in having alevel playing field.
Q: What about theirargument that position limits would reduce liquidity?
A: It clearly was abogus case, because causing a few large short traders to reduce theirpositions would actually increase liquidity, not decrease it. Legitimate hard position limits in silver, forexample, even if those limits were reduced to the 1500 contract level Irecommend would only affect less than 1% of all traders on the COMEX.
Q: Did that point comeout?
A: Not at the meeting. But I will be sure to make that point inthe future, in the public comment period.
Q: What exactly is thepublic comment period?
A: The time when theCommission seeks written input from the public on specific issues thatgoes on the official record.
Q: Should peoplecomment?
A: Absolutely. The hundreds ofpublic comments last year on silver and gold are what led to this recentCFTC hearing. It’s very important to email orwrite to the Commission on this issue. All comments must be received byApril 26, 2010.
Q: Was JPMorgan at thehearing?
A: No.
Q: Why wouldn’t theyattend?
A: My guess is that they didn’t want to answerspecific questions and incriminate themselves.
Q: The whole thingsounds like a review of all the issues you have raised. Doyou agree?
A: Absolutely. That’s what madeit so great.
Q: Would it be safe tosay that this meeting wouldn’t have taken place if it were not for you?
A: All modesty aside, Idon’t see how.
Q: What happens next?
A: There has beentremendous attention placed upon the meeting and the important issuesare being openly discussed and considered.
Q: I’m more interestedin what happens next to the price.
A: The price of silveris going a lot higher.
Q: I’ve already had somecomplaints that nothing happened after the hearing. Whatdo we tell these people?
A: Tell them the samething you told them at $4, $5, $7, and every other price over the pastten years. Look, silver’s the best investment tocome along in most people’s lifetimes. Have somepatience. Besides, the price did go higher in thedays following the meeting.
Q: Do you think positionlimits will be changed downward?
A: Yes, in silver. At a minimum, the position limits in COMEX silver willbe adjusted downward relative to gold.
Q: When might thishappen?
A: My feeling is after the price has moved up a lot.And I think that will be soon.
Q: What about exemptionsto position limits?
A: Everyone knows that is the key. If they don’t crack down on JPMorgan and the other bigshorts, the CFTC will be discredited.
Q: Do you think the bigshort sellers expect these changes?
A: I think JPMorgandoes. I think the others may be missing what’scoming.
Q: They must be taking actions to protectthemselves, don’t you think?
A: I think JPMorgan istaking action, not the others.
Q: What can they do?
A: Close out theirshorts by buying them back or delivering against them, and mostimportantly, not selling short on the next price rally.
Q: Do you see any signsof this?
A: Yes, as regards JPMorgan. Andthey are the key.
Q: What happens ifJPMorgan does sell short on the next rally?
A: I think there will bea public outcry and both JPMorgan and the CFTC will come under severecriticism. I know I won’t hold back.
Q: You have been verycomplimentary and supportive of the new Chairman of the CFTC, GaryGensler, in spite of much disagreement. Why so?
A: Look, I judge peopleby what they say or do, not on some preconceived notions.He’s said and done the right things.
Q: I see many arejumping on the bandwagon about position limits. Howdoes that make you feel?
A: Good. After20 years, it’s about time.
Q: You are the soleperson who raised the issue of position limits on silver.Do you think the CFTC is finally on board?
A: I think theleadership is.
Q: Exactly what impact doyou see these rule changes having in silver?
A: The silvermanipulation will be terminated.
Q: What will that do tothe price?
A: It should go much higher.
Q: You’ve expressed tome privately and to our broker staff why you think people should buysilver now. Would you state the case here?
A: A number of factorshave converged, in addition to the regulatory matters. Themost important of these factors involve strong signs of an emergingwholesale shortage of silver.
Q: What signs?
A: Over the past 5 or 6weeks, there have been unusual movements in COMEX warehouse silverstocks and deliveries by JPMorgan, as well as the withdrawal of asignificant amount of silver from the big silver ETF, SLV.Taken together, these unusual movements suggest the big dealersare scraping the bottom of the barrel to come up with the timelydelivery of silver to their wholesale customers. Itappears to me that the big dealers are borrowing silver from Peter inorder to pay Paul. This is a juggling act in which one misstep willunravel the whole silver scam.
Q: How much silver has beentaken out of the SLV?
A: 9.5 million ounces infive weeks. Frankly, it’s beginning to look like there isn’t enoughsilver to go around.
Q: I know you think silveris better than gold. Why?
A: I don’t sense the samejuggling act taking place in gold. The criticaldifference between gold and silver is that gold is not consumedindustrially, while silver is. As a result ofthis critical difference, there is less silver bullion in the world thangold. Silver’s industrial consumption sets upthe likelihood of a shortage, a condition not present in gold. Silver has investment demand on top of industrialdemand. Gold has mostly investment demand.
Q: What does this meanto buyers of silver?
A: You can make a lot more money with silverthan you can with gold. Silver can rise much morepercentage wise.
Q: Can you be morespecific?
A: I can see gold rising in price 20% or so, under theright circumstances, say up to $1,300. I can seesilver easily rising 100% to 200%, to $35 or $70. Inalmost any scenario, I can see silver outperforming gold by five or tentimes. With silver you are going to get thebiggest bang for your investment dollar.
Q: But gold and silverperformance has been roughly equivalent over the past ten years, haven’tthey?
A: I realize that, and both have performed better thanstocks or bonds or real estate. But I amconvinced that the facts point to silver vastly outperforming gold. May I speak in blunt terms?
Q: I think my ears couldhandle it.
A: I think that gold investors who don’t hold asignificant silver exposure have been lucky to date that gold has keptpace with silver. And I think these goldinvestors are being given a tremendous opportunity now to convert someor all of their gold holdings to silver.
Q: That’s not likely tohappen in a big way, is it?
A: If all the goldinvestors were to make the switch there is not enough silver. But some can. I hope they dobecause silver is going to beat the stuffing out of gold price-wise, andthere are going to be a lot of gold-only investors who will regret notmaking the switch.
Q: What can happen withinvestor demand if prices rise?
A: Initially, it willincrease. It’s human nature for investment demandto grow as prices increase. Later on, at muchhigher prices, investors may begin to sell. Whenwe get to those much higher prices, we’ll monitor investor behavior.
Q: Are the industrialusers still oblivious to the events unfolding in silver?
A: Absolutely. The example I like to use is that they are like agiant herd of wildebeests on an African plain, feeding but sniffing theair for the scent of lions. When they do get thescent, they are all off and running. When theusers get the first silver shipment delay notices, they will all panicand rush to build silver inventories. I don’t seewhat can stop it.
Q: What about these poolaccounts and silver storage where there is paper silver but not realsilver?
A: That is a very big problem still, even though somuch as been written about it over the years. Ifyou don’t have the serial numbers and exact weights of the 1000 oz. barsbeing held for you, with the ability to take delivery immediately ofthose exact same bars, you don’t own silver. Period. How anyone could continue to hold unallocated and notspecifically earmarked silver is beyond me.
Q: As far as mainstreamfinancial news is concerned, you are still a voice in the wilderness. How come so few people see what you see?
A: Because they don’ttake the time to study the facts. It’s mucheasier to just assume you already know everything you need to know aboutsilver and skip time-consuming tasks of actually studying it.
Q: Is that good forsilver buyers?
A: Of course. It givesthose who do take the time to learn the real silver facts theopportunity to buy before the crowd wakes up. Justask those who loaded up at single-digit silver prices. Thesame will be said about buyers at today’s prices.
Q: Any new breakthroughsin the uses for silver?
A: Every single day. Whenyou have a material that is the world’s best conductor of electricity,best heat transfer agent, best reflector of light, and best biocide, howcould there not be new breakthrough? Silver isthe most versatile metal of all.
Q: Is industrial demandfor silver still growing?
A: Sure. Aslong as world GDP and population grows, silver industrial demand willgrow. But what’s really remarkable is thecomposition of silver demand.
Q: In what way?
A: How many commoditiescan you name where its main demand engine was crushed and other newdemands emerged to maintain and increase total demand? None. Yet silver lost its main demand sector in photographyand still overall demand increased. That’sincredible and shows just how versatile silver is as a vital industrialmaterial.
Q: What impact do you think Chinahas on silver?
A: Huge; both from a production and refiningperspective and as a consumer. Chinais currently the largest consumer of all metals and that doesn’t look tochange except accelerate. The long-term futureof the price of silver will be determined by China.
Q: How will they reactto a big surge in the silver price?
A: I’m not exactly sure,but if you stick around for a while, I guess we’ll all see with our owneyes.
Q: China recently made silverownership legal. Are the Chinese people known tobe buying silver?
A: There were reports to that effect a whileback, but information from China is sketchy. I think it’s safe to say, however, that they will playa major role in the future.
Q: Whatabout the inflation factor? Is silver one of thethings to own to offset inflation?
A: Sure, but that’s kindof elementary, so I don’t write about it much. There’snot much value added in telling folks what they already know.
Q: Retirees on fixedincomes are getting hurt by low interest rates. Theyare afraid to risk their precious capital in silver. What do you say tothem?
A: I understand their dilemma. Sufficientand dependable income from savings is hard to come by in today’sultra-low interest rate environment. I’m not amagician who can turn silver into an income-producing asset. But I believe it is a safe asset that can grow to manytimes its current price. I believe you will beable to sell it at a profit in the future that will more than beat thecurrent rate of return of bonds or CDs, just as it has for the past 5 or10 years. I think people should look at it as analternative for some of their current savings type accounts.
Q: I feel like we’vepassed a tremendous milestone in the silver debate. Themain theme you introduced years ago has had a complete airing. However, that takes us to the next part of yourequation, which is your prediction of a dramatic price rise. Ever worry you could have miscalculated?
A: SureI do. But the amazing thing is that, while I’vealways worried about being wrong, the more I study the situation, themore I am convinced that the price explosion is still ahead. It’s kind of weird, even though the price has moveddramatically higher over the past 10 years; the bullish case is morecompelling than ever.
Q; All along the way youhave exhibited great caution and care about the facts you’ve presented. For me that’s given you great credibility. It also gives me a lot of confidence in yourforecasting. I know you don’t like to be put onthe spot but where could silver go eventually?
A: The reason I’m alwayshesitant to mention specific prices is because I don’t know and I don’tlike to write things that I’m unsure of. In thecase of extreme future prices for silver, however, considering thedynamics of what could happen to prices in a shortage and short-coveringpanic, my hesitance is in picking too low of a price.
Q: Won’t higher pricescause silver substitutes to be used?
A: Sure, but that willtake time to unfold. In a panic to the upside,there will be scant relief due to substitution in the short term.
Q: What if the big shorthas been covering its short position over the past weeks and months. Could they get this done without driving up theprice?
A: To a certain extent, but please remember the pricehas already gone up and they have a lot more covering to do.
Q: Tell us again whathappens if they stop shorting in the future?
A: The biggest pricecontrolling mechanism will have stopped and we’re in a whole new era.
Q: Would you say we’reoff to the races with silver now?
A: When we’re truly offto the races, you won’t have to ask me, as it will be obvious. The trick is seeing it just before they shoot thestarting gun. That could be now.
TedButler
April 8, 2010