One for the Books

You might be forgiven if you thought that last week’s big news was about what details were in the health care bill, or how it got passed, or who said what afterwards.  You could have thought the biggest news was the fact that the nations with a triple-A credit rating were put on notice.  Or maybe it’s Portugal’s credit rating that you’re worried about.

But none of these were the week’s biggest story.

The big story of the week was the CTFC.  Yes, that’s the Commodity Futures Trading Commission.  Neither the most glamourous nor the most high profile arm of the sprawling bureaucracy.

On March 25th, however, the CTFC held a a public hearing concerning the metals markets.  The thrust of the meeting concerned something that would normally be mind-numbingly boring: position limits on futures contracts in the metals markets.

In this case, however, the meeting took place against the backdrop of a CFTC investigation into silver market manipulation.  Investors have routinely complained about large banks manipulating precious metals markets… and the CFTC routinely reports that there is no manipulation.  But many are hoping that this time will be different, with growing pressure from investor groups – many of which take the manipulation for granted.

The commission seemed to be make up of individuals who – while differing in opinions – genuinely seemed to be interested in markets that are open, fair, transparent, and free.  And to their great credit, they invited a wide variety of market participants to speak (despite the apparent snub of Ted Butler, whose relentless decades-long struggle for transparency in the silver market is well known to the Commission).

Notably, the hero of the goldbugs was there: Bill Murphy.  He heads the Gold Antitrust Action Committee, an organization dedicated to proving the manipulation in the gold market.  His poorly spoken, read-it-from-a-script style was painful to watch.  The others were polished, and he was not.

And yet, after his tense, rapid, nervous, words – he had managed to even accuse the Treasury, the Federal Reserve, and large banks of colluding to suppress the price of gold.  All of this the Commission knew he would say, and they should be commended for at least allowing him time to air legitimate concerns.  But the bombshell was yet to come.

Later, upon being asked if he had any actual evidence of anything, Mr. Murphy gave a resounding yes.  And, despite his poor style, he revealed that they had a whistleblower named Andrew Maguire in London who had information about JP Morgan’s efforts of market manipulation.  Where, specifically, they would brag about being able to control the market.  And also, a documented case (including names and dates) where Mr. Maguire was able to a) warn regulators of the date of an upcoming manipulation, and b) communicate in real-time with regulators during the manipulation.

Needless to say, this could be a very key moment for the metals market.  FYI, in many conspiracy theorist circles, it is thought that JP Morgan acquired the large short positions in the metals markets when they took over the operations of Bear Sterns.  In addition, there is ample evidence that the short position is so large in the silver market, that it, in fact, makes up the majority of all short positions in the precious metal.  Ironically, it’s the CFTC’s own data that has been used to prove this!

The next day, on March 26th, to the alarm and chagrin of conspiracy theorists everywhere, stories came out that Andrew Maguire, the very same informant, was involved in a car accident when a driver appeared to purposely ram his car and then get away.  I wish Mr. Maguire and his wife who was in the car with him well.

The entire CTFC hearing is available online.  At 5½ hours long, it’s not exactly light viewing – but for investors everywhere, it’s worth taking a look if for no other reason that to understand the current state of regulation of the markets, and what future changes are likely to come.  And with many key figures and a little contentiousness, it’s not a half bad viewing either.  For some of us?  It’s even exciting.