Am I on the right track??

The only people I've ever seen the SEC go after were Egan Jones for doing a ratings downgrade.

 

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Was it hard to let go of the silver? Was it junk silver, bullion bars, or ASE? Would have it mattered - do you think?
thanks.

 

The deal was $325 or 10 ASE, and I could and did replace the 10 ASE for $300. The best part is whenever I see him he tells me to let him know what and when I'm buying so he can piggyback. I like reducing my shipping and getting quantity breaks, he likes the pricing I get him, so we both win.

 

SLV Vault Inspection Documents:

http://us.ishares.com/content/strea.../slv_vic_11_2011.pdf&mimeType=application/pdf

SLV Trust Documents :

http://us.ishares.com/product_info/fund/performance/SLV.htm

What the above page says is the following, Bold is my emphasis:

Many skip over the "Trust" designation , and most skip entirely the prospectus it operates under, and then try to imagine that they know how it works and how the value is calculated, and how distributions can be made and to what individuals or custodians. It is not a mechanism to "stack", it is an investment entity to realize gains or losses in the commodity of Silver. You buy in with paper, and you exit with paper depending on your gains or losses, but that does not mean that the physical backing of the trust with silver is not there. Since distribution is in cash , if ( for example only) everyone wanted to cash out, the "principles" are responsible for providing the cash for the share of SLV. They in turn get silver which they can then sell or do anything legal with it.

Anyone other than a principle that thinks he can have a "delivery of silver" will face sorrow. Of course this is my opinion from reading the prospectus and other reports, some section such as that on delivery and exchange several times.

Some other funds ( which I will not name, do the same things in their trust , but provide physical payout , which is financed by very high fees ) Read their complete prospectus also. You could end up paying much more for physical than taking cash and buying your own through the market. IMO.

Jim ( I do not currently own GLD,SLV, or others, but I have traded the options of both at various pivot points as I see them).

 

Hi Jim,

I am not 100% sure what you are getting at or if you agree or disagree with me, so we will take it through, and if I get off course let me know.


Your first point is it is not a mechanism to stack silver. You pay in paper and get paid in paper. That is totaly correct, I never said you can cash your shares in for physiscal silver. What I did say though, is as money flows out of the fund, they (ishares) must sell silver and they do that on the open bullion marker. A share holder will never recieve physical bullion. They sell the silver and give you the cash. That was an easy one.

I do not understand this statemet

It is the last line "they in turn get silver which they can then sell or do anything legal with it"

If you mean by "get silver" they get it from their vault, then all is good, but if you mean they have to go aquire silver, then sell it, that is not true. They already have the silver.

Here are their holdings. No stocks no bond, no cash, just silver. The only way possible to get the cash to pay out their shareholders if they are cashing ot is to dump the physical bullion they are holding for they have nothing else

[TABLE="class: yfnc_mod_table_title1"]

[/TABLE]

[TABLE="class: yfnc_tableout1"]




[TD="class: yfnc_tabledata1"]Physical Silver Bullion

[TD="class: yfnc_tabledata1"]N/A
[/TD]
[TD="class: yfnc_tabledata1, align: right"]100.00
[/TD]
[/TD]
[/TABLE]

Mike

Also from the quote you provided, one may think that it is saying the fund is not regulated, I am sure you know that it is not what it is saying but other may think that e which of course is not true. The fund is still regulated, just not in the manner as a mutual fund. The are regulated by the SEC and are required to provide financial statements like anyone else.

Here is a link to their 10Q's and 10 K's which does show BTW, they have the shareholders covered 100% with physical bullion.

http://us.ishares.com/library/kits/slv_kit.htm

 

Coal is pretty much uniform for what gives it value, i.e. energy content, so it does OK on the fungibility test.

Where it fails miserably is portability. Sure, a piece of coal can be portable, but how much value can you carry at $60/ton?

 

I was not defending nor damning SLV and its role in Silver or the same for GLD and its roll in gold. They are what they are, and if you are looking for a play in silver and will accept paper settlement (USD$), it can let one do this quickly, readily, and in various forms ( shares, options). It is regulated, but trusts are regulated differently than ETFs and commodity pools to my understanding. The SEC does require the regulatory filings. SEC also regulates the trust, but I do not know the section that applies.

One needs to look at the structure of SLV trust. This is from http://www.google.com/finance?cid=709305

From this we see that in forming the trust, the trust issued shares to the original principles of the trust for corresponding amounts of silver deposited to the custodian of the trust ( JPMorgan Chase, London branch). {they hold the bullion silver}. They are also a member of the trust. So if JPM Chase contributes 100,000 oz of silver to the trust, the trust gives them 100,000 shares which JPM can sell or use as basis of options ( shorts if they wish). The silver doesn't move anywhere. If JPMorgan sells 100,000 shares of SLV, they release the claim on the silver they originally gave to the trust in exchange for them, they have the cash from selling the shares. The silver still stays in their custody even though they can't claim it, it belongs to the trust. Now JPM can buy more shares, even for cash on the open market, but it is probably easier to transfer the custody of their own personal silver to the SLV trust for the shares. Silver still doesn't move , but new silver has to be deposited to the trust for each new share the trust releases to the depositor. Trust silver can be sold to pay for certain fees to cover operation expenses the principles didn't assume.

If the worse case scenario, if a panic and people sells every share of SLV they own, as long as the big banks that are aligned in the trust can pay out cash per share, either (1) the silver is transferred from SLV account to the individual banks account for each or (2) the bank can just hold the SLV share and the silver stays with the trust. If the banks ( principles) could not come up with the cash, then the trust would have to sell on the open market. This doesn't have to be done in minutes, the regulatory limits on completing buys and sell are still based on old non-electronic transfers.

If the price of silver was crashing so badly, that everyone was selling, the bank might well look at it as a long/short term investment and be getting silver at a very large discount. Why sell it on the declining open market? Hang on and sell it later or sell options or contracts on it. I did not go into fees, etc as they are a small portion of the total. The principles have made great profits since the start of the trust. They created it for their own advantage and as major player in the silver market.
i have probably done a messy job of trying to explain without just repeating the prospectus. The trust's asset is the silver it has in exchange for shares issued originally to the principles, who then traded them based on the underlying value of the trust's assets ( silver bullion). IMO.

Jim

 

Ann Barnhardt has a few words on the topic.
Stay physical. With your play money that you don't mind losing, there is SLV and GLD. That is my of the fly opinion.

 

I would still rather have PSLV since it has more physical backing. SLV and and GLD keep the price lower than otherwise because they divert demand from the physical market into paper contracts that don't have the same impact on supply as buying physical. Ultimately even PSLV feeds into this too since the metal in these funds has already been pulled from the available supply unlike buying physical which will put more pressure on supply comparatively.

 

from Friday's : http://sprottphysicalbullion.com/sprott-physical-silver-trust/net-asset-value/

But is the premium worth it?

if you look at the numbers above, take the market value in silver and divide by the number of units outstanding and compare that to the NAV given. Or divide the NAV value of the trust by the number of units and I see a difference of about 7% rounded off. The NAV is determined by the average of bid/ask price, so that must mean the difference between the bid and ask is about 14% of the NAV. So for this day ( last friday) if one wanted to sell to get their silver, they would be losing 7% from the average NAV and maybe 14% ( bid offer) from what they thought they had in physical ( if silver has been relatively level). Likewise if one wanted to buy shares, they would pay about the same 14%. Seems like a high premium either way.

I have no problem with people wanting to accumulate physical, but they need to look at the numbers. IMO.

Jim