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I am using this opportunity to combine two items of interest to precious metals investors. I do not consider them to be particularly related. In other words, I do not consider any of the funds to have the same counterparty risk as some other financial assets purporting to represent an avenue towards the protection of precious metal ownership such as GLD and SLV and even Comex Futures contracts and options.
I do still think the premium on Sprott silver reflects the scarcity of bullion and the relatively friendly terms of taking ownership of metals from the fund, but this is just a theory.
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"We have a very tough time understanding those bearish arguments against silver. We look at the real silver market, and based on the supply and demand data coming from the real, physical markets for silver, the fundamentals are only getting stronger.
And yet there exists another silver market, which as we’ve shown, is not very connected to the physical realm at all. And though silver investors have for decades suffered the tyranny of a rigged paper monopoly over silver price discovery, it appears to us that the tides are turning. In the age of QE to infinity, investors are being more scrupulous with their capital and as such they are demanding physical silver in quantity.
With more and more dollars flowing into the silver markets and a finite supply of physical to meet that demand, the theoretical losses for the paper silver short-sellers are near infinite. And with such a skewed and obvious risk/reward payoff vastly favoring the longs, we pose the following question.
Who is most at risk in the silver markets: the buyers of a scarce and real asset that serves a growing multitude of purposes, or the sellers, who are short a quantity of silver which may very well not even be obtainable at anywhere near current prices?
Let the Seller Beware!"
Sprott Asset Management, Caveat Venditor
I should add that buyer must also beware, because of the growing counter-party risk as the leverage extends and the available supply shrinks. If the dominos start to tumble, we have seen that the counter party risk can quickly cause the problem to reach critical mass. This is because the financial sector is grounded in leveraged speculation and gaming, and not in the real economy.
For years I had watched the charts showing the 'netting' effect of the derivatives markets, and how the nominal risks were really much lower because of the netting effect. However, once the markets were actually stressed, the netting fell apart because of a couple of major participants who could not deliver.
I think the same situation still exists in a number of markets due to the very weak financial reform and lax oversight of the Fed, the SEC, and the CFTC in particular. And of course the extreme moral hazard of bailing participants out of their oversized risks when they fail.
When you go to collect your silver, you may find only a stack of paper IOU's depending on which vehicle you are using.
When you socialize the losses and privatize the gains for a powerful few, when you reward the perpetrators and punish the innocent and unsophisticated victims of fraud, when you idolize greed, selfishness and deception and vilify simple hard work and honest decency, how can one really expect a healthy, vibrant economy? You are birthing a monster.
Austerity will not improve this picture, and will inflict intense misery on the growing number of unfortunates. They know this, but they don't care. When the oppressed react, there will be calls to put them down, to subdue them, savagely. Provoke and react. Never waste a crisis, and if you need it, create one.
This is the road to hell.
The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained recovery.
Very nice bounce in the metals as silver turned green for the week and gold looks to have the potential to form at least a temporary bottom. The miners in my portfolio added some serious leverage to the gains, despite the short index hedges. Those hedges were increased into the close, as I remain skeptical of a sustained equity rally and any recovery in the real economy.
Distractions like trolls and sensationalists on chatboards and comment threads are more than annoyances, and will cost you money. The notion that all opinions are equally valid and valuable is romantic, egalitarian rubbish.
It is good and necessary to hear different views, and the discerning mind seeks out quality perspectives of all types. But it is not productive to waste time with baseless swill tossed out by trolls and 'analysts' too lazy to put some real work, facts, and diligence into their opinions.
You would not eat garbage off the street. Why would you put something that is of a similar character into your mind, so it will affect your investment accounts? Be selective in how you spend your time. There are quite a few opinionated idiots and broken traders who would love to drag you down to their level and beat you with experience.
Distractions can affect your trading. If they do, get rid of them.
Trading is just a business, and so one should treat it as such. It is neither good nor bad, but a craft of sorts if you will. One has to be on the right side of the market, and it has nothing to do with courage, and everything to do with knowledge, luck, and skill.
Conducting ourselves honorably and standing for the truth, upholding our oaths if you will, is a calling however, a high aspiration which we all receive, but which not all take up. And as with all worthy things it is never easy or accidental, and there are always failures as we learn, so we should not be too discouraged when we stumble and fall, or when we are fearful or confused. This is the human condition of us all.
But courage is moving forward, not when we are certain of every step to victory, but rather, when we are certain that this is the right thing to do, and are determined to do it as well as we can, come what may.
"It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat."
Theodore Roosevelt, Sorbonne, 23 April 1910
End of quarter paint job, helped in part by the sweet deal that the 'regulators' at the Fed cut for the banks and their debit card fees.
The Fed had originally proposed capping the fees at around .12, but today decided to give the banks almost double that at .22, and delay implementation of the rule from July to October. Mastercard and Visa, along with the financial sector, rallied on the better than expected tax on the real economy to help support bank profits.
Let's see how equities go into the long holiday weekend. Today was more window dressing for the trading desks to calcualate their quarterly results.
