silveraxis

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    • Silver ETF Bull Market Remains Intact [view article]
      Eviladam: Silver's use in industry is widespread and much of it is in consumer electronics and jewelry (a cheap substitute for gold when people don't have the money to buy the yellow stuff) which is unlikely to be greatly impacted even in an economic downturn. Contrast that with copper where 40% of its global use is in construction. In addtion, several major silver-lead-zinc projects have already been shuttered in by crashing lead and zinc prices so there may very well be less future supply than the recent projections. And of course investment demand is the wild card which actually appears to be accelerating. For perspective, consider the late 1970's when the global economy wasn't exactly hot either, there were about 1.5 billion ounces of silver in reported stockpiles, and industrial demand was a fraction of today's level; and yet silver was still able to rally to a high around $50 (almost $150 in today's dollars). If you don't like to judge price levels by spike highs, then try a 200 day moving average around $20 (almost $60 in today's dollars). Silver did have the Hunt Brothers back then but today there is SLV, which already has accumulated DOUBLE what the Hunt Brothers achieved at the peak of their stunt. Importantly, SLV is accumulating in an unleveraged manner and shows no signs of being stoppable. If silver does not outdo its 1979-1980 acrobatics this time, it will be for some reason that is currently unfathomable. Those who consider SLV the enemy of the silver investor have absolutely NO IDEA what they are talking about. Aug 24 04:46 PM
    • Commodities: Brief Correction or Bursting Bubble? [view article]
      There are quite a few small "commodity stocks" where the project economics are now underwater. If commodity prices slide far enough, the same thing could happen to some of the majors. Over time, the price of a given commodity (absent a monopoly like diamonds) will be slightly higher than the marginal cost of production. This is a reality that most current (sophisticated) investors recognize by awarding P/E ratios that are subpar to the market as a whole. If we do have confirmed peak production in a particular commodity, the paradigm may very well change but this is not something we will be able to confirm until several years of declining production in spite of higher prices. I agree that if and when the mom and pops buy up this sector, there could be other new paradigms to explain the overvaluations. Investing on that basis, however, is an application of the greater fools theory and not the way any billionaire got to be that way. Instead, if you have enough patience to wait for the type of absolute proof that is required to borrow every last penny you can to buy commodity stocks, you might be rewarded in the years ahead. And I don't think it will be too late if you just chill out now and wait for it. Remember the new paradigm: several years of rising commodity prices in spite of declining annual production. If it happens, that would be true alpha. Aug 22 05:10 PM
    • The Inconvenient Truth of the Slowing U.S. Economy [view article]
      (continued)
      Back in the mid-1990s, Greenspan warned these players when he stated that the central banks stand ready to lease gold should it be required. The conspiracy crowd took this to mean that the central banks had already leased gold in pursuit of their aims, but I don't see where that has been necessary. Greenspan's words were merely a warning and a reminder to the players that central banks hold so much gold that it would be impossible for the players to inflate debts away without central bank cooperation. Well, I believe we will get central bank cooperation at some point given that the alternative is unthinkable.       Aug 22 04:52 PM
    • The Inconvenient Truth of the Slowing U.S. Economy [view article]
      (continued)
      During a monetary crisis, liquidity tends to drain toward the inverted bottom of Exter's pyramid, which is where gold resides. In other words, gold is likely to receive a disproportionate share of monetary fund flows. This effect is very insidious and can become deeply ingrained, with the extreme example being that funds meant for paying off debt are used instead to buy gold since the players know the debt will be eventually inflated away. These players are so far playing nice because it is not necessarily in their best interest to see the monetary regime fail, but they will do what they must to survive when push comes to shove.       Aug 22 04:46 PM
    • The Inconvenient Truth of the Slowing U.S. Economy [view article]
      JS, This is very good big picture stuff about gold but expectations drive the price and some of these things like the social security debacle are not even on most Americans' radar. How people view the possible effects of the business cycle on gold can and will trump the longer-term considerations from time to time. That said, I think gold can do well during a slowing U.S. economy, especially where the risks of credit defaults mean that the central banks will engage in more and more liquidity injections. Aug 22 04:39 PM
    • Silver ETF Bull Market Remains Intact [view article]
      With the dollar probably bottoming and oil topping in the next couple of weeks, the timing is about right to be looking hard at buying, if not throwing down a few pennies. Aug 22 04:33 PM
    • Making Sense of Fortuna Silver's Recent PPS Action [view article]
      Otto, could it be that the cheap ($7 million in stock) buyout of 24% of the JV partner on the San Jose project has confirmed the low market value being placed on the project? It may be a good deal, but one could also look at it as management shooting themselves in the foot. Besides that, now Fortuna will need to pay the other 24% of exploration and development expenses. Aug 22 04:28 PM
    • On SLV's 10-for-1 Split: It's All About Liquidity [view article]
      Actually, the threshold list is maintained by each exchange as they are self-regulated organizations (SRO) .

      The splitting of SLV shares makes it unnecessary for naked shorting of shares in order to build up a basket size for redemption. Think of it this way: before, 50,000 shares representing 500,000 oz. of silver were issued in each batch or basket. It could take days for a single Authorized Participant (AP) to sell these shares, especially since there are multiple APs out there not to mention funds that try to lead them. That put them at risk of not only earning the arbitrage profit but actually taking a loss on the trade. So what the APs did was sell shares ahead of time which allowed them to lock in a price and acquire an equivalent amount of silver with no further hedging required, and then once they had sold 50,000 shares they could deliver the silver to the Trust and the shares to the buyers. Of course, if this was not done in T+3 and the shares were not borrowed (it can be difficult if not impossible to borrow ETF shares), then the AP had a fail to delivery. If this persisted for more than a few days, the failed trades would show up on the Reg SHO report. Note the AP is not actually naked short because it has been incrementally acquiring silver as it sells the shares. In any case, reduction of the basket size from 500,000 oz. to 50,000 oz. allows the AP to avoid this altogether because it can transact in smaller quantities and more often. One other thing that I did not mention in the article but is important to consider is that the basket size reduction is probably reflective of a re-assessment by Barclays about the liquidity of the physical silver market itself. In other words, whatever liquidity that the physical silver market had in their view when they launched SLV in early 2006, that liquidity has gotten more viscous.

      Regarding Ted Butler, trust me he knows who I am as he or his associates are usually among the first to read the comments on my website.       Aug 22 04:19 PM
    • The Strange Case of Dr. GLD & Mr. Bullion [view article]
      DougM: Yes, that is precisely what happens. But as my recent SA article regarding SLV's share split tries to explain, it is always easier to do it in smaller batches. Aug 22 04:04 PM
    • Gold (and Gartman) Haunting Some Investors [view article]
      Brad, you don't need delta when AT THE MONEY. You receive one dollar of insurance for each dollar move against the underlying position. The cost of that insurance is the time value and it is directly related to volatility. We can ignore the greeks completely as they all disappear at expiration of the option, which is the time period we are seeking to insure. In other words, you wouldn't pay more in time premium than you would expect the underlying could move between now and expiration of the option.

      I understand this wasn't the point of your article and I did read Hedging Gold's Volatility. I also understand how one could try to strip out alpha using such a method. But there are problems with the method as presented. I'll pick just three. First, you chose a "convenient" timeframe where DZZ was generating returns, not dragging on them. This made the return and risk-to-reward of the hedged portfolio artificially high compared to real world results. Second, I don't see where you took into account the fact that it took about $20,000 to acquire the hedge. In other words, $20,000 Hecla with a $20,000 DZZ hedge should be compared to $40,000 Hecla. I presume this would make the hedged returns when gold is climbing (which is most of the time in a bull market) even more pathetic. Third, you've created alpha but that doesn't mean it will always be positive. That's because you don't have ANY beta in the hedged portfolio at all. So, when beta is large and positive, you are going to have a large and negative alpha. And that would buy you exactly one calendar quarter as head of a hedge fund.       Aug 21 12:07 AM
    • Options as a 'Gold'en Opportunity [view article]
      Brad, I see total upside of 50% on this trade with a maximum downside of 33% (the time premium on the put and call option). There is virtually no leverage to higher gold prices unless gold stocks significantly outperform. The 50% gain would come around a gold price of $600 by end of December (how likely is that). I'd grade this trade a B-. For 1/3rd the cost (the amount at risk), you can strangle Dec. GLD with an 87 call and a 75 put. At $600 gold, that's a 200% profit and you have unlimited upside. What am I missing? Aug 20 11:25 PM
    • Gold and the Dollar: Putting the Relative Cart Before the Relative Horse [view article]
      Otto, $29 billion is chump change in the $1 trillion per day forex market. The Fed alone has swapped (dumped) over $300 billion in Treasuries since the start of the year. The theory that the dollar is gaining its support out of Asia does, however, have merits. If you've watched the currency, commodity and gold markets over the past few weeks, you'd know that a large percentage of the moves in these markets have occurred while only the Asian markets were open. Frankly, the most obvious guess as to why is an unwind trade: funds being pulled out of emerging Asian stock markets, carries, loco metals and energy, etc.. The common denominator with most of these unwinds is that they end up in dollars. Combined with the smallish but persistent selling in the Euro, Pound etc, the demand for dollars to facilitate the unwind has shown up as a very impressive USD rally. So to answer the question about the dollar's rally, it has little to do with economic considerations in the U.S. and almost everything to do with massive capital flows. The dollar will continue to rally while these flows require dollars for conversion between markets. The trick is to figure out which markets these dollars are going into next. Another SA contributor had it right when he mentioned the weakness of BHP, Anglo, etc. in early July as a sign that an unwind was about to take place. Aug 20 01:56 AM
    • The Bedrock Case for the Return of the Gold Bull [view article]
      There is no such thing as volume for the forex markets as a whole, that is why there is no volume on the USD chart.

      As for gold being used as money, nobody is going to spend gold in a grocery store. Even when money was based on a gold standard, gold itself rarely ever changed hands in everyday transactions. It was used to store and transport wealth and in large transactions. Most of it was used to back gold certificates. And there was silver or other metal coins and also trade bills for everyday trade (but not all of these forms had to be accepted for payment of debt, one could demand gold). So when we say "gold is money" we don't literally mean it will replace the penny, nickel, dime, quarter, one dollar bill, ten dollar bill, etc. Instead we mean that gold serves as the most liquid, immutable and internationally recognized store of wealth and means of exchange. Gold's value soars in relation to other forms of money when wealth seeks absolute safety. Even the IMF, BIS and most central banks recognize these facts, so it is a bit surprising that some of the posters have doubts here.       Aug 20 01:23 AM
    • The Disconnect Between Supply and Demand in Gold & Silver Markets [view article]
      slugbait and others who can only bee-yatch here: why don't you start your own assay shop and mint? That's what a lot of people did in the 70's when there wasn't enough bullion around either! It's not very expensive to get going--a furnace, a 1000 oz. bar, some molds, a brand and you're in business. Stop bugging the people trying to mint more product and get crackin' on your own. Aug 20 12:57 AM
    • The Disconnect Between Supply and Demand in Gold & Silver Markets [view article]
      Bron, I don't believe GoldMoney or Bullion Vault have liabilities against their gold (other than the customers' fractional share).

      User244350 & James Conrad & others: SLV and GLD both publish bar lists including serial numbers and they are also audited annually by a Big 4 accounting firm. The bars are held in London metal warehouses (subcontractors) that have never had a major loss of silver or gold over the years including 2 world wars. Morgan Stanley did not admit the allegations against it were true. Here is what they said:

      Defendants believe that the record demonstrates that they handled their customers’ precious metals accounts properly in all respects and that if the case were not settled, they would be entitled to summary judgment dismissing all claims. Defendants believe that the evidence shows that the documents provided by Defendants to Class members contained no misrepresentations regarding the purchase or storage of precious metals from and through MSDW. At no time did Defendants make any promises to purchase or store metals on an “allocated” basis, unless specifically requested for by the customer, nor to segregate metal on a customer-by-customer basis. Defendants also assert that MSDW purchased actual, physical metals for its retail customers and that no client sustained any economic injury whatsoever. <u>The undisputed evidence shows that all of the precious metals held on behalf of Defendants’ customers are present and accounted for, purchased pursuant to each and every customer order. Defendants also arranged for the storage of metals at secure, credit-worthy depositories. Defendants were also contractually entitled to charge their customers storage fees for the services they facilitated, pursuant to the CDS that customers signed. These fees were not inconsistent with the fees charged by other brokerage firms.</u> Defendants also assert that all members of the Class were beneficial owners of their precious metals and that the metals were not subject to lien by Morgan Stanley or its creditors.

      www.gardencitygroup.co...       Aug 19 11:16 PM
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