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Thursday, August 11, 2011

Do you trade SLV?

I do. Aggressively.

However, DO NOT BE FOOLED. YOU DO NOT HAVE "SILVER." YOU DO NOT HAVE CLAIM TO SILVER. YOU DO NOT HAVE REDEMPTION RIGHTS TO SILVER. THE SILVER THAT SITS IN THAT VAULT IS NOT YOURS. You cannot present your shares to SLV and get the silver out of the vaults. Only "authorized participants" can do this, who are the big broker dealers. That list reads like a "whodunnit" list of the standard group of criminals in the silver manipulation schemes, JPM, Goldman, HSBC, Scotiabank, etc. THEY will get the bullion in the fund..... and those folks are HOPELESSLY short.

Do NOT dream you "own silver" by trading this contract. If you use it to speculate on the dollar value of silver, then great! Like I said, I do it, too. I recommend it. The options market especially for SLV is much more liquid than options over on the COMEX. However, if you are concerned like me about the massive naked short position of investment banks, then SLV will wind up leaving you completely empty handed in the event of hyper inflation. If you believe in the basic soundness of the economic infrastructure of the USA and world... and this is just a bump in the road, then by all means, use SLV however you wish. If you are concerned about the health of the dollar and the massive printing exercises of the federal reserve then you are a FOOL to try and hedge with SLV. If you, like me, believe that the large investment banks are in collusion with the Treasury/federal reserve to hammer back gold, then be sure to have the majority of silver and gold IN YOUR HAND. There is also good evidence that silver, because it is such a tiny market, has been used as a proxy short on the gold market, which is the REAL target of the treasury. If you want material on that, email me. Here is a Youtube vid where Noel Archer, the ISV manager of SLV admits (wait for it) that ONLY the authorized participants in SLV can take delivery.

The CME raises margins again and SLV is a Ponsi Scheme - 4th May 2011 - YouTube

He slicks it over, but says clearly that little people cannot take the silver home. I do understand the silliness of allowing someone with one share certificate to show up at HSBC and demand an oz of silver, btw. Restrictions have to be made, elsewise the custodians become retail sellers of silver. However, this restriction has become a wall between the retail owner and the privileged insider, so that the game is rigged against you, if you think you are "buying silver" by owning SLV. You simply are not.

Also, SLV itself has a built in "disconnect" from the price of silver (which SLV tracks) and the amount of bullion in its vaults. There is a mechanism in SLV wherein silver in the vault is at disparity between the "NET ASSET VALUE" of the trust (based on the amount of bullion) and the share price, which tracks silver. Said another way, it is possible that the NET ASSET VALUE of the trust may reach $1.10 while the SHARE PRICE is only a dollar. This is not only possible, it happens, and happens frequently, especially in down markets. This allows the "authorized parcipants" to arbitrage aggressively and buy SLV (because they can take delivery of the physical silver) and simultaneously short the futures on the COMEX, driving the price down.

An Authorized Participant can buy SLV, present the shares to the vault, and walk away with the silver. He notices that the vault may have a thousand ounces, but the share price of silver times the number of outstanding shares only require 900 ounces in the vault. Those 100 shares are free for the taking, if you have the SLV. He also sees that the COMEX futures are trading at a 100 dollars, but SLV is at 90 dollars. He will then buy and sell via computer orders (executed almost simultaneously) so that he sells the COMEX silver and buys the SLV. That is the strategy, and it is outlined and documented here

You cannot play "against" these guys in the paper market. They will crush you and walk away leaving you with nothing. You can take away their tools for fun and games by buying silver (especially) and taking delivery on it, thus removing their ability to create more shenanigans in the fake paper markets.

So, Go ahead and trade both GLD and SLV. I do. But recognize that you might as well be trading a fund that specializes in hubcaps for all the good it will do you to hedge against serious inflation. This was a fund created by the big boys for the big boys. We are not invited to the party.

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