Explaining Today's Silver Surge
A few days ago, Eric Sprott decided to take advantage of the record premium over NAV of his physical silver fund PSLV (or for some other arbitrary reason) and to issue a $300MM follow-on offering, whose proceeds would be used to buy up silver to add to PSLV's existing physical holdings. Naturally, as soon as the news broke, the premium dropped to about 10%, making PSLV holders unhappy. This is not the first time that Sprott has done this: as a reminder after his April 2011 follow on offering in PHYS, we were fully expecting a comparable physical sequestration to occur via PSLV, to wit: "It appears to have already had an impact on silver, which jumped by $20 cents to another 31 year high on the news, as the market now likely expects a follow on offering in PSLV as well imminently." About 10 months later, it finally happened. As was to be expected, any short-term gains focused investors obviously became angry that by collapsing the premium, which we speculated was shortage driven, they have suffered a hit to their P&L (expressed in dollars of course, which as a reminder to the holders, should be largely irrelevant, especially to those who believe a PM-based barter system is imminent). Yet they forget the flip side to the equation: the money taken out of the premium, would be promptly used to take silver out of (hyper hypothecated) circulation, in other words, in the closed system, the drop in Premium would translate in a rising price in the underlying. Which according to UBS is precisely what has happened, and why silver moved as much as it did. Quoting from FMX Connect: "Today’s incredible move was the culmination of a comment made by UBS analyst Edel Tully. He stated that hedge fund manager Eric Sprott may be in the market buying spot futures in a private letter to his clients." And even as the premium dropped, the price of spot silver increased by over 5%, on the speculation of silver being taken out of the market and delivered to Sprott.
So to summarize: speculation that $300 million in physical silver may be taken out of circulation raises the price of the underlying by 5%. Does that mean that a $3 billion follow on would result in a 50% rise in spot; $30 billion in 500%, and so on? Something tells us the trade off of the premium collapsing to zero in exchange for $100+ silver would be equitable... And as we noted previously, the primary reason for the surge in in the NAV could be many things, but shortage of real physical silver is certainly the most likely one (and good luck trying to buy, transport, store, and insure $10MM or more in physical, without relying on some true physical representation such as PSLV). And if UBS' speculation is true, this has just been confirmed. Most importantly, it once again raises the spectre that anyone wishing to corner the silver market, can do so quite easily even in the aftermath of last year's parabolic move.
Full note from FMX Connect:
Market Recap:
As of the globex close, March Silver was up an astonishing 5.4% ($1.66) on the day, crushing big brother Gold (up .76% on the day). Silver was up an impressive 11 hours in a row, starting from 7 AM. Please enjoy our special commentary below.
Over the last week, and particularly today, silver saw heavy buying. FMX | Connect Managing Partner Vince Lanci discussed the potential for a breakout higher two days ago in an interview hosted by Kitco News (WATCH IT HERE). Of particular note, when asked his opinion on Silver was “If you’re bullish on Gold you should buy Silver.”
Today’s incredible move was the culmination of a comment made by UBS analyst Edel Tully. He stated that hedge fund manager Eric Sprott may be in the market buying spot futures in a private letter to his clients. With declining open interest in a rallying market, it didn’t seem likely to us, but over the last two days we noted open interest has flat-lined and started to turn upward, a bullish indicator.
Intraday moves did not care about how the Euro did or how gold traded. When Silver crossed the 50-day moving average at 30.90 it left Gold in the dust. While thousands of Call butterflies traded in gold over the last few days,they ended the week essentially unchanged.. But the hundreds of calls purchased over the last few days in Silver proved to be big winners for longs with the May 40 Strike garnering the most interest. Finally, note the commitment of traders shows an increase in commercial shorts (an increase of 1,320). This means the bullion dealers have not thrown in the towel and this could just be a market fading away from an impulsive buyer. We’ll wait and see.
Directional Commentary:
Options: Gold volatility was lower going into the weekend and ahead of February options expiration next week. Skew was selectively higher. Options activity remains mostly neutral and is unlikely to manifest strong biases while futures trading is orderly. Conclusion: Neutral
Technical: Gold finished almost $10 higher on the day but still below the highly-cited 50-day moving average at 1673.60. We see this moving average as a strong impediment to gold’s near-term prospects. As a contrasting indicator, open interest has started to creep higher in Jnauary. This (and other factors) leads us to believe that Gold may be due for a near-term correction, but maintain it upward trajectory in the intermediate term. Gold’s objective to the upside is a settlement above 1674 and its objective to the downside is a return to 1600. Conclusion: Neutral
Active Options
G 1675 C, G 1700 C
G 1600 P
H 1700 C
M 1900 C
Z 2000 C, Z 1100 P
ATM Volatility Curve:
As of 1:30 P.M.
Volatility Smile:
***From NYMEX Settlement
End of Day Straddles
GC
Future Bid Offer
G12 1664 25 29
H12 1666.8 65 69
J12 1666.8 101 105
K12 1669.7 130 134
M12 1669.7 156 160
N12 1672.1 182 186
Q12 1672.1 205 209
U12 1674.5 230 234
V12 1674.5 249 253
X12 1676.9 268 272
Z12 1676.9 286 290
As of 1:30 P.M.
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Silver Bitchez!
yes I did try to long SLV short PSLV...no fkin shares to borrow
so why didn't you just long ZI, instead of coming back and continuously bitching about it in 10+ posts? Need to work on the whole "outside box" thing
See the link - http://www.bloomberg.com/video/74304064/
Edel [pronounced A-dell] is definitely not a "he."
"long ZI"?
what I like about Trav is that he understands BNW, and that he shares a first name.
What doesn't makes sense is approaching it based solely on IQ.
The whole point of BNW is to stratify.
I would rather have 10 helpful retards working for me, in proven physical capacities, than live in a world where everyone is 2 sigmas to the right and they all think they are god's gift to earth.
PS, I've got your long ZI right here
I see your point and that's a valid argument. IQ is just a starting point. We don't have a system where retards are stratified...they get to vote here.
I'm not looking to stand up alpha island, but I do believe that Huxley was off-target on that, given the tendency of higher IQ societies like Scandinavia to be in far better shape. Smart people are qualitatively different than the dumb, and this is something that seems to have escaped Aldous.
I wanted a PAIR TRADE, not a long futures position...wasn't I clear?
Scandinavia is definitely something to reflect on.
All I'm saying is, if X is supposed to = Y, and X = 1.3Y instead, and you CAN'T get the short leg of a pair trade... Antediluvian probability theory, I know
Hail, my bit..er.. subjects! for my lineage goes back to 810AD to the father (Halfdan the Black) of the first king (Kong) of Norway (Harold I). Eff your trades.. I'll just take an axe to your neck and take it...with my bare hands!! /end morning humor
...actually..where is Robo, miss his "input" explaining why things swung this way today and why next week will be "worse" ;-)
Imagination WTFPWNS IQ &/or Math
language is a big stumbling block of free will
the enemies gate is down
Superman, where are you now?
.....and this is something that seems to have escaped Aldous.....
Given that the structure of DNA wasn't discovered until 20 years after the publication of BNW, it is not surprising that Aldous would have some gaping holes in his genetic engineering fantasies. For you to have been duped by something so obvious casts* you squarely into the Epsilon negatives.
I had never thought of it before, but I bet the possibilities presented in BNW really appeal to you. Finally, poor whitey will get some respect for all those transistors and refrigerators he invented! The only problem with being one notch above the blacks, is that you're still two notches below the Asians and Indians (dots, not feathers). Perhaps if we thoroughly sterilize, dehumanize and whitewash mankind into perfect little groups devoid of individual character, all the KKK trailer park pigs won't seem so reprehensible - and, well, that's a plus.
Max Fischer, Carpe Hunc
*yes, that's a pun.
What angers Trav the most is being 10 notches below "the tribe".
You wanted a pair trade, but waited until the last minute to put it on (like the lilly-white pussy you are) and got punked.
Teeny violins, motherfucker.
I knew a guy with a masters degree, who couldn't change a flat tire. I knew a kid, that most thought was mildly retarded, who could jury rig broken things to work, with stuff he could find, for free. once you get put in a box, it's hard to get out.
If you want to ponder the theory of relativity, quantum mechanics or the entire history of Keynesianism, find someone with a PhD.
If you want to fix anything with shit left over from the last 100 years or so, come to the U.P.
Nobody up here has any money to pay anyone, so we build, grow and fix everything ourselves.
Keep trying, dumbass. Use any savings you have for the kid's college accounts. Use your last fucking penny in that trade.
aka - "The Gerber Plan"
Steve Jobs
Mark Zuckerburg
Bill Gates
John Quincy Adams
All dropped out of college. College is a sham and with todays inflated prices an outright ripoff; $60,000 a year to go to Columbia. A four year degree costs $240,000 and that doesn't even count books (which is probably another $10,000)
Zuckerberg is Scull and Bones, Gates was hand picked by the Illuminatti, and Jobs was born into the system, because he is a jewe.
Nothing for John Adams? Not even a Free Mason ref.?
Maybe he owned slaves and wrote Brown Sugar that was later made famous by the Rolling Stones.
He wasn't called Big John Adams for nothing...
And Bob, we didn't quite see the "low 20's" in silver you called for by the end of 2011, but close enough at $26 or so. You called it much better than I did. I stand corrected.
Steve Jobs owned slaves, they just happened to reside in China.
Not a fan of Zuckerburg or Gates, although I'll cut Jobs some slack.
College or no college, Adams doesn't belong on a list with any those guys.
Larry Ellison
Michael Dell
Kirk Kirkorian
Ted Turner
Ralph Lauren
Roman Abramovich (it pays to have a bestie like Putin)
Annnnnd....
Andrew Lloyd Webber were also relatively recent dropouts
Some older ones were
Howard Hughes
John D. Rockefeller
If you were interested.
Jon Huntsman
Bawney Fwank Hunts Man.
?
Silver Hunts.....Brothers?
ori
gold-de-spell-ed/
Ian Anderson dropped out of high school...
Degrees are mostly crap, really, other than as an entrance ticket. I've known many multiply-degreed people who were DTABOR -dumber than a box of rocks. Screw the degree, show me what you can do!
And threatening mass suicide.
Zuckerberg is Scull and Bones, Gates was hand picked by the Illuminatti, and Jobs was born into the system, because he is a jewe.
Perhaps that's a joke that I am too dense to comprehend.
In the case of both Google and Facebook, three talented students in their 20's came out of obscurity to establish multi-billion dollar enterprises. Do you suppose they had some help?
He is one of the most ''successful entrepreneurs'' in the last decade. Having made a fortune through his Facebook empire, he reaches more than 500 million people worldwide. It seems like a fairytale. A student creates a new interface to connect the people throughout the world. Well, it sounds great doesn't it? It would, if we were true.
Here is a good video that demonstrates that Facebook was indirectly funded by the CIA with the goal of learning and storing everything there is to know about you. Why? To monitor and ultimately control.
Still pretty fuckin funny now eh?
Zuck: Yeah so if you ever need info about anyone at Harvard
Zuck: Just ask.
Zuck: I have over 4,000 emails, pictures, addresses, SNS
[Redacted Friend's Name]: What? How'd you manage that one?
Zuck: People just submitted it.
Zuck: I don't know why.
Zuck: They "trust me"
Zuck: Dumb fucks
That link is dead dude. And Zuckerberg is a chubby nerd with a shitty looking gf.
http://www.byroncrawford.com/2010/08/facebook-founder-has-average-house-and-car-busted-asian-girlfriend.html
ooof. Wasn't FB originally for the preppy scum to rate each others gf's? Wonder how he would have fared back then with this yung lady?
Who did Larry Ellison work for as a contract programmer was developing Oracle's database? CIA.
Is there a less user-friendly interface than Oracle? I'm trying in vain to look up an account balance and somewhere L.E. is kicking it on his yacht. Something is very wrong with this picture.
I don't know if your comment is accurate, but I appreciate you changing it up. And if this is true, is the key takeaway from it that the primary driver of success is CIA experience? Because if it is, I would like to apply for a gig at the CIA. They probably don't need to do a background check on me as one was already done after I started commenting here. LOL!
there was friendster and myspace before facebok. it's not like the guy invented the wheel.
he was lucky in the sense that it was a website that was originally free of ads, and where you couldn't make face profiles.
right place at the right time. and it wouldn't surpise me in the least if he had a little federal help to squeal on your neighbor, so to speak.
JQA was educated at the best schools in Europe, (back then they were far superior to our colleges) while being John Adam's (his dad's) secretary. He spoke French before he spoke English which spooked his father. JQA was far ahead of his contemoraries in America. The Monroe Doctrine of James Madison, which was keep Europe out of America, was his brain child. We are still learning this lesson. Europe has been a mess for over 3 centuries.
i've always been a little troubled by john & abigail's roles in forging and using the alien and sedition acts of 1798
how this might effect dad's secretary is anybody's quess
American Experience | John & Abigail Adams | People & Events | PBS
I'm not, and almost no one is in the class of the individualy you mentioned, but I got a job as an engineer because I have a degree in engineering, my wife got a job as a teacher because she has a bachelors and a masters in education. My daughter just got a great job as an RN and she would not have gotten the job without an education and a degree - but I agree that the whole college thing is way to expensive.
Govt subsidizes unqualified college students, that don't really concern themselves with tuition expenses, since Big Brother is picking up the tab. Is it any wonder then that universities start sucking harder at the teat?
Trav...That's a good strategy...Central Fund and Sprott always seem to underperform...Hey, collect the scraps...Nothing wrong with that...
i got into that comment of trav's too!
transpersonal deleuzians? L0L!!!
but after reading tyler's intro, i mechanically thought of the arb: sell PSLV, buy silver, myself! so, i found it fascinating that trav "couldn't borrow the shares" for the short leg
apparently, if we take him @ his word [& why not, trav BEing trav?], he was late and all the available shares had already been borrowed and sold OR his broker didn't figure he was "worthy" of this trade and fed him a line of BS~~~same result
i never heard of someone not being able to short an ETF, so a did a little research and PSLV is not an ETF, it is an ETV~~~ExchgTradedVEHICLE. next: what's the diff? wheels?
Euronext - ETV segment > FAQ had the answer for me (paste):
What are Exchange Traded Vehicles (ETVs)? ETVs are simple and transparent open-ended securities which trade on regulated exchanges. ETVs enable investors to gain exposure to assets without trading futures or taking physical delivery. ETFS-branded ETVs are secured, undated, zero coupon notes that are designed to accurately track the underlying asset index or individual asset. Are ETVs very similar to Exchange Traded Funds (ETFs)?ETVs are similar to ETFs because they are both open-ended, continuously traded and have multiple market makers. The main difference is that ETVs use a secured, undated, zero coupon note structure, whereas ETFs typically use a fund structure.
so, now i know! now i'm wondering is the "no shares available for shorting" is a widespread phenomemon or just a brokerage thing at the time trav tried to place the order?
I've never heard of anything the 'big boys' concocted you couldn't short...This is really interesting...The whole 'Vehicle' thing kind of scares me...
Question is...How much legroom does it have?
None. And when TSHTF - unless you're a good friend of Eric, or Warren, or George - no engine.
There was no available borrow. The short stock rebate was quoted low, but nary a share to be had. The little folks aren't allowed to play.
bingo...maybe i could have synthetic'd it with some puts or a vertical credit spread or something. Will have to investigate NAV premium ranges for a good entry, but the pair trade is a guaranteed winner
not sure how to get a synthetic up to that 30% for the arb/pair short
maybe short a reverse mining ETF or something
this IS nuts! when i first thought of that, i thought it was funny, but now it's starting to make sense!
gee! maybe i have a magic bong!
bingo-bongo, BiCheZ?
When NUGT/DUST changed from 2X to 3X a few weeks back...Any big pullback in the miners is gonna shove this bastard (NUGT) back against the wall with a spring...How much can get shaved off without this becoming some sort of twisted Zeno's paradox?
thxz! i needed that!
luckily, i wasn't eating our drinking anything!
I am sooo long on silver coins, you wont imagine =)
I can imagine.....like visions of sugar plums dancing in my brainbox....I see silver everywhere
https://picasaweb.google.com/lh/photo/5WZTlE8AAYWkUCSU-2L5E9MTjNZETYmyPJy0liipFm0?feat=embedwebsite
ding ding brother! Fortunately for someone like me who can't understand techy stuff like this article (I'm not a trader and feel honored most of the time to be among the brain power up here, except for some of the bigots) it only takes a little common sense to understand that the bigger the stack the better off we will be.
yes,siree!
What's your avatar...I see a phenyl ring with what a couple hydroxyls...What is it? Just curious...
Pretty fuzzy but I'm guessing trimethoxy phenyl propylamine. Looks a bit more like methanol side groups off the ring, then three carbons with a fuzzy end group. Not an intuitively obvious avatar, but a dead dancer/actor can't be too judgemental.
Good eyesight for a dead disco dancer!
my fav. hallucinogen, mesc.
Ah, trimethoxy phenyl acetylamine for the win.
you have excellent taste, sir. 3,4,5-trimethoxyphenethylamine has some truly unique and lovely properties. the alpha-methylated analogue isn't bad either, as are the methyl & bromo analogues, and especially the chlorinated version of the alpha-methylated analogue, provided you don't mind a 16 hour experience. good to see there are some other, uh, enthusiasts around here.
you have excellent taste, sir. 3,4,5-trimethoxyphenethylamine has some truly unique and lovely properties. the alpha-methylated analogue isn't bad either, as are the methyl & bromo analogues, and especially the chlorinated version of the alpha-methylated analogue, provided you don't mind a 16 hour experience. good to see there are some other, uh, enthusiasts around here.
The whole article is total bullshit. I would say the arguments presented would make some sense if the move was restricted to silver but platinum and palladium are creeping up too. I saw various arguments explaining this but in my view the ultimate reason is growing speculation about imminent QE3 in the works by shit Bernanke. It also may explain the sharp move up in commodity currencies like AUD, NZD end even to lesser extend CAD. The move in AUD looks especially absurd in light of substantial slow down in China.
Shit Bernanke and Marxist Obama acting in tandem rapidly move us to the edge of abyss. I wish Ron Paul had a chance but the man though arguably unusually honest for politician is simply not up to the task of winning such a tricky thing as US Presidency.
God save America...
What....as opposed to the sell-outs he's running against? You've already had 100 years of puppet enablers doing the bidding of the banking cartel and crony capitalist oligarchs....
Fools like you need to wake the **** up....shuck off your 'programming' and realize the path and choices laid before you are not some quaint little soundbites you've been brainwashed into regurgitating.
There was a GAP on the daily candle chart on spot silver & a reverse H&S is now forming...
Otherwise this is all hyperbole for the moment...
Disclosure: Long physical silver (because I need to replace the stockpile that was lost in a boating mishap)...
i have a peculiar compulsive behaviour that
goes like this. every time i read the term
"boating mishap" i need to hit a green arrow
with the cursor. very strange
Boating, and ice fishing. Damn stuff goes straight to the bottom; glitters and flashes all the way down though. Pretty.
and to think the many times i have been
ripped off buying those clad coins thinking
they were bullion. i could puke.
"This was no boating accident" http://www.youtube.com/watch?v=lSSelk84oA8
That wasn't a shark it was a vampire squid.
Land Shark:
http://www.youtube.com/watch?v=a3ELlI1nrjE
Unless you were rowing in the middle of some ocean, what about learning to dive and try to retrieve your silver?
Head and shoulders or falling wedge?
http://www.kitco.com/ind/maund/jan162012_silverA.html
How much more milk can the old cow give?
When they run out of milk, just pay them $5 to get them to help you dig it out of the ground...
They're already equipped with cloven hoofs...
My mistake. I meant to make the comment on the Merkel post.
"My mistake. I meant to make the comment on the Merkel post."
That cow? Why, she will keep giving milk as long as she can get it (taxes) from her citizens.
I'm afraid we will be doing the digging in one of those FEMA designer camps. The Panama canal was dug mostly by hand. Forced labor is very profitable you know.
White Sea canal.
And Buckrys Shovels
Silver went through the top of a massive descending wedge. The paper dam broke and physical took over.
Look... I'm a silver BULL... But if you want to talk about PAPER TECHNICALS, the price above the $35-$35 area (which has weekly chart gaps and is missing a lot of PAINT from September, July, & last March) still has to be dealt with...
I'll be a bull to about $36... Then you'd be chasing... PHYSICAL Ag owners need more patience than this...
Patience? Ask the losers that were players with MF Global about their patience... anyone still playing with paper PMs is a lunatic... You included Trav777... and, as Satyajit Das recently said "Trust No One With Your Money". The COMEX is now a joke and many Compliance Departments have explicitly banned participation in the COMEX. Big buyers of bullion are now going directly to miners/refiners and avoiding the CRIMEX altogether.
BTW, did anyone notice the timing of little Timmy's trip to China and the US/Israeli decision to stand down from 'military exercises' near the Strait of Hormuz? Hmmm? Power follows the PMs and the PMs are heading East. PMs are not money (and therefore power) Benny? Guess again azz hat!
From Reuters:
"Executives from CME Group Inc, IntercontinentalExchange Inc and other U.S. exchange operators will meet this month to discuss how best to safeguard customer money at the brokers they oversee.
They expect to make proposals for rule changes by the end of the quarter.
But if, as CME officials have suggested, the broker knowingly misused the money and deceived regulators, no amount of checking could have prevented the losses, Roth said.
"I think the search for a silver bullet is probably futile," Roth told Reuters from his Chicago office. "If someone wants to break the law, you can't prevent that without sitting with them 24 hours a day."
...and from Jim Willie via Jesse's Cafe Americain:
"Inflation; The Only Tool Left"
http://www.financialsense.com/contributors/jim-willie/2012/01/20/inflation-the-only-tool-left
@SW
Look... I think I'm on your team... But THIS ain't the breakout you're looking for...
When I say PATIENCE... All I mean is "keep stacking"... This is STILL going to go on for longer than anybody (around here) wishes... I wish I could say differently... Yet at the same time I'm happy for the additional TIME...
I've really come to the conclusion that TIME (at this stage in the game), is as valuable as the PHYZZ (while the games are being played)...
Agreed.
I'm appreciating the extra time. At my age, there is no multi-million $$$ bank account- every pay period that makes good is an opportunity to squirrel away PMs and food for the rainy day that seems inevitable at this point. Every month is giving my children an extra two months of proper nutrition at this point, so another year or two would be just fine by me.
FS and Prometheus... I'm not saying that this debacle is going to collapse soon. I am saying that anyone that continues to play the rigged paper game is a damn fool.
Like everyone that sees what is coming, I continue to prepare. But, trying to beat the rigged casino, the LBMA and CRIMEX, is akin to playing in front of an oncoming locomotive.
Get your assets out of reach of the US Gov any way you can, do not place your assets in the hands of anyone that represents a counter party risk. Assume that there are hundreds more MF Globals out there and that they are going to continue to steal their customers money and the US Gov isn't going to do one damn thing to stop them.
Ignore this advice at your own peril.
Agreed.
Physical.
I would normally agree -- I thought that after MFG, open interest at the COMEX should just go to zero -- but the current open interest long silver seems to be ... so confident.
They can't possibly simply be ignorant. I can't believe that. Instead, I have the feeling that they know something I don't.
I totally agree, though, in general, about counterparty risk.
I think that all the people I see still playing this game are collecting pretty sea shells after the ocean has mysteriously withdrawn to the horizon. Me, I'm running for my car.
That line of darkness you see just above the horizon? That's not a storm.
It's a wave.
Don't speculate, accumulate
Too bad. We've got until the next American warship tries to run the Straits.