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SLV Trading At A Record Discount To NAV
Probably the strangest development in the world of ETFs today is that the silver ETF, SLV, was trading at a discount to its most recently disclosed NAV of 38.1932 at well over 10% earlier, when the spot price of silver dropped to just over $32: an all time record. So momentum-based and emotional is the trading in precious metal ETFs now that there appear to be gaping arbitrage opportunities within these high volume products. Granted, the NAV is updated once a day, and we expect that should today's silver paper price not revert to the NAV, that the NAV will decline. Alternatively, if the price drops, the discount to NAV could creep to yet another all time low. And while these are merely artificial ETF mechanics, which can and should not be traded merely for the sake of their manifestation in the market, the reality is that total COMEX silver just dropped to another fresh all time low, following another 250k ounce reclassification from Registered to Eligible, and the withdrawal of 444k ounces, offset by the receipt of 109.760 ounces by JPMorgan (of all COMEX banks).
h/t Nolsgrad
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Both levered ETFs are getting fisted by "slippage" (unfavorable daily compounding) thanks to recent volatility.
I just put on a pair trade to capitalize on NAV reversion and ETF slippage: 2*SLV - AGQ. Thanks for the heads up Mr. Durden
so what? These huge deviations show an unhinged market (in other words, silver being silver), but market makers will be quick to buy SLV shares and redeem them. Won't last very long.
so when silver moves to 25 on physical market what will the feeling be? Buy or sell or hold?
i would suspect people will / would be buying quite a lot with their frn's. your question basically places silver's bottom at $25. if you believe that to be true i would suspect you would / will be a buyer there too. i know i would be.
I liked it at 25 before and I'll like it again at 25. Thanks JPM! You dicks.
People don't want to invest in the ETF's with imaginary silver holdings? Well they can sell their shares and convert to U.S. dollars which is a form of imaginary money...or they can just convert to bullion themselves and insulate their money from the Ponzi.
The comex will go into default. It's a guarantee. Silver is in HUGE demand.
If after the last 2 weeks of shaking the tree has not resulted in people selling
back to the comex then what will ? default imminent.
wholly shit
i've read the rumors that the metals ETFs may not have, or not be able to procure, all the metal they are supposed to have to match the insane quantity of share purchases. it seems likely they don't, especially when you find the usual pm manipulators guarding the vaults. the size of these ETFs makes them dominant players in the market. you gotta wonder with the millions of ounces being added all the time to GLD and SLV why the spot price is not reacting more strongly. seems that the pm not being bought is a very possible answer. now the flip side, when the market continues it's dive and people need cash for bills, they will sell these etfs right away. i suspect that mass redemptions in GLD and SLV shares will have an asymmetric effect on the spot price compared to the same price movement on the upside.
blocks of shares, once created, are not destroyed in the same proportion on a downward price movement as when bought (and created) on the way up.
If PM ETFs are just a scam sponge to sop up all the investment demand for pm. this diversion not only suppresses the pm price now but could be used to absolutely crush it short term through the undermining of faith in the ETF itself, causing a run on the etf, and subsequent massive gold sales/shorts. seems to me if there was a sharp loss in confidence in the ETFs they (the shares, not the metal) would be clearly be sold. this selling would have to be matched by actual selling of PM. if the ETFs are run as advertised.
ultimately, though, an unraveling of a ponzi etf would cause a scramble for physical PM..
The ETFs are not gold, they are stock certificates. It is the supply and demand of these certificates that determines the share value, not the underlying. They only track the underlying according to how well the managers of the funds have set up the ETFs.
the big boys are the only ones who can redeem ETF shares for the underlying commodity. so should i assume that everyone else (essentially everyone) cannot and their trades are just matched by brokers like stocks. so, except for the special exception of redemptions by say JPM and HSBC, shares do not come out of the float when sold.
what incentive do the big boys have to redeem shares for metal in a declining price environment. Seems to me they would rather have the cash if the metal price is expected to go down. I don't have any faith in the big boys just keeping the ETF float normalized out of the goodness of their hearts. besides, they can take delivery from comex.
it is hard to reconcile close tracking of the PM spot price with an ever increasing float. this implies that the share price tracking the underlying is a matter of faith, a psychological phenomena. eventually, the share price must depart, and fall, from the spot price because of the constant increase in supply of the shares.
if the etf departed from the spot by a large amount to the downside it could be seen as throwing off a forecast. the false impression that the etf is predicting the PM market would quickly become self reinforcing due to the over supplied shares getting sold off.
it is also easy to see that most people would mistake an issue of oversupply of shares for a price forecast inherent in the difference between the share and spot. this is where things would self perpetuate. people believe the religion that the free market finds the right price with the help of invisible hands, even though they could easily understand that it is supply and demand that determine market price.
along these lines, backwardation could be caused by a loss of confidence in the futures markets expressed as lower prices for futures instruments. this loss of confidence and reduced demand for futures contracts could trick bugs by falsely signaling something they have been waiting years to see.
one thing is for certain. the price is manipulated downward, which means it is on sale.
The primary purpose of most ETFs, particularly the ultras and PM shares, is to divert real buying or selling demand from the underlying commodity or sector.
history will call them a scam.
so maybe the government somewhere down the line nationalizes the pm ETFs to "protect investors,"" forcing them to wait to settle in hyperinflating cash and through force majeure confiscates the (real or contrived) mountain of metal.
they did it in 1933.
Well said, Otis.
if the comex loses 200k ounces a day, it will be depleted by 160 workdays
I am also seeing $1+ premium from spot to physical. I use BullionVault, and the physical silver prices are at least a dollar over the spot, which in turn is 10% over the NAV in this article. Over the last few years bid and ask have dutifully straddled spot, with exceptions coming on holidays with big news. Weird Shit Ladies and Gentlemen (terms used loosely for this site).
AGQ & ZSL both negative on the day, screwey things there too.
Weird disconnect between SLV and AGQ today. What gives?
ZSL is the Inverse of AGQ and its down too! Should be up.
The SLV is a ponzi scheme. Get either the Central Fund of Canada, or sprotts physical etfs, if you want this form of Silver/Gold. If not, do the best thing and just buy the physical.
http://ericsprott.blogspot.com/
I am a fan of holding physical and do, so I'm probably on Team TMOS here mostly, but I also regard SLV/GLD as just additional tools in the toolbox, even with their imperfect documentation of the collateral lien, just like futures, options, etc. Even Sprott Asset Management owns some SLV and GLD, and has for quite awhile according to their 13F filings (anyone else shocked by this?) In the short run (only), I am pretty agnostic as to how I own it, and I'm not thinking a higher coin/bullion premium over spot (really a higher bid/offer spread) means that I made money in the last few days. I didn't. Nor do I think every pullback is a buying opportunity, sometimes they aren't and are followed by even greater drawdowns. I hold PMs and will continue to because the central thesis of industrial, numismatic, sovereign wealth fund/central bank and investor demand combined with globally stupid fiscal and monetary policy is still intact, while supply remains, while not completely inelastic, at least predictable.
I saw that discrepancy in ZSL. It made me think, "the shorts are covering". So I bot the SLV for a nice 4 % gain daytrade.....
gh
Wow, a nice, easy math question. THX Tyler.
All, sometimes time lags happen. Market is crazy right now. Save the dry powder for silver at 22 and gold at 1250.
the foreshadowing - I has it.
I do not often swear, but I just have to say, "Sheesh." Pardon my French.
The NAV of SLV is now, and forever will be, the spot price less accrued fees. Read the prospectus. Accruded fees currently amount to about a dollar. So if silver spot was $32, the NAV of SLV was about $31. To sell at a 10% discount, SLV would have had to be going for about $27.9.
That $38 dollar figure is obviously based on the Afternoon London Fix from May 11. It is stale.