Thursday, July 21, 2011
Buy real silver and not paper silver
Take SLV for example (us.ishares.com/home.htm). It is almost certain that they have the bars of silver they claim, just over 9,840 tonnes at the last count on their website, but as this is seriously unallocated silver, it is almost certain there are multiple owners of each bar.
According to the publisher of The Morgan Report, David Morgan, on precious metals and proprietor of Silver-Investor.com.
"It takes ten contracts to be a market maker. So I have got ten contracts, I have got fifty thousand ounces, and I ship it to my buddy who is a hedge fund manager over in Idaho. That is my silver. I have just sent it over to him on a lease. I have leased it to him. Now he has taken that silver and he has swapped it with somebody at the SLV, so they have got bars there. And he swapped for those and now those are on the exchange showing as part of the deal. So you can have a lease and a swap, so you could have two or three claims on those same bars. And that happens over and over again."
"So the reason I used "purportedly" is that is the correct word. There are very few bars that are actually one-to-one correspondence that are sitting on the SLV and that is their only purpose. That is not the way banks operate. That is not the way the whole system operates. So I am not against the SLV, but I also state very clearly that if you follow what I teach, you would not want that to be considered a primary silver investment. That is a paper investment. That is not silver. That is paper. It only settles in paper. People ask whether I think there is going to be a default on the SLV. I say, how could there be? I mean, read the prospectus, they settle in cash. Think they have any trouble printing that stuff up? I haven't seen any problem with that lately."
And with recent suspicion that the exchanges and trading the metal do not hold sufficient volume of it to meet their obligations the question has to be asked. "Is the silver market actually fair and, importantly, is it free of manipulation?
David Morgan explained in a recent interview that “The silver market is definitely manipulated, though likely not as rampantly as some believe." However, despite this manipulation, he feels the overall upward trend in silver will not be suppressed in the long term.
"Holding physical bullion as a core part of one's precious metal portfolio is absolutely critical. Many of the bars pledged to tradable securities (ETFs, futures, etc) are assigned to multiple owners - meaning there is much less actual bullion underlying these securities than the market thinks."
It is a very precarious position indeed to hold silver ETFs instead of real silver therefore and seems much more sensible to buy real silver and not paper silver. Solid silver in your own hot little hands has a guarantee that no paper silver can match. It belongs to you.