March Silver delivery information - JP Morgan in trouble? Silver Comex Default? Plus "Silver Fallacies" by David Morgan

David Morgan of Silver-Investor, wrote an article about "Silver Fallacies" what people think compared to what is of the Comex market of shorts versus longs.  The article is below.

First information about what is going on in the Silver Futures and Comex this week.

The CME (Chicago Mercantile Exchange) due to the rising price of metals the last couple of days, especially silver has to try and stop it in what ever way they can.  JP Morgan (thus the government) is in trouble with all the orders at this moment standing for silver delivery for March.  The CME yesterday raised the margin amounts needed for longs to 50%, effective immediately!  So, if someone wants to put a long order down for Silver or Gold they have to have 50% up front, to do so.   They are doing the work for JP Morgan because obviously the amount of shorts JPM has on silver has not been working to suppress the price.  It definitely has not been working to scare off longs either.

More longs are standing for March delivery at this moment, than ever before.  Considering there are suppose to be more longs standing than, Comex's own inventory, which numbers stand around 42 million.  The default would be heard and experienced around the world by a violent rise of silver and the whole Comex would crack!  The question is....will those longs stand and place 100% of the money by the 28th of February for delivery?

Another question is.... is the information real, of all those funds that wrote a letter to JPM, letting them know they are going to stand for delivery for March, if not just to be paid off with a huge premium from JPM instead of physical?

It seems everyone in the financial business have caught on to JP Morgan's comex game.  Those financial entities who want to make a huge percentage from their investment in a short amount of time put longs on for silver.  From my understanding they are more than happy to put up 100% of their money to stand for silver, when they don't plan on taking physical!  Why?

Because JP Morgan will then pay them off due to the amount of shorts they have on the Comex with a nice premium!  So those funds will walk away by making instant money at a percentage they could not make elsewhere!  Eventually, JP Morgan will get drained (except they have the U.S. government and The Federal Reserve to keep bailing them out).  But it will keep hurting their bottom line!  They are going to lose who knows how many billions by having to pay off the longs who stand.   This is another way of breaking the Comex, imo.  Imagine as more and more funds learn the way to make fast money...... JP Morgan will become JP Morgue and the instant pay off for those who like fast returns!

David Morgan, wrote "Silver Fallacies" in 2008.  I am inserting it here as I believe it now applies more than ever.  He was ahead of his time in thinking (but that is why people subscribe to him) about what will happen in the silver market.   Also, I just listened to his subscriber only update, where he discusses what is currently happening as it happens with charts, etc.  In his update, he explained "The Three day trading rule".  He showed silver breaking through it's last high and said his Three Day trading rule is it is actually a break out and not a fake out, if it continues staying above the last high of $31.21.   He then explained his way of trading if it does stay above that high.  **** as a note - Thursday was the start of above that high, Friday continued it - We now only have Monday to go, to see if it stays***** 

UPDATE 2/21/11 5:13pm est - WOO HOO - we reached David's three day BREAK OUT POINT!  Silver did not even look back at $31.21 during the three days!  I can not give you David's way of trading,  from his subscribers section, but the 3 day BREAK OUT WAS reached and confirmed - the rise up from David's expert opinion was not a Fake out but a REAL BREAK OUT! 

Here is the "Silver Fallacies" article David Morgan wrote in 2008, I am bringing back up for everyone's attention - It completely applies to right now!

I recently read an "advertorial" suggesting silver to be a fantastic investment, and I could not agree more. However, the author was stating that all short positions have to eventually be covered with physical silver and that when this took place there would be a price explosion.

 

It is a fallacy that all short positions have to be covered and the shorts will have to buy silver to cover. First, to state that all positions have to be covered is misleading; a position can remain open for a very long time, because as the contract becomes due, it can be rolled over. Technically, it is not the same position, because when it is "rolled forward," it is a different month and involves a different contract, but basically the contract is moved out to a later date. This rolling takes place all the time in the futures markets.

The second fallacy is more important because almost all the shorts in the silver market can close their positions with cash, no silver required. Let's say silver moves UP fifty cents in one day and you are short the market. You just had what is known as a bad day. You will get a phone call from your broker asking you for more money to be placed into your account. You can instruct your futures broker to close out your short positions and all you would be responsible for is a check, not silver. This does not mean that a price explosion to the upside cannot take place. However, it is important to recognize that if physical silver were required to cover the short position the price movement could be far greater!

Yes, silver does get purchased and moved off the exchange, but this is only about one to two percent of all the activity as represented by market activity. This is another area not very well understood. Each month the CFTC publishes delivery notices, but these are notices, not actual deliveries. Many in the industry know that some of these delivery notices are NEVER acted upon! Yet we see some pretty well respected Internet sites that proclaim so much silver was gulped up off the exchange. This is not true; other notices and/or paper swaps or transactions offset most notices. In simple terms, there could be "notices" for several million ounces of silver in a given delivery month, but when all is said and done not much has really happened. Oh, let me restate: a whole lot has happened on paper but not much in a physical way.

 

Yet, with all this paper silver flying around, the physical market is the most important and will at some point drive the price, no matter what the paper pushers intend. Since the world's financial system is becoming so stressed with bad debt that cannot be repaid, institutional and retail investors alike are seeking higher quality investments. First, this will translate into government-backed debt (bonds), and certain currencies will become the flavor of the month. For example, the euro or Canadian dollar will be favored, but all of this "money movement" is really the last vestige of the bankers selling people on the idea that paper currency is safe if only you are smart enough to choose the right paper currency.

 As the carry trade unwinds and a new era of quality replaces one of quantity, the precious metals will reassert themselves in the overall financial landscape. Gold will be sought by institutions and, yes, even the central banks again at some point, but silver is held by few governments -- China and India being the only two -- and both hold pitifully small amounts of silver at this point. The once vast silver holdings of the United States of America were depleted several years ago.

As momentum builds and more and more precious metals are purchased, the prices will be reflective of these purchases, and since one of the main purposes for purchasing will be wealth preservation or financial survival, don't rule out the underdog -- silver! You see, big institutions, banks, and the elite will flock to gold, but remember "the poor man's gold"? Literally, millions of people have something to protect and these people will flock to the safety of the physical silver market.

This buying frenzy will drive the price far higher than most people imagine at this point, since there are far more "poor" people than rich people and since there is far less silver than gold available in investment form. The percentage gain in silver and silver related investments will be noted in financial history, just as the silver "corner" by the Hunt Brothers was in 1980!

BTW: yesterday - I posted how Silver is UP 106% in a years time!  What other investment has given someone that rate of return in one year?  NONE that I can think of!  Next month - will it be "To the Moon Alice - To the Moon?  :)  I sincerely hope I can do a "Happy Dance" in March due to the Silver Comex! I just love anticipation and excitement!  Don't you?

UPDATE 2/23/11 - FAKE Silver Coins/Bars/Ingot Are Confirmed on the Market in U.S.!