20 April 2009

The 1997 Silver price manipulation

Some interesting comments regarding the 1998 silver price manipulation made by Martin Armstrong in “look behind the curtain, April 9, 2009”

During the late 1970s, the silver market was claimed to be "cornered" by the Hunt Brothers. That was far from true, for what they failed to understand, was that the attitude of the major brokerage houses was not that you were a pure trader-customer, but someone to pick—off for profit. During the 1980s, I had to take on some hedging projects that were awesome. One was in platinum. When you are the largest trader in a narrow market, they watch everything you do. If I was to sell, they assume the whole lot is being sold and jump in front. You suddenly find yourself trapped. I was a witness to the Hunt collapse. They couldn't get out of the market at any price. The dealers were selling in front of them taking short positions looking to buy back when the Hunts were in a state of panic dumping at any price.

I learned early on that to professionally hedge, one had to navigate the brokers. The only way to deal with them, was to play one-off-against-another, use related markets to confuse and hide your strategy, or else fall prey to the Investment Bankers. In other words, if you had a large position of gold that you wanted to sell, you go to a broker asking for a market in silver. He gives you a quote, and you then buy taking what will become an intentional loss. You go back to the same broker and now ask for a quote on the real market you are trying to sell - gold. He will anticipate you intend to buy because of the silver, shifting the quotes to pick up extra profit assuming you are a buyer. when you sell the gold, you just got a higher bid, you are out of the position, and he is scrambling to cover with other brokers. If you hit all the brokers the same way at precisely the same time, they are all now short, and are trapped trying to get out selling back gold that they just bought from you.

These games are at times necessary in the cash markets because the brokers themselves are not satisfied with just making a real market. They need to create an edge. So when you are the 800 pound gorilla, you need defensive measures. It helps to understand the method to the madness of the game.

The market manipulations that really began back in the 70's with force, became intermixed among the Investment Bankers with technology. we began to see grouping of houses by the later 1980s and early 1990s. Perhaps at first, they were looking for another Hunt. They needed to sell some billionaire on the virtues of cornering and manipulating a market.

The first real coordinated scheme began back in 1993 that I could verify. The target market was silver, and the central player, broker-dealer, was Phillips Brothers who were a big commodity outfit in Connecticut, picked up by Salomon Brothers who was later absorbed as well. This ms known as PhiBro of the same fame relating to Marc Rich.

PhiBro had a huge client who they were acting for to buy up the silver market in 1993. This was an aggressive professional strategy. The Commodity Futures Trading Commission could easily see where the buying was centered in real force. They went to PhiBro demanding to know who their client was. PhiBro refused to give up the name. The CFTC ordered PhiBro to just get out of the market. They did. They just dumped everything at the market wiping out small investors in the blink of an eye.

The CFTC just walked away. Had this been a small broker or money manager, he would have been criminally prosecuted. But the CFTC is notorious for never even once bringing a complaint against a major house. The sources I relied upon, gave me the name of the client —Warren Buffett. Based upon this information and belief, when his name came up again in 1997, it is not a shock.


We kept track of what the "club" was doing and warned our clients whenever their antics were conflicting. One of the big ones that blew the lid off, was again silver. In 1997, I warned that silver was going to rise from $4 to $7 between September and January 1998. I was even invited to join them, and told to stop fighting, and put out false forecasts. I declined. Their strategy became insane.

At first, a friend of mine who had been Prime Minister Thatcher's economic advisor became a board member of AIG in London. He called one day and asked if he could drop in to Princeton the next morning when he arrived from London. I naturally said OK. To my surprise, he arrived with the head trader from AIG London who then proceeded to try to convince me to stop talking about the manipulations. I told him I would not ever reveal any names, and the government didn't care anyway.

Things got insane thereafter. An analyst on the payroll of PhiBro had a main contact at the Wall Street Journal. They decided to slander me and get the press to target me claiming I was trying to manipulate the market. It was an interesting strategy, but one I cared nothing about since I was primarily a institutional and corporate advisor, and they were not really interested in silver.

The journalist from the Wall Street Journal called me. He accused me of this nonsense and we argued. It got quite heated. He said if silver was being manipulated, then give him the name. I told him he wouldn't believe me anyway. He demanded the name and so I said fine, go ahead, let me see you print it, knowing he never would. The name I gave him was Warren Buffett. He laughed. Told me everyone knew Buffett did not trade commodities I told him that was how much he knew.

The Wall Street Journal published the article. The London newspapers were fed stories by the "Club" that I was now the largest silver trader in the world. This became all a joke to me. Even the CFTC could look at positions and knew I was not a big player in silver.

The mistake made by the "Club" by turning out the press against me, was they actually created such a worldwide story that the CFTC was forced to call me. They knew I was not the source. They asked me, where was the manipulation taking place? I told them it was in London, out of their jurisdiction. They told me that they could pick up the phone and find out. I told them that they had to make that clear decision. I hung up. Never did I expect that they would really do anything.

A few hours later, my phone rang. It was a good source in London who also was helping to monitor the "Club" actions. He told me that the Bank of England had called an immediate meeting of all silver brokers in London in the morning. I was shocked. The CFTC had made the call. But then again, I had given them no names so perhaps in their mind, this was fair game.

Within the hour, Warren Buffett made a press announcement. He admitted he had purchased $1 billion worth of silver, in London. He denied he was manipulating the market. Claimed the silver was a long—term investment. Everyone was shocked that Buffett was suddenly exposed as a commodity trader after all The next day, the wall Street Journal called me. The writer asked — "How did you know?" I told him it was my job to know! Silver thereafter declined and made new lows going into 1999. So much for the long-term investment.


There have been major manipulations of markets such as rhodium and then there was the manipulation of Platinum. Cornering a supply is far too risky. What the "club" did was to join forces with Russian politicians. The deal struck was to recall the Russian supply of platinum to suddenly take an inventory. Platinum soared in price. Of course the long positions were already laid in before the announcement. Russia had never before recalled its entire supply to take an inventory. Nevertheless, it worked. They were able to force platinum up for the auto—industry were buyers. At the top, the "club" sold their long positions, reversed into short positions, and then instructed the Russians to end the inventory. Platinum crashed. Even Ford Motor Company sued over that one.


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