Ask Eric Sprott: Why Won’t He Buy More Silver For PSLV?

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Ask Eric Sprott: Why Won’t He Buy More Silver For PSLV?

Just read Kids latest post.  Trying to figure this one out. Any comments on this?

Eric Sprott is one of the leading voices of the silver bull market.  His minions worship him, and lap up his every word.

But Sprott’s words and his actions are out of sync.  His words say that there is a shortage of physical silver, that it’s a matter of time before silver prices skyrocket, that silver bulls will continue to take physical silver out of the market and that the result will be a supply squeeze and higher prices.  His actions defy logic:  despite managing a closed end silver fund, $PSLV, which trades at a huge premium (almost 20% lately) to Net Asset Value, indicating ample demand for the shares in the fund, Sprott refuses to buy more silver bullion and do a secondary offering of PSLV shares, which is what he should want to do if his goal is to expose the shortages of silver he preaches about constantly.

Remember: since PSLV is a closed end fund, not an ETF, it has no creation-redemption mechanism* which would allow the market to arbitrage NAV differences by adding or subtracting metal in exchange for shares.  The only one who can add silver to the fund is the manager:  Eric Sprott – which he could do via a secondary offering by buying silver bullion and selling more shares in the fund.  This is what closed end funds should do when they trade at a premium.  The premium indicates demand for shares, so they sell more shares and take more metal off the market.  It’s what $CEF (Central Fund of Canada, a gold and silver bullion closed end fund) has done a number of times, and it’s what Sprott himself just did a few days ago in his gold closed end fund $PHYS – again, not for the first time.  PSLV shareholders are clearly indicating that Sprott has the ability to buy much more silver for the PSLV coffers.

All silver bulls should be wondering why Mr. Sprott doesn’t do a secondary offering for PSLV and help their cause by taking more physical silver out of the hands of those they view as evil manipulators.  Every silver bull should be wondering why, despite PSLV’s shares trading at a full 20% premium to its NAV (that means that investors are willing to pay $120 for every $100 worth of silver!), Sprott refuses to utilize the demand to help the silver bulls’ cause.  I would encourage silver bulls to take every opportunity to ask Sprott why he is acting so strangely when it comes to (a lack of) PSLV secondary issues, and why he doesn’t want to accumulate more silver bullion for the fund, potentially accelerating silver prices and the resolution of the demand/supply imbalance in the silver market that he talks consistently about.

-KD

disclosure: I am long $SLV and short $PSLV.   I have no direct exposure to the price of silver, just to PSLV’s premium.

postscript:  There are some other factors to consider as well:

1) Sprott’s hedge funds own a significant chunk of PSLV shares, which they have been selling at the huge premium to NAV (as I’ve written about numerous times: 1) the filing  2) the first sale  3) the latest sale).  If Sprott does a secondary offering for PSLV, the premium to NAV may suffer, and his hedge funds’ performance may suffer.  Instead, he’s selling his funds’ shares to investors in the marketplace!  Silver bulls should be quite annoyed by this, as PSLV is not helping accumulate any physical silver bullion, and not helping to squeeze the folks that the Silver Mafia always accuses of shorting massive amounts of paper silver.

2) Sprott knows that the investors buying his fund are confused by the meaning of the premium to Net Asset Value, and that this premium can be used to manipulate their sentiment!  The Silver Mafia has managed to convince PSLV holders that they are paying a premium because it’s better than the competition.   I wrote a whole post about this already, which is mandatory reading for interested parties.

3) Sprott has made a “promise” to PSLV shareholders that he will not do a secondary offering that will whack the premium of PSLV like he did with PHYS previously.  The problem is that this is a promise he can’t keep:  he can’t control the premium for PSLV, other than by continuing to talk about how tight the silver market is while he refuses to do anything about it.  Not wanting to hurt PSLV’s premium isn’t a “reason” to not do a secondary – it’s simply evidence that Sprott wants to manipulate the NAV premium.  Let’s be clear:  Eric Sprott is one of the people in the driver’s seat who can potentially expose all of the problems he alleges are evident in the silver market:  He has the ability to take large quantities of physical silver off the market for his fund.  Yet he doesn’t do so…

4) Related to the last point in #3:  perhaps another reason Sprott doesn’t want to do a secondary for PSLV is that it will expose all of his “hype” as false:  it might prove that there isn’t a problem getting large amounts of silver, and end up being the Dose of Reality that kills the Silver Goose, so to speak.    If the opposite is true, and a large silver purchase would have a drastic effect on silver supplies, then bulls should be SCREAMING for Sprott to help expose the supply shortages with his actions – not with his words. (and yes, Silver Bugs, I know that you’ve read that it took Eric Sprott a long time to get the silver for PSLV’s initial offering.  Guess what: it took a long time because Eric Sprott arranged for it to take a long time, so that he could trumpet about how long it was taking, and confuse you Silver Bugs!  We know this because Sprott structured the purchase of the silver himself, and the counterparty did not default on the contract, as Sprott’s own Investor Relations department will tell you.  The silver for PSLV’s initial purchase was delivered per the terms that Eric Sprott arranged.)

Sprott could also get silver by buying and redeeming $SLV (or buying and standing for delivery of COMEX futures).  Of course, this would be yet another potential feather in the Silver Bugs’ cap if their SLV fears (And COMEX fears) are legitimate and there are problems getting silver out of SLV (I don’t think the fears are legitimate, by the way, and I think that Eric Sprott knows that SLV has the silver which they claim to have: he cites their inventory in his presentations about the state of supply and demand in the silver market) – which could be exposed by Sprott.   This is yet another reason silver bulls should want Sprott to do a PSLV secondary.

Of course, Sprott can just go buy bullion elsewhere if he doesn’t want to test the COMEX/SLV theories.

5) Keep your eye on the ball here: If you’re a silver bull reading this, you want Eric Sprott (and everyone else) to buy as much physical silver as possible.  You should ask him why he isn’t doing this.  That’s the point: simple.

6) *footnote: the “creation/redemption mechanism” is what people in The Business call the ability to create and redeem ETF shares daily in exchange for metal.  On another blog several weeks ago, a novice reader accused me of “lying” when I wrote that PSLV doesn’t have a creation/redemption mechanism to keep the price in line.  $PSLV, despite having a clause in their prospectus to allow for redemptions of shares for bullion, does not have a creation/redemption mechanism as the term is normally used in The Business, and neither does $CEF – although CEF also has a clause that allows for redemption of shares at a discount to NAV (80%)

Link

http://kiddynamitesworld.com/ask-eric-sprott-why-wont-he-buy-more-silver-for-pslv/

Edited by admin on 11/08/2014 - 06:09
UGrev
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Because a crashing sucks and

Because a crashing sucks and a controlled crash sucks less...?

Captain Benny
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Complain all you want...

The truth of the matter is this: People are in fact paying 20% premium today.  COMEX silver inventories are rather low, even though the bulk of silver for delivery is never traded on the COMEX.  There is clear intent to keep the price of silver suppressed:  We've known for years, but they May raid is just further evidence.  Sprott has indeed been acquiring silver outside of PSLV and has also been acquiring miners outside of the PSLV trust.

Eric has been very vocal and open about his actions and why he decided to acquire the miners instead of holding such a huge premium in PSLV.

If you're in it to play arbitrage, sure short PSLV and go long SLV.  If you're in it for long term gains that will make many, many more percentage points  return than a silly arbitrage without any leverage needed, go long the physical.  You're a fool if you play arbitrage right now.

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Kid Dynamite is a known

Kid Dynamite is a known antagonist on other blogs. I suggest he contact Sprott Asset Management and ask for an interview or a comment rather than telling the silver faithful to do so. I'm sure Sprott would be happy to accommodate him since he is generous and kind to the media regarding interviews.

My point is, that if this was true (about the NAV and silver shortage) I think someone would have pointed this out on ZH or elsewhere. Sprott came out right away and defended his position on buying more silver and miners with his sale of PSLV. Just check ZH. They have both stories, the initial one and also his response regarding the sale.

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R man J
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Hat Tip To You Good

Hat Tip To You Good Doctor:

...for shining the light. after 12 weeks silver finally breaks free, so the Kid freaks out...seems obvious to me.

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Ditto to you R man J. He

Ditto to you R man J. He writes prolifically about other important topics over there too. *rolls eyes*

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This criticism is playing

This criticism is playing both sides of the fence.  Sprott does nothing, he writes this artcle.  Sprott does issue more shares, he laughs at all those "foolish" investors overpaying for shares.

I'm really not sure what would make this guy happy.

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Sprott is in business to make

Sprott is in business to make $. If people choose to buy his product it's because they perceive value in said products. KD, Andy and a few others constantly demand other successful and or prominent  people take up their crusade(s). I don't profess to know who is right or wrong on all these issues but I do see who is/are creating schisms and divides in the pm community. Right or wrong I want anyone pushing slv and or gld downwind of my mossberg. One must always be aware of agents provocateurs.

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What would make him happy is

What would make him happy is him accepting and understanding his cognitive dissonance between facts about physical silver and what he wants those facts to be. I'd say he's on the losing side of the bet right now and he's not happy about it. 

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I just see it as more

I just see it as more evidence to stack physical. Sometimes my tinfoil hat makes it hard to know who or what to trust, in those times I roll a silver round over my knuckles, look at my safe, and know that only the physical can truly be trusted. Paper is useful to make more paper to trade for physical but in the end all paper will lose.

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Last time he bought more

Last time he bought more physical, he issued more shares (he must, be definition), which went out onto the market and brought the premium crashing down, which pissed off a lot of people who bought in at high premium.  He promised he would never do it in PSLV again, after all the hooplah.  If he bought more, he would be breaking his word.  Shame on Kid Dynamite for criticizing someone for sticking to their guns.

Of course, this doesn't stop him from opening PSLV2, which he is likely to do soon.  But those regulatory hoops don't jump through themselves.  It takes a long time to bring new funds to the market.  You can bet he'll never make such a promise with this one.

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Give this guy a break, he's just asking a question

First post!

Anyway, I've been investing in Silver for the past 4 years and keeping up with events and reading the message boards.  I decided to post because I've been asking myself for the last several months why Sprott doesn't issue more shares of PSLV.  I feel strongly enough to throw in my 2-cents.

I know everyone here (including me) loves Eric Sprott ... just for the sake of doing it, let's just assume you don't know anything about him.

The author of this thread proposes some very good questions.  In a nutshell, why have a closed end fund buying silver if you're not going to buy anymore of it when the premium reaches sky high?  Everyone knows that CEF buys more silver/gold when the premium goes up - I think everyone assumed Eric would, too.  Why hasn't he?  And more importantly, why hasn't he given us *any* explanation?  The argument that he doesn't want to make the same dilution problem of PHYS doesn't seem to be a strong enough reason.  Or if it is, he should just say, "He guys, I'm not diluting PSLV, get over it".  But instead, he leaves everyone guessing. 

It's funny, I've listened to all of Eric Sprotts interviews on King World News and read all his articles - I love listening to him.  However, the OBVIOUS question of:

"Hey Eric, the premiums of PSLV are at 20%!  When are you going to do another offering"

Is *NEVER* asked.  I don't think that's a coincidence.  To be honest, I don't know what the intent is behind Eric not issuing more shares.  Is it "good" or is it "evil"?  I don't know.  But dang it Eric, just answer the question and get this behind us!

Again - let's look at this objectively.  I'll say it again - everyone here loves Eric Sprott and assumes he walks on water.  If you forget all of that and just look at the facts, what's going on?  Why doesn't he issue more shares?  I know I - and most people here - would love it!  Another 20-30 million off the market in a heartbeat.  And if he did, the premium would go down and maybe I'd buy some (along with lots of other people).  Imagine the waterfall effect...  But instead, he doesn't issue shares - gives no explanation - and the premium stays at 20% and people like me don't buy his fund.

Ok, I'm done.  Thanks for reading.

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Well, let's e-mail Eric King

Well, let's e-mail Eric King and get him to ask the question next time Sprott is on.

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About Kid Dynamite

Kid Dynamite is at least stupid.

He criticizes Sprott for letting investors pay high premiums, and then he proclaims he is long slv.

Slv too lets investors pay premiums.

On the contrary, the newly created Sprott Silver Bullion Fund allows you to invest in physical silver, being its shares physically backed, without paying any premium.

If he is so worried about investors not being cheated, why Did Dynamite doesn’t advertise for the Sprott Silver Bullion Fund instead of slv?

Seems to me this guy wants only to defame Sprott

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tmosley wrote: ......snip

tmosley wrote:

......snip ......  Shame on Kid Dynamite for criticizing someone for sticking to their guns.

Of course, this doesn't stop him from opening PSLV2, which he is likely to do soon.  .................

The idea of a SECOND closed end fund makes sense .... I have had opportunity to sit in on recent conference call of Sprott - he seems sincere in his reasons .... you can probably get a password to listen in - was last week.

In the mean time -- there are other options .... check this out ....   https://spreadsheets.google.com/ccc?key=0AsAy8x4Mq0aSdEsyeFFUTERtY2JHZ05uRU5PV21KZkE&hl=en&authkey=CPmaiOsH#gid=1

this is a google spreadsheet that 'someone' much smarter than I made ( found link of a Kitco MB ) ....  buy SVRZF ( SBT.UN-T ) it is only 10% premium and it wasn't that long ago it  was a hell f  a lot less that this .... personally I like CEF ( 50% AU  50% AG )

Disclosure - I own CEF.A  SBT.UN  GTU.UN ( all Central Fund items ) and various Sprott 'stuff ...yeh - a cdn.eh

Greg

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flc wrote: Let’s be

flc wrote:

Let’s be clear:  Eric Sprott is one of the people in the driver’s seat who can potentially expose all of the problems he alleges are evident in the silver market:  He has the ability to take large quantities of physical silver off the market for his fund.  Yet he doesn’t do so…

If the opposite is true, and a large silver purchase would have a drastic effect on silver supplies, then bulls should be SCREAMING for Sprott to help expose the supply shortages with his actions – not with his words.

http://kiddynamitesworld.com/ask-eric-sprott-why-wont-he-buy-more-silver-for-pslv/

I don't understand him.

Sprott is buying silver bullion like no other company

he is buying silver miners like no other company

he is providing investors with multiple instruments to invest in physical pm like no other company do

but for this kd person it's not enough

?

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Overshooting

flc wrote:

(and yes, Silver Bugs, I know that you’ve read that it took Eric Sprott a long time to get the silver for PSLV’s initial offering.  Guess what: it took a long time because Eric Sprott arranged for it to take a long time, so that he could trumpet about how long it was taking, and confuse you Silver Bugs!

http://kiddynamitesworld.com/ask-eric-sprott-why-wont-he-buy-more-silver-for-pslv/

laughlaughlaugh

Silver deliverer: so, delivery in 2 days ?

Sprott: no no. Lets make 2 months...

SD: but why ?

Sprott: in order for me to be able to say that the physical market is tight ! ! !

SD: but couldn't you just take the metal tomorrow and lie about the tightness of the physical market ?

Sprott: no, I don't want to lie.

SD: but even if you take the metal in 2 months, saying that the physical market is tight, wouldn't it be lying anyway?

Sprott: well..., aaaarrrrrggghhh!!!

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Kid dynamite wrote:Eric

Kid dynamite wrote:
Eric Sprott is one of the leading voices of the silver bull market.  His minions worship him, and lap up his every word.

kliguy38 wrote:
Kid....I read you all the time and have learned so much......You truly are an expert in the silver trade world. I hope everyone appreciates your expertise as much as I do. I'm selling all of my PSLV and buying SLV as soon as possible

laughyeslaugh

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Overshooting N. 2

kid dynamite wrote:
PSLV is not helping accumulate any physical silver bullion, and not helping to squeeze the folks that the Silver Mafia always accuses of shorting massive amounts of paper silver.

...

The Silver Mafia has managed to convince PSLV holders that they are paying a premium because it’s better than the competition.

...

The Silver Mafia can (and does) just make up their own reality by claiming that SLV doesn't have silver.. .Unfortunately, the real world doesn't support that reality

So, if you are accusing jp morgan of shorting massive amounts of paper silver, you belong to the Silver Mafia.

And if you say pslv has a higher premium than slv since investors think pslv is better than slv, you are not just stupid, you are ... Silver Mafia !

And if you dare to say slv is a fraud ... well you know already

Kid dynamite

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kd wrote:it took a long time

kd wrote:
it took a long time because Eric Sprott arranged for it to take a long time, so that he could trumpet about how long it was taking, and confuse you Silver Bugs!

kd wrote:
I laid out facts.

...

So consider me the "Fair and balanced" measure of reporting ...

http://kiddynamitesworld.com/ask-eric-sprott-why-wont-he-buy-more-silver-for-pslv/

laughlaughlaugh

Ernie Pantusso
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kd wrote:Then Eric Sprott

kd wrote:
Then Eric Sprott goes around and hypes silver shortages, taking advantage of silver market ignorance...

...

Eric Sprott has commented repeatedly about the nature of the silver market: how there is a "shortage" of physical silver compared to tradable paper silver

...

Has Eric Sprott stirred up the Silver Mafia by saying that there is a shortage of physical silver available?

I find most interesting the argument this guy, who is fair and balanced and lays out just facts, uses to show that there'd be no shortage

kd wrote:
You want to talk about COMEX stocks now? let me ask you a rhetorical question: what has happened to the supply of visible silver (COMEX + ETF inventories) over the last 2 years? Ask your heroes that question... (hint: they have RISEN)...

... an increase of etf inventories = no shortage?

surprise

this poor kid dynamite is taking for granted the official (Cpm Group's) method, introduced in 2005, of considering etf inventories as available silver.

How stupid (or deceiving) such a method is was explained by Jeff Nielsen one year ago

http://www.bullionbullscanada.com/index.php?option=com_content&view=article&id=13244:inventory-fraud-increases-in-silver-market&catid=49:silver-commentary&Itemid=130

Let's hope someone will point him some day to Nielson's article

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