Mike L

Are GLD and SLV Legitimate Investment Vehicles?

Regarding Mark Anthony's reply to Michael Murphy, where he accuses SLV of creating a fraudulent bullion bar list. The methodology Anthony uses for his 'analysis' is very similar to J.S. Kim. i.e., no actual research at all. No knowledge of the subject matter (bullion bar serialization protocols), no effort to contact the ETF fund manager, the custodian, the trustee, the auditor or the refiners in question, and unsubstantiated nonsense allegations galore.

Basically, just serious unsubstantiated allegations of fraud, with zero but ignorance to go by. Anthony has been corrected on his assumption errors numerous times but to reply to him once again....

1) Clueless about bar numbering and date/lot codes. The simple 'bar number' he is looking at does not include alpha charater midifiers.

2) Clueless about refiners who have been refining for decades, many bars pre current serialization methods.

3) No 'duplicate' serial numbers have matching weights, thus not 'xeroxed', or computer generated redundancies as he claims.

4) Anthony did no research with the ETF fund managers, just doing baseless unsubstantiated speculation.

5) Anthony did no research with the ETF trustee, just doing baseless unsubstantiated speculation.

6) Anthony did no research with the ETF custodian, just doing baseless unsubstantiated speculation.

7) Anthony did no research with the ETF bar listed refiners, just doing baseless unsubstantiated speculation.

8) Anthony's first charge of fraud re the bar list, on another forum a few weeks ago, was that the first listed refiner "Amax" had never refined silver bars. It took about 1 minute of web research to ascertain that Amax had indeed refined silver bars, and that Anthony was as usual, making baseless false allegations based on his inability to do any research or know anything about his subject matter.

9) If Anthony's charges were true, this would mean a massive fraud involving dozens of people. Wall Street Journal reporters would be very interested, as would the New York Times, and dozens of financial publications. Perhaps Anthony should contact some of them with his 'concerns'.

10) It is tiresome to see a world so infested with those who make fraudulent, reckless, baseless, unsubstantiated 'fraud' allegations...particul... when those making the allegations, know virtually nothing about their subject matter, and have done zero by way of genuine research. This kind of approach is a shallow, vacuous, disingenuous approach to investment commentary.

It serves no one at all other than the accuser, who has his own agenda. Which in Anthony's case, happens to involve hundreds of posts all over the web attempting to scare investors out of their holds and into his picks.
..Which is really quite ironic since his article he links to above, is all about the dangers of 'counter party risk' with SLV and questions of not holding a commodity ETF due to that risk. Yet his top recommended buy right now, what he says is his second biggest position, is UNG! An ETF that holds NONE of the underlying commodity except in paper promise derivitave form, and has enormous 'counter party risk' associated with it. UNG is being investigated by Congress and the CFTC for potential market manipulation, and may be squelched in its ability to operate freely.

Speculations, guesses, un-reseacrhed and unsubstantiated allegations of fraud...all desiged to drive someone out of an investment and into THEIR picks, does not equate to integrity or credible analysis.

Expect this post to vanish quickly, as 'seekingalfa' believes strongly in free speech for fraudulent mis-information to be posted by its 'authiors' but immediate censorship for any factual contra data or correction. They have removed my posts 6 times now all for the same response to Mark Anthony's false and libelous charges of fraud re SLV, and for my response to his grossly incorrect, unresearched, and misinformed statements regarding bullion bar serialization.

Are GLD and SLV Legitimate Investment Vehicles?

Good lord, intelligent commentary that is spot on and given by a professional in the business. What a welcome breath of fresh air!

Thank you Mr. Murphy for the needed island of sanity in a market where delusional paranoic lunatic fringe nutballism is the norm rather than the exception.

Conspiracies and shenanigans certainly occur in finance, but this does not mean every fringe lunatic unsubstantiated accusastion should be treated with the equivelance of hard evidence and fact. Particularly when the accuser demonstrates they are totally clueless on their subject matter, such as Kim does when it comes to prospectus disclaimers.


On Jul 20 04:05 PM Michael Murphy wrote:

> I have recommended both GLD and SLV to my subscribers after reading
> the prospectuses, so I read this article carefully to see what I
> may have missed.
>
> 1. As may others have pointed out, the prospectus language the author
> quotes, “Neither the Securities and Exchange Commission [SEC] nor
> any state securities commission has approved or disapproved of the
> securities offered in this prospectus, or determined if this prospectus
> is truthful or complete. Any representation to the contrary is a
> criminal offense,” is boilerplate found in virtually every prospectus.
> It has no meaning for the truthfulness of the statements in the prospectus,
> and if any of them are ever found to be untruthful, the SEC can prosecute
> and jail people.
>
> 2. Also as others have pointed out, the two banks are simply custodians
> of the metals. They cannot buy or sell them, short them or borrow
> them. They are on the hook only to be sure all the gold and silver
> bars are there are at all times. If any bars went missing, the ETF
> could sue the custodian in a heartbeat.
>
> 3. It is true that if the independent auditors are incompetent or
> in cahoots with the custodian, bars theoretically could be stolen
> and covered up. This would require a large conspiracy, and after
> the Enron debacle my experience is that accounting firms go overboard
> in the opposite direction, with numerous checks and balances. I
> also suspect SLV and GLD have theft insurance. The probability of
> a theft or missing bars is minuscule.
>
> 4. The call for the CFTC to investigate is very strange, since these
> entities are not regulated by the CFTC. They are regulated by the
> SEC.
>
> 5. The focus on the fact that these entities are not regulated by
> the Investment Company Act of 1940 is equally strange, since they
> are not mutual funds.
>
> My conclusion remains that aside from a reasonable amount of junk
> silver for use in an emergency, it is safer and very effective to
> use GLD and SLV to protect your assets, especially in a 401-K, against
> accelerating inflation. While this article required me to spend
> an hour of research re-evaluating my position, and listening to contrary
> opinions usually is very beneficial, ultimately the hour was wasted
> time because the author's points were so inaccurate or irrelevant.

Are GLD and SLV Legitimate Investment Vehicles?

I think that Kim, and the vast majority of commentators here, need to re-evaluate the nature of investment research. Making wild unsubstantiated allegations of fraud, for an ETF, SEC listed security is an extremely serious charge that requires serious evidence. Not someone's 'feeling', supposition, speculation, and WAG.

Kim makes numerous statements that are simply either;

a) Flat out false, or
b) Totally unsubstantiated, but being stated as fact, or
c) Specualtion with no research or fact to back it up

This means Kim's credibility ranks very low on the esteem-o-meter for all but the most cynical 'conspiracy' fringe nutball crowd.

There is nothing wrong with owning physical metals, I own physical silver and gold myself... but there are numerous advantages to a safe, phsyically backed, ETF.

For example No storage problem, no insurance problem, no future assay problem, no massive spread, instant liquidity, margin account tradeability, leverage, stop and limit orders, trustees, custodians, no danger of home invasion to be killed for your metal, (which happens much more frequently than people realize) etc etc

Kim, has done no actual research into these ETFs , just made wild and reckless speculations, and unsubstatiated claims of fraud based on reading their prospectus. Incredible! And he seizes on the standard disclaimers that virtually ALL prsopectus have in them as his 'evidence'.

If these GLD and SLV ETFs were a fraud, it'd be the scandal of the century. If Kim had evidence of it, he could get wealthy overnight blowing the scandal open and writing his book. Guess what? This isn't going to happen.

I will comment on a few of KIM's statements;

>>.."First, let me preface this article by stating that it contains my opinions and speculation based upon no concrete evidence.."<<

This opening statement is the most credible in the article. It is all downhill from here.

>>>.."Ever since the launch of the US gold ETF, GLD, in November, 2004 and the launch of the US silver ETF, SLV, April 2006, a debate has raged in analyst circles regarding the legitimacy of these two investment vehicles.."<<

Actually, no. Only the ultra fringe nutball newsletter crowd of 'analysts' like Ted Butler (who is paid by IRI to steer people to physical and bash the ETFs) have any reservations about these 2 ETFs. Among credible and repsected analysts there simply is no such debate.

>>.."Let’s begin with the obvious. Is it not a huge conflict of interest that JP Morgan (JPM), a bank that perpetually ranks among the largest short positions against silver on the COMEX, is the custodian for the iShares Silver Trust (SLV)?.."<<

Where is KIM's evidence for this? Link please. This is simply speculation on his part being stated as fact. Very disingenuous and misleading.

>>.. According to silver analyst Ted Butler,.."<<

This is a very generous characterization of Butler, who is paid by IRI for his 'analysis' to steer people to physical purchases at IRI.

>>.." JP Morgan is consistently among the one or two U.S. banks that hold more than 80% to 90% of the entire commercial net short position in COMEX silver futures..."<<

Where is KIM's evidence for this? Link please. This is simply speculation on his part being stated as fact. Very disingenuous and misleading, again. You claim to want integrity Mr Kim in finance but you are demonstrating none.

>.."Is it also not a conflict of interest that HSBC (HBC) bank, a bank that allegedly holds some of the largest short positions against gold on the COMEX,.."<,,

Alleged by whom? Butler? Where is KIM's evidence for this? Link please. This is simply speculation on his part being stated as fact. Very disingenuous and misleading, AGAIN.

>>..."I have maintained for a long time now, ever since I carefully read the GLD and SLV prospectuses, that any investor that buys the GLD and the SLV and believes that these two investment vehicles are as risk-free and as sound as purchasing physical gold and physical silver is highly delusional. .."<<

At least KIM is stating opinion here, but he;

a) Fails to understand the prospectus, and
b) Fails to take into account the risks of physical I outlined earlier
>>>..."..I call the prospectuses of the GLD and the SLV “Alice in Wonderland prospectuses” because it is literally impossible to ascertain what information contained within them is fact or fiction. .."<<

This is simply a nonsense statement based on nothing. One could say the same about virtually any prospectus.

>>.."Does anyone else besides me not find it ludicrous that both the SEC and the CFTC have not examined either the GLD or SLV prospectus to determine if it is truthful or complete,.."<<

This could be said for every commodity ETF out there, the vast majority of which are derivitave based and don't even hold physical commodity. Is KIM kidding with this?

>>.."there is absolutely no way that you should believe that buying the gold ETF and the silver ETF is the same as buying physical gold and silver, or even a proxy for buying physical gold or silver..."<<

Completely unsubstantiated statement based on KIM's poor understanding of how prospectus must be written.

>>.."Elsewhere in the SLV prospectus, the following claim is also made: “Accordingly, the bulk of the trust’s silver holdings (emphasis mine) is represented by physical silver.” If the bulk of the trust’s silver holdings is represented by physical silver, what constitutes the “remainder”? .."<<

KIM is just so lost here. New shares are cash until the silver is purchased, which happens almost immediately. This is clear in the prospectus, as even the earlier paragraph KIM had cited in his article demonstrates.

>>..."Clearly, the SLV prospectus states that there is a “remainder”. If you read this statement carefully, the statement clearly refers to the “trust’s silver holdings.” Thus, this statement implies that some of the SLV’s funds are allocated to something else other than physical silver. So what is the rest of the trust’s silver holdings? Paper silver future contracts, air, or something else?.."<<

This is just plain silliness on KIM's part. Newly purchased shares do not result in silver bullion equivelance instantaneously, SLV makes purchases, or divestments..determining inflow or outflow...daily.

>>.."But even were the bulk of the SLV’s holdings physical silver, remember that this claim could be false and still contained in the prospectus due to their qualifying statement at the beginning of the prospectus that:.."<<

Good grief, they are regulated and would be guilty of massive fraud. Why doesn't KIM get 60 Minutes or the New York Times on this story then? I'll tell you why, KIM has done zero research and has no credibility here.

>>.."In fact, given the entirely suspicious elements of these prospectuses, were every investor to liquidate their positions in the GLD and SLV and take their cash and buy physical gold and silver instead, I would speculate that the price of gold and silver would rise substantially,.."<<

And most legitimate analysts have speculated that it was the inception fo the GLD, and SLV ETFs that CAUSED gold and silver to rise substantially be creating addition investment demand! This much is clear. The facts are the opposite of KIM's contention here.

>>." it appears that there may actually be grounds for my past speculations regarding the fact that the GLD and SLV funds may actually be used to help suppress the price of gold and silver on the futures markets..."<<

It appears? How about some hard evidence and fact? This is the problem with these kinds of articles. They are akin to the "Moon Wlak Fraud" theories. All smoke and mirrors, so substance.


>>..."The CFTC Should Investigate the GLD and the SLV, Audit their Holdings, and Report Their Findings to the Public

Thus, if the new CFTC Chairman Gary Gensler is truly sincere in his public comments about increasing transparency in the commodity markets, I suggest he begin with an investigation of the unregulated SLV and GLD ETFs to..."<<

Certainly nothing wrong with that. Let's bring on the investigation! But of course, if the CFTC found that GLD and SLV have all the phsyical gold and silver, you know KIM will come back (like Butler did re the Comex) , with an article that would then claim they didn't do teh investigation right, and the ETFs still don't have the bullion.
>>.."It is entirely ludicrous to allow the custodians of these two ETFs to operate with zero outside regulatory oversight .."<<

Simply a false statement. They are independantly audited.


>>.."There will always be vast amounts of paper gold and paper silver available to be sold, but only a limited amount of physical gold and physical silver. Perhaps this is why the real thing is becoming increasingly difficult to come by these days..."<<

Once again, a false statement. The precise OPPOSITE is true. The market has been flooded with gold and silver, suilver in particular the past few months, and premiums have dropped to the lowest levels in years, while retail shortages of coin and bullion have all but vansihed with a massive glut of available material.

>>.." On Tuesday, the US Mint once again reported that it has temporarily suspended minting of nearly all its gold uncirculated and proof coins and nearly all of its silver uncirculated coins due to very limited availability of blanks..."<<

This of course has nothing whatsoever to do with gold and silver availability as anyone who constantly studies the coin market knows. Who does KIM think he is kidding here? Unless he truly is unaware of the facts as to why the U.S. Mint has trouble with its supply chain. Please do try and do a little actual research Kim. Even the collapsed premiums and ready availability of massive amounts of gold and silver coin, (not to mention the glut at dealers and fire sale low premium prices) would be enough to fill you in. If you were willing to do some actual fact checking instead of speculating.

All in all, a very non credible piece by someone with an extremely shallow and un-researched approach to 'analysis'.