SLV: Is It Solvent?

There is a simmering problem developing in the precious metals market. Before it becomes a wild fire, I want you to be aware of it. The iShares Silver Trust (SLV) is an ETF that owns silver bullion equal to the capitalization of its shares. As the spot price of silver fluctuates, so does the price per share of SLV. All good so far.

However, do they really own silver equal to the capitalization of the ETF? There have been questions about the integrity of SLV for at least a year, but most were treated like “black helicopter” sightings. The questions are gaining weight, and being made with more certainty.

J.P. Morgan (JPM) is the custodian for SLV. They are the largest player in the silver market. What many don’t know is that JPM plays the silver market up and down. They are one of the largest short sellers of silver on the futures market. If that sounds like manipulation, maybe it is.

I have read two articles in the last month that question SLV’s integrity. This is why I think you need to have exposure to silver. If questions get louder and more frequent, SLV could collapse. This would throw panic in the market. And panic means the price of silver will go through the roof. SLV is supposed to hold roughly three-fifths of the total world stock of silver. Many believe they do not have it. Imagine what happens if there is some funny business in the inventory.

Did you know that SLV shares can be used to settle contracts on the COMEX futures exchange? Did you know that we do not mine as much silver as the world uses, and have not for years? Did you know there is less silver above ground than gold?

Silver already moves more than gold, good and, bad. When gold goes up 1%, it is not uncommon for silver to go up 2%. The same happens going down.

Silver is the poor man’s precious metal, and an industrial metal since it is used in manufacturing because it is a great conductor for electricity.

As silver increases in price, the possible fraud at SLV is more likely to be exposed. One article that you may want to read for additional research is Zero Hedge’s, “Multiple Anomalies Detected in Silver ETF”

Another article questions SLV as a legitimate investment.

Gold and Silver have rallied out of fear that we are facing inflation. We surely are, just not yet. It is hard to have inflation, with high unemployment, and a struggling economy. The weak dollar is also contributing to higher prices for precious metals. When dollars are worth less, it takes more of them to buy a commodity or precious metal that is priced world-wide.

If the economy does not recover as quickly as current market optimists believe, precious metals may take a dive. This is when you need to be greedy with silver.

Disclosure: No Positions

Comments

[Silver nut:]

What's to prevent JPM from setting up a dummy company and then "leasing" the silver in their custody to that company which in turn "sells" it to JPM for delivery to cover their short position on Comex. That way JPM can say they had no idea the dummy company didn't own it. Such manipulation has not been unheard of on Greed St.

There is one rumour going around in the ether here that COMEX will let you settle as short with shares of your SLV etf. I tried that and it didn't work. You settle with cash or delivery. Will someone get rid of that obviously false rumour?


On Aug 05 12:05 PM MoneyMustang2002 wrote:

> us.ishares.com/content...;mimeType=application/pdf
>
>
> The above link is the SLV current prospectus from iShares website.
> The main issue raised in this and couple other articles is JPM's
> conflicts of interest being the custodian also short seller of silver.
> Based on the prospectus, JPM's sole duty to the trust as a custodian
> is purely custodian for the SLV trust assets in nature. JPM can only
> buy/sell silver in actual quantities (not paper silvers/futures/contra...
> etc) under SLV trust sponsor's directions. The silver within SLV
> trusts cannot be used by JPM to transact short sellings as the silver
> assets do not belong to JPM but belong to SLV trust. JPM's own short
> selling silver transaction is its own business decision and does
> not have anything to do with the custodial performance of SLV.

Aug 05 01:50 PM

[mark joseph:]

Every seems to agree that owning Silver is the way to go, yet most on this board say get out of SLV. What good is all this if no one talks about alternatives. The author of this piece wants to tell everyone there is a fire in the theater, then fall short of telling us where the exits are. What good is that.

Please feel free to talk about what the "better ways of buying silver' are. Without that second a half of the puzzle, this tends to read more like an enticement for one of these get rich quick newsletters that we get that leave us short of answers unless we pony up for the info.

Aug 05 03:42 PM

[MarvinMBA:]

JPM has the ultimate responsibility and the SEC should and would be concerned if there was a shortfall or duplicate entries. Until the SEC decides to investigate, I'm assuming that everything is Kosher. I hold SLV....MarvinMBA

Aug 05 06:45 PM

[TheHague:]

After all is said and done how do any of us truly know that the company's, bonds, mutual funds and ETF's etc that we invest in every day are what they say they are? We all know individual's "fudge" their taxes every year to hide good and bad number's! Why wouldn't company's do the same thing? That being said we still invest and trade with out hesitation! Now, because of a couple of well written article's show up questioning SLV and GLD books we want to put them in jail! What a farce! Just sell the damn stocks and put the money in the ground! The only place anything is truly your own is your pocket! Out side of that we all live on fantasy. I might add we live pretty good on it!

I own SLV and I plan on buying more tomorrow first thing when the market opens. If it goes down I will buy more! Why, because news could break on JNJ just like it did for PG today and the price could fall through the floor! So why sell something that has made me money to this point for some thing that bad news could wreck in a heart beat!

One more thing and then I will quit! Monday I bought a company that appeared to be a solid dividend payer and pretty solid over all. Their share price had just dropped to a place that I felt good about so I bought! While I was pressing the buy key news broke about how this company had been down graded and one should not buy at all or if you owned then sell! Damn! I lost almost 20% of my money before I could not take any more. Today the shares dropped another 4%! The point in this was the "analyst" had been investigated and fined for corrupt practices on other deals! Why were we listening to him any way! He probably had shorts on the company and needed to make some money!

So you see none of this stuff we do is a sure thing! My guess the whole system is corrupted in some way! Keep your money or keep investing knowing that it is all a mirage! Try not to be greedy and take your money from the middle! The top is pretty hard to find and you will be constantly frustrated by it pursuit!

Thanks

Aug 05 07:06 PM

[TheHague:]

Some think Miners and other support industries are better than the actual stuff they mine! I read that they out perform gold/silver multiple times over! Still have to do DD though. The whole industry of precious metals is pretty volatile and your stomach had better be made of cast iron! I recently bought NGD and they have done well for me! PZG was another purchase but is sort of going side ways at the moment! There are alternatives to the rocks just keep looking! I still don't believe SLV is a bad way to go. I would have to view other evidence before dumping it! I just got back to profitability with it after a pretty long down stretch! Then I read these articles! I would have blown a gasket three weeks ago if I had read them. Now I am trying to be level headed and not do anything rash! You should too! Good Luck!


On Aug 05 03:42 PM mark joseph wrote:

> Every seems to agree that owning Silver is the way to go, yet most
> on this board say get out of SLV. What good is all this if no
> one talks about alternatives. The author of this piece wants to
> tell everyone there is a fire in the theater, then fall short of
> telling us where the exits are. What good is that.
>
> Please feel free to talk about what the "better ways of buying silver'
> are. Without that second a half of the puzzle, this tends to read
> more like an enticement for one of these get rich quick newsletters
> that we get that leave us short of answers unless we pony up for
> the info.

Aug 05 07:16 PM

[Hephasteus:]

It's a very simple scam. You simply pass a commodotity back and forth between central banks at a predetermined prices using computer speed to make sure bank B buys it and bank A sells it at a low price. It won't ever run out of silver or gold or whatever any more than a scam artist fake selling the same thing over and over to a party in collusion with you to simply put on record or in conciousness whatever value the 2 parties want to put into conciousness. JP morgan's interest in silver begins and ends with determining it's value for the rest of the legitimate buyers and sellers. What will stop it is that it's tied to several other scams and it will all come tumbling down when the people who think they are in control of this business cycle find out they are just along for the ride.

Aug 05 08:24 PM

[kohalakid:]

As I have posted on several other message boards, the author is completely and absolutely WRONG when he says shares of SLV can be used to deliver against a COMEX futures contract.
Shares of SLV, and GLD for that matter, can be used to facilitate EFP (exchange for physical) or EFS (exchange for swaps) transactions.
These are bona fide hedge transactions. You can read up on them on the NYMEX website under COMEX rules 104.36 and 104.36A. They have absolutely no connection to the delivery process on spot contracts.

Shares of SLV and GLD CANNOT be delivered against spot COMEX contracts. COMEX Silver Rule 112.02 says:

.."delivery shall be made up exclusively of..five (5) bars of refined silver..cast in bars of 1000 troy ounces..."


There is no provision for delivering shares of SLV against an expiring futures contract and I maintain my offer of $100 for anyone who can show me otherwise.

Aug 05 08:59 PM

[kohalakid:]

What prevents it is the SLV prospectus which says that the silver cannot be lent either by the custodian or by the trust itself.


On Aug 05 01:50 PM User 415837 wrote:

> What's to prevent JPM from setting up a dummy company and then "leasing"
> the silver in their custody to that company which in turn "sells"
> it to JPM for delivery to cover their short position on Comex. That
> way JPM can say they had no idea the dummy company didn't own it.
> Such manipulation has not been unheard of on Greed St.
>
> There is one rumour going around in the ether here that COMEX will
> let you settle as short with shares of your SLV etf. I tried that
> and it didn't work. You settle with cash or delivery. Will someone
> get rid of that obviously false rumour?

Aug 05 09:03 PM

[kohalakid:]

If anyone is concerned about their SLV, I'll gladly sell you my 1000 oz good delivery COMEX bars at 40 cents over spot delivered.

Hope your Fed Ex guy ate his Wheaties........

Aug 05 09:13 PM

[whidbey:]

I am nervous, of course, since if the above respondents can think of gaming the system I am sure JPM has some of the same ideas.

The depository actions of JPM are not insured? If that is the case, why don't they just rob us all and let us fight it out with their insurers.

OH, no insurance?

Aug 05 09:33 PM

[ussmls7:]

If you play with crap you smell like it, & if I have no control over it,who does? If its real Physical Gold & Silver, you can hold it in your hand,then you have vaule,not a paper promise by a bunch of lies from a bunch of banksters that are stealing from the NATION, AS YOU GO BROKE !!

Aug 05 10:06 PM

[purestock:]

a close read of the SLV and GLD prospectus does not instill
great confidence....

thankfully, most people do not read the fine print...

and so the confidence game can move forward....

these are nothing more nor less than trading vehicles...

for long term investors, buy the HARD STUFF

Aug 06 05:07 AM

[HATEFEEBAY:]

ALTERNATIVES:

SLW silver streaming stock. The company is well managed, makes money and has a war chest of cash ready! Also physical silver in your hands (tested as there are a TON of fake silver bars out there). in priceless.


On Aug 05 03:42 PM mark joseph wrote:

> Every seems to agree that owning Silver is the way to go, yet most
> on this board say get out of SLV. What good is all this if no one
> talks about alternatives. The author of this piece wants to tell
> everyone there is a fire in the theater, then fall short of telling
> us where the exits are. What good is that.
>
> Please feel free to talk about what the "better ways of buying silver'
> are. Without that second a half of the puzzle, this tends to read
> more like an enticement for one of these get rich quick newsletters
> that we get that leave us short of answers unless we pony up for
> the info.

Aug 06 09:01 AM

[LanceLink:]

Needless alarmist nonsense.

I have a large position in SLV, and I have found it to be accurate, liquid, and convenient.

And, with the recent addition of options trading, we can sell calls against our holdings and bring in some cash, even when SLV is stuck in a range. I can't do that with the silver in my basement.

Aug 06 10:39 AM

[searcher:]

Don't be too alarmed at the ignorance displayed by some of the comments you see on the gold or silver modes. Most of these folks merely have 'views' and 'attitudes' and do not now, nor ever have, invested in any of these instruments.

Aug 06 11:15 AM

[ryshay2:]

Bernie Madoff was never investigated by the SEC, even though a whistleblower had shown the SEC several times why Madoff was running a Ponzi scheme.
Don't rely on the government to protect your investments.


On Aug 05 06:45 PM MarvinMBA wrote:

> JPM has the ultimate responsibility and the SEC should and would
> be concerned if there was a shortfall or duplicate entries. Until
> the SEC decides to investigate, I'm assuming that everything is Kosher.
> I hold SLV....MarvinMBA

Aug 06 11:30 AM

[Jimbo:]

One above commenter asked for alternative suggestions. Here is one: Last year I purchased a shipment of "junk silver". This consists of 90% silver coins minted by the U.S. prior to 1965. These coins have been in circulation and show normal wear. I see this kind of physical silver as a safe haven if the currency collapses and I fear it very well might. Most silver seems to be mined as an adjunct to other metals, so most mining shares are base metal producers. I hold shares in some of these as well.

Aug 06 12:43 PM

[billyboy54:]

There's a new silver ETF: SIVR

Aug 06 02:20 PM

[auto44:]

You are either kidding or you haven't seen the awesome failures of the sec that led up to all the current problems.


On Aug 05 06:45 PM MarvinMBA wrote:

> JPM has the ultimate responsibility and the SEC should and would
> be concerned if there was a shortfall or duplicate entries. Until
> the SEC decides to investigate, I'm assuming that everything is Kosher.
> I hold SLV....MarvinMBA

Aug 06 09:24 PM

[chux08:]

(CEF) is another alternative. (SIVR) is backed by the real thing too. Once this news hits main street, the inflows into SIVR and CEF from the outflows of SLV could be quite a sight....

Worried about (GLD) too? Then go with (GTU)

Aug 07 02:07 AM