In last week's column I presented some fallacies that pertain to the silver market. The feedback I received was mixed; most was positive but some was negative, proclaiming that I was implying the "shorts" could not lose and investing in silver was almost hopeless.

This is not my studied position at all. In fact it has been my conviction from the time I began writing about the silver market that silver is one of the best investments to be made, from the year 2000 to present, and I still maintain that the physical silver and gold markets are the foundational investments that must be owned by any serious precious metals investor.

Quite some time ago there was a meeting held in my home city that included the Commodity Futures Trading Commission (CFTC), the Silver Users Association (SUA), the Silver Institute, Merchant Bankers, some top silver producing companies, members of the press, and others.

Each invitee was asked to do a presentation, and the purpose of the meeting was to bring as many facets of the silver market together for open dialogue. I paid close attention to every speaker, in particular the gentleman from the CFTC, who stated that during the Hunt Brothers episode the Exchange did NOT change the rules, but merely enforced the rules that were already in place. This gave me cause to look deeper into the matter and certainly I have not been able to read the exact rules that were in place in late 1979 through 1980.

What we do know is what rules are in place now regarding the futures market in general. The excerpt taken below from the NYMEX Web site applies to emergencies and not just the silver market -- this would cover any emergency condition on any commodity traded on the NYMEX. I focus on silver because, first, it is the market I am most familiar with and, secondly, we do have a historic record -- when the Exchange ordered liquidation only. This is what happened to the Hunts -- "trading was limited to liquidation only"!

The reader will observe that I have supplied the NYMEX link for further study, and I have only shown five of the rules regarding the possibilities. I found these to be the most interesting that forced liquidation, changing delivery points, ordering member firms around, suspending trading, and finally, the one I find most interesting, modifying or suspending any provision of the rules of the contract market!

I do not want to be an alarmist, but over the years many have asked me certain questions about what they would do or like to do regarding the silver futures market. Many times I have pondered, "Have these people read all the rules?" Admittedly, I have not read them all for some time, but upon reflection of the potential "What if's?" I thought it prudent to review them.

Again, what is shown below is a partial excerpt, not the entire section.

From the New York Mercantile Exchange (NYMEX)

See: http://www.nymex.com/rule_main.aspx?pg=459 - Section%20703

Section 701 Emergency Action

"(A) In the event of an emergency, the Exchange, by two-thirds vote of the Board and subject to the applicable provisions of the Act, and to the applicable rules and regulations promulgated there under, may adopt and place into immediate effect a temporary emergency rule.

"(1) limiting trading to liquidation only, in whole or in part, or limiting trading to liquidation only except for new transactions in futures or options contracts by parties who have the commodity to deliver pursuant to such sales; ...

"(4) changing delivery points, the manner of delivery or the means of delivery; ...

"(8) ordering the transfer of futures and/or options contracts and the money, securities and property securing such contracts held by or on behalf of customers by a Class A Member or Member Firm to another Class A Member or Member Firm or to other Class A Members or Member Firms willing or obligated to assume such contracts; ...

"(10) suspending trading; and

"(11) modifying or suspending any provision of the rules of the contract market, including any contract market prohibition against dual trading."

In conclusion, it is not necessary for anyone with a futures contract(s) paid in full to have much concern. Your title to your metal is specified by weight of bar and serial number. However, if an emergency were to take place and you were planning any of a number of possibilities, remember, it is possible for the Exchange to suspend any provision of the rules of the contract market.

It is an honor to be,