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A reply to the CFTC''s statement on silver
Regulators Try to Stop Silver Rumors;
Agency Inundated with Queries about Conspiracy
By Kate Gibson
CBSMarketWatch.com
Wednesday, May 19, 2004
http://cbs.marketwatch.com/news/print_story.asp?print=1&guid=
442E9C3B-CD5E-4CA1-9E9D-071B8FF468BE&siteid=google
CHICAGO -- While rumors move the markets every
day, rarely is one so powerful that the federal
government steps in to refute it. But that's what's
happening as traders hear that something's wrong in
the silver market.
The U.S. Commodity Futures Trading Commission
took the unusual step of posting a letter on its Web
site last week reassuring investors after a controversial
columnist said large banks were manipulating silver
prices.
Jupiter, Fla.-based writer Ted Butler, a former Drexel
Burnham Lambert account executive, has told readers
of his column about a two-decades-long conspiracy to
manipulate prices downward. He has encouraged them
to buy silver on the theory that the manipulation will
end and prices will rise.
"My Blackberry (e-mail device) was buzzing
continually with e-mails from regular people all over
the country, some of them not very polite," CFTC
oversight director Michael Gorham said.
"Some people were quite angry," he said. "Others were
pleading for help. It was very touching. People like
your mom and dad, who couldn't understand what was
going on." Gorham said his office received more than
500 letters and e-mail messages.
The New York Mercantile Exchange, where silver
futures trade, has received similar correspondence.
"We've spoken to and written to Mr. Butler several
times in the past, explaining our surveillance process
and how our markets are structured," said Nachamah
Jacobovits, an exchange spokeswoman.
Butler is paid to write a weekly column published
by Investment Rarities, a Minneapolis seller of coins
and bullion.
"Normally we would not spend so much taxpayer time
and money" on such complaints, Gorham said. But
given the number of concerned shareholders, he said,
his staff spent several months looking into Butler's
claims and determined that "there is absolutely no
evidence for the theory that this guy is spinning."
The CFTC actively monitors more than 300 futures c
ontracts, and silver is one, Gorham said, that "has
behaved reasonably well."
The director added that the Internet posting is a first
for the CFTC in his two years there. "Our job is not
to argue with analysts, but we took this step where
the analyst has a huge following, and is telling people
that the NYMEX and CFTC are not properly
policing" the markets.
Butler, a self-described man on a mission, was
undeterred by the agency's rebuke and said it
confirmed his suspicion. "It took three pages and
nine months to tell you there wasn't a problem. A
lot of people would tell you there isn't a problem
until there is an official denial," Butler said.
He said that the regulatory agency is reluctant to
"open up a Pandora's box" by going head-to-head
with the large central banks that he believes are in
collusion in curbing prices. If it acknowledged a
problem, the CFTC would have to admit that it
failed in its duties at the expense of small investors
for the past 20 years, Butler said.
When asked why he would urge people to buy into
what he believes is an unfair playing field, Butler
said the market can't remain "artificially depressed
forever."
A believer in the laws of supply and demand, Butler
said silver prices will rebound as global supplies run
out and says it's "happening before our eyes."
Gorham said he knew the CFTC's letter would not
convince everyone that the market is sound.
"(For) anybody who is a true believer that silver is
manipulated and believes that with a religious fever,
I'm sure this won't have much affect," he said.
The agency and Butler also remain at odds over an
unpaid fine stemming from the analyst's days in
Drexel Burnham Lambert's Miami office.
The CFTC in 1988 lodged a complaint against a DBL
customer, Butler, and a DBL manager, charging the
trio conspired to manipulate the price of orange juice
futures.
Butler on Tuesday said he was innocent of the charges
and therefore had refused to settle, much less pay a
$30,000 penalty imposed in 1993 by the CFTC.
Gorham confirmed that the fine remained unpaid.
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----------------------------------------------------
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