February 14, 2003
William J. O’Neil
Survey Department
Investors Business Daily, (IBD)
12655 Beatrice Street
Los Angeles, CA 90066

Dear Mr. O’Neil

I received your letter this week which contained a Consumer Feedback Survey which you said would help you come to an understanding of why I cancelled my subscription to IBD. I am 67 years old and retired. I have survived stock trading for 36 years. I have no illusions that this response will in any way change the way you approach your thinking and coverage of business news. However you asked for a response and since my answers will undoubtably be typed into a computer database and not necessarily convey the information I would like to share with you I have chosen this method to respond. I have no reason to disbelieve you when you say I can be assured you plan to read my comments and give them serious consideration. Though the following may seemed to be somewhat argumentative, I assure you it is not. I learned long ago not to argue with someone who buys their ink by the barrel.

As I recall, my subscription to IBD was cancelled around June 2002. My reason for cancelling was the biased way your publication treated the gold and silver markets. You exhibited an almost condescending attitude toward precious metals and in fact indicated to your readership that investing in Gold and Silver was most likely a losing proposition and cautioned against it. Some months before your article appeared I was given the opportunity to invest in a private placement of a small mining company at a discount of about 15 cents per share. I purchased shares at an average cost of 2.08 per share, with warrants to purchase additional shares. (At this writing the shares are up more than 180 percent) In June of 2002 (about the time of the above mentioned article) the short sellers began a concerted effort to drive down the shares of most PM stocks. And they succeeded. The company I invested in dropped from around 7.80 to just above 3.00 as the short position climbed from 5000 to 780,000 within a period of about two months after your article appeared. Since then the short position has increased to a million shares. This is a company with only 15, 800,000 shares. I am not suggesting anything written in your paper has anything to do with the shorting of PM shares. Indeed if I thought you had that kind of power I would still be an eager subscriber. What I would suggest is there is a newsworthy story here. At present there are less than 100 million oz of physical silver available for delivery on the COMEX and there exists a short position of more than 600 million oz.

IN CASE YOUR STAFF MAY HAVE SKIMMED OVER MY LAST STATEMENT, I WILL REPEAT IT. THERE ARE AT PRESENT LESS THAN 100 MILLION OZ OF SILVER AVAILABLE FOR DELIVERY ON THE COMEX AND THERE IS A SHORT POSITION OF 600 MILLION OZ.

Here are the facts concerning silver:

1. SUPPLIES have been declining. (From around 1.6 billion oz in government supplies at the end of WW-2 to nearly none now)

2. DEMAND has been going up.

3. PRICE has been going down.

I would challenge you to name any commodity where a similar situation exists or has ever existed.

I would guess that if any stock (let alone a whole sector) other than precious metals, were up 100% ,150% and in the case of some individual stocks, up 600% within the past two years, it would be making the front page of your paper. Not so. Your behavior in this regard reminds me of someone who walks into a restaurant, spots someone they are not on good terms with and averts their gaze pretending to not notice them while they are being seated a comfortable distance away.

Cancelling my subscription to IBD has allowed time to catch up on some valuable reading. Some of the things I have learned:

1.Throughout history when governments have resorted to a fiat system of money, the system has always failed. Always.

2. The "Federal Reserve System" is not "Federal" and has no "Reserves".

3. As late as 1966, Alan Greenspan defended the gold standard and was critical of the banking cartel. Then he became a director of JP Morgan & Co and after being appointed Chairman of the Federal Reserve, became silent on these issues.

4. Milton Friedman predicted after the first OPEC induced oil crisis that oil would return to 2.00 bbl. (Dr Friedman’s book "Free to Choose" which I read many years ago was a favorite.) But as his prediction showed, even the smart guys from the "Chicago School" can get it wrong.

5. Massive short selling in gold and silver is non-transparent, very complicated and few people understand how it works. Sounds like another Enron in the making except this scheme is bigger...much bigger and even more complicated. Even our most sophisticated "experts" didn’t understand Enron. If massive short sellers are distorting the free markets they are clearly in violation of securities laws as are those in the government who are willingly and knowingly allowing this to take place. If for example the SUPPLIES of any other commodity (sugar, gasoline, wheat ....take your pick) were found to be going DOWN, while DEMAND was going UP, do you seriously think there would be massive short selling in those markets? I realize there are stupid people out there but few would be stupid enough to short wheat in the amount of SIX TIMES the physical supply of wheat. Especially if for example it was a well known fact that the production and stockpiles of wheat were already down and heading lower due to a worldwide drought.

In short, the small investor has had about enough. We want some answers. There are all sorts of conspiracy theories floating around. One bizarre theory is that IBD is owned by one of the very banks holding a massive short position in silver. I am not a conspiracy theorist and consider that allegation to be pure rubbish. However I am convinced the precious metals markets and the silver market in particular is distorted because of these massive short positions. Knowingly distorting markets is illegal.

I subscribe to several web sites where, with the exception of the specific survey Q&A (which I consider personal) I intend to publish this letter as well as your response, or for that matter, lack of response. In sum these web sites contain thousands of investors of whom I’m quite sure, like myself, make their own investment decisions. In effect then, this may be a chance for you to add hundreds of new subscribers, not just one. You can do this by explaining how it is legal for massive short positions to exist in the silver market but not in other markets. (Hint) If the explanations get into derivative swaps and a myriad of other schemes we don’t understand then you have already lost us. We are only interested in who is holding the bag and how they get rid of it. And if you can’t explain that in terms people with average intelligence can understand, then those with massive short positions have lost you too.

In closing I will mention I spent 31 years with a major airline, 23 of them in the left seat as a Captain. I will share with you what I taught many of my eager new co-pilots. "It ain’t what you don’t know that will get you killed. It’s what you know that’s wrong". I’m asking you, with your resources, expertise and skills to find out what it is these massive short sellers know that’s wrong. Then tap one of your many barrels of ink to report your findings to your readership.
Respectfully,

CS

February 23, 2003
As published by Investment Rarities, Inc.

This is from Ted Butler

Last week I met, via teleconferencing, with the board of a large mining company. I was asked to speculate on what I thought would be the undoing of the silver manipulation. My answer was a delivery problem on the COMEX. As I've said before, the unavoidable termination point for the decades-long silver manipulation will come when the shorts can no longer deliver physical metal. That's what makes the call to buy real silver compelling. Obviously, you want to own what you know is going to he in greatest demand, or shortest supply, real silver. Since the COMEX is at the epicenter of world silver, it is the place the world will turn to if real silver is needed in a hurry.

For many years, I have written that the amount of short positions in COMEX silver dwarfs real world supplies, and that this is a condition unique to any other commodity. That should be enough to prompt a reasonable person to wonder why, especially since silver has been operating in a documented current deficit (most bullish position a commodity could be in) and the price is at historic lows, by many measurements. Because hundreds and hundreds of millions of paper ounces held short on the COMEX are unbacked and unbackable, it is easy to see why prices are depressed and that trouble portends in the future to these naked shorts. But don't think its going to delivery failure of hundreds of millions of ounces of COMEX silver to force the issue. No, it will be a remarkably small number of contracts caught short and unable to deliver that will start the stampede. Prices, as well as supply and demand, are always set "at the margin." That means it is the last quantity of each to be traded which sets the price. For instance, the closing price of a stock determines the value, on any given day, of all such stock.

The term, "at the margin", has even more important influence when talking about shorts having to come up with real merchandise, to deliver against a commodity contract, when real supplies are not plentiful. Most delivery problems involve relatively small amounts of contracts. The best example I can give you involves an incident that occurred in the final of the April 2000 Platinum on the NYMEX (parent of the COMEX). On the last two trading days of that contract, the price of April Platinum soared from under $500 per/ounce to S800 per/ounce, or more than 60%. In two days. The reason? An inability of the shorts to deliver on, get this, ten years, only 40 contracts (2000 ounces of platinum). I am not making this up. This occurred on the exchange that is the center of the silver world.

My point is that it will be the failure of remarkably small number of silver contracts, certainly not hundreds of millions of ounces that will cause a stampede in silver similar to occurred in two days in platinum.

When further asked by the mining company as to when I expected this delivery problem in silver, of course, I had to respond that I am an analyst, and not a prophet. But I can offer this. Since we are in a continuing deficit, every successive COMEX delivery month becomes automatically and increasingly the logical the target. And while the COMEX offers delivery capability in every calendar month, I'd guess (and this is only a guess) that any delivery problem is likely to occur in a standard COMEX silver delivery month, of which take a COMEX silver delivery month, of which there are five: March, May. July, September and December. That makes, by the formula based upon inevitability, the March COMEX delivery month as the likely prime target. If, and when March comes and goes without delivery incident, the next prime target automatically becomes the May contract.

Please remember that because the stakes are so high the shorts will try everything to cause a sell-off in gold and silver to alleviate having to cover on the upside. It may very well be a matter of survival for them. As such, don't to count them out until they're out. This is what I when confess to not knowing - how this COT drama will play out in gold and silver. Will the big concentrated shorts throw in the towel and cover to the upside, or will they succeed in engineering the price lower to cover their shorts trading days and escape potentially ruinous losses.

If the shorts are done in on the upside, then we face a different game, a game perhaps devoid of manipulation. That will result in a radically different pricing pattern in silver for the next compared to the last ten years. But I even if the concentrated shorts still manage to am not making this up. This occurred on the win this round by precipitating a sell-off by the exchange that is the center of the silver world, funds and speculators; it is likely to prove temporary, especially in silver. That's because of the force of supply and demand. Technical funds and speculators versus the commercials is one thing. No one can be sure how that will turn out. A physical deficit is something else. There is only one way that can turn out.

That's the current battle, as I see it, in silver. The COT market structure, telling us the shorts will be working overtime to jiggle this market down, versus the inevitable future silver delivery problem. If the shorts succeed, we get one more super buying opportunity. If they fail, or if we get to a delivery problem first, the super buying opportunity will be no more.

As published by Investment Rarities, February 2003. (Investment Rarities does not necessarily endorse these views, which may or may not prove correct.)