Guest Post: "Smelly Smoke Signals" by NN-L

Our pal, Ned, has cranked out a very interesting piece regarding the recent suspension, by the LBMA, of the publication of silver forward rates (SIFO). In an effort to give this article as wide of distribution as possible, it is reprinted below.

The most interesting and compelling part of all this is the timing. The LBMA decided to suspend SIFO reporting at the close of business on Friday, November 2. At that exact same moment, some newly-created measures of backwardation such as Sandeep Jaitly's "Basis/Co-Basis" were literally screaming of extreme backwardation and physical tightness. (More details here: http://www.feketeresearch.com/index2.php) The question is: Is there a direct connection here or is this all just a strange coincidence?...and I think you know how I feel about coincidences in the metals markets.

So, what do we know? Well...

  • Massive, recent physical purchases by Sprott, the Royal Canadian Mint et al.
  • Huge drawdowns of silver from SLV and ZKB.
  • Startling day-to-day turnover at bullion bank vaults
  • Highest total silver open interest on the Comex since October 2010.
  • I'll even add this: Tremendous recent price strength in face of blatant capping and manipulation.

What does it all mean? Maybe nothing. Maybe price will continue to languish while we patiently wait for the price to catch up with the fundamentals. Maybe, though, this is the beginning. Maybe we are finally about to see the incredible short squeeze and signal failure which we've all been expecting and was narrowly averted in May of 2011. Maybe we are about to witness something explosive and historic.

Maybe. We'll see. Just BTFD.

TF

(Will edit and load as a scribd in a few minutes.)

128 Comments

The Watchman's picture

Think I Saw Kid Dynamite Talking To VTC Wearing This Shirt

IF BRAINS WERE DYNAMITE.... TEES

silver66's picture

FWIW

so am I

Have sent a note to a VP of the firm asking for direct comment

Copied Victors post to him

Silver66

tmosley's picture

I seem to recall Kid Dynamite

I seem to recall Kid Dynamite was a troll.  Come to think of it, his writing style and arrogance were on par with the other indoctrinated freegolders I have seen, though I don't think he ever talked about Freegold, but rather spent most/all of his time bashing silver and silver owners.

¤'s picture

Irregardless

@SRoche...Possibly so, but to me it's become a withering and regularly scheduled distraction of obfuscation by VTC or others.  It inevitably distracts from the thread and is given too much weight simply because it's become a dedicated interaction for VTC and some others. 

That's why I call it 'obvious' because the consistent negative Sprott slant is always present and always at the ready to claim something questionable about Sprott (and silver) into question.

To the extent I've replied and have allowed myself to react is regrettable. I won't cater a thought or comment on the game any longer. But I have a feeling I'm about to see another extended version of it.

Mr. Fix's picture

Doesn't anybody remember not to feed the trolls?

Anybody that starts bashing my buddy Eric Sprott,
or tries to post persuasive arguments against the fundamental value of silver, is not someone that I wish to engage in any way shape or form.
It is a waste of my time.
I have read all of the threads in question since the day Motley Fool posted his first diatribe.
I even welcomed him to Turdville. Then I watched the chaos that ensued.

It was posted within the past couple of hours that these guys
are desperately trying to sway people out of silver.
Why that is happening is obvious to me.
I'm kind of surprised that so many took the bait.

Nobody loves a lively discussion more than I do,
but I refuse to do it with someone that has a nefarious agenda anymore.
Quite frankly, it took me a few years to figure out how to abstain.
We have more important matters to attend to,
and feeding trolls does not rank high on my list of priorities.
Congratulations to those that bought the dip in silver,
and all those that are stacking silver, will be richly rewarded.
There is absolutely no legitimate argument that can refute that fact.

For gods sake, shut up and stack!!!

And,

DO NOT FEED THE TROLLS!!!

Counterfiat's picture

Sprott vs Dr. Antal Fekete

Even Harvey on his blog showed buyers were being gouged by sprott at over 20% over spot. Dr. Antal Fekete wrote about the ripoff. Beware of the fund manager, crying from his rooftop that the paper silver market is a joke, while down there under the roof he is selling paper silver at a 25% mark-up.

http://professorfekete.com/articles/AEF140YearsOfSilverVolatility.pdf

Mr Fix, the key is not to be manipulated in overpaying for volitial ag. You lose purchasing power by holding cash in inflationary times

tmosley's picture

Sorry, does Sprott actually

Sorry, does Sprott actually get 20-25% over spot for his shares?  If he did, then why does every new offering drive the price down to near spot?

Or is this referring to his selling of his own shares at high premiums prior to the purchase of additional physical silver for his fund?

Hrunner's picture

@CA, What about land?

Cal Lawyer, interesting and thoughtful post about house prices.

None other than Gary Shilling believes in a second dip in housing, as do several others.  Factors:  Fiscal cliff, another global recession looming, more product coming onto the market as banks capitulate and start to unload toxic loans as foreclosures complete.

(warning- this is a one hour video, but includes guest Shilling, John Mauldin, El-Erian, Rick Yamarone, Jim Bianco, Barry Ritholtz (the big picture blog)- he's too much of a lib but I follow him because he challenges my views in a thoughtful way, and of course the LLL.)

www.postelectioneconomy.com

My question- do you feel the same way about raw land?  A straight-up cash purchase of a few acres could be 'off the radar' in terms a being a homeowner- yes it is still property.  Cash purchase means no debt, and in the meantime provides a BOL with as little as a hand-built cabin (built from materials paid for in full with cash of course) and / or an RV trailer.

Random thought- I just had a prepping brainstorm- "cabin-raising" weekends with help from nearby like-minded folks that are trustworthy.  Allows holders of a few acres or more to raise a cabin very quickly with no debt incurred.  I'm talking small 12 x 12 size range cabin to provide immediate shelter in the near term, and a staging area if one desires a future bigger structure.  Kind of like a networked Amish community composed of preppers.

Worked for Habitat for Humanity (despite Jimmy Carter, I would add, not because of him)

H

The Death Ceiling's picture

Trolls?

I do not believe anyone should try and stifle debate.

Hillsie's picture

This is it I can smell it....

$50 silver by February.

SteveW's picture

Sprott PSLV

When the fund was launched I asked a member of Sprott's team where the silver was sourced. He said it was ordered from a bank, so it makes sense that a Canadian bank sources it from the LBMA.

Now the shelf prospectus allows additions at any time but the terms of the trust require that existing holders not be diluted in terms of their silver holding. Thus secondary offerings can only be made when the premium is sufficient to support the offering with its associated additional broker costs. Now it has been very noticeable over the last two or three weeks that the premium on PSLV is way down, under 1%. Perhaps this reflects the most recent offering or maybe the shares are being shorted to prevent any further offering. The Spicer's silver bullion trust has a 2.8% premium and their CEF has a premium over 5%.

SteveW's picture

PSLV at 20% over spot

As I remarked above PSLV currently trades at a premium of around 1%. At one point last year, I believe, the premium went as high as 20% for quite some time. As I recall there were no new shares issued during this time, maybe after it had dropped to around the 10% range. So any savvy holders of PSLV could sell their shares and buy physical silver. I believe Eric himself did that with some of his holdings which is the basis for some of the misinformation above.

Why did PSLV trade at a 20% premium? Because that is what buyers were prepared to pay in the market.

SteveW's picture

PM ETF premiums

are never completely correct since NAV is based on London pm fix for gold, 10am EST and/or the London fix for silver 7am EST while the share price is taken from the close at 4pm EST.

DayStar's picture

Harvey's Up!

Tyler Durden explains why he can't figure out the movement of gold prices.  Bloomberg describes gold demand in India and the outlook for the US credit rating.  Dave from Denver says the cliff dive the metals took at the open was blatant manipulation.  Ron Kirby says the $15 million in gold that disappeared from the RCM was because they had tungsten and not gold.  All this and more on the Harvey report!

http://www.tfmetalsreport.com/comment/240976#comment-240976

DayStar

Mickey's picture

PSLV was at 29 or 30% premium

If I am recalling this correctly , Ranting Andy was at that time highlighting the huge premium saying Silver reached the explosive point re: supply and demand.

California Lawyer's picture

@Hrunner

Raw, arable land is an excellent investment, in my humble opinion. I am watching prices like a hawk, and right now, land prices are just too high to justify me trading any part of my stack. Soon, certainly within the next four years it will be time to trade some of the shiny for land. Maybe by then there will not be a capital gains tax on the gold and silver eagles, but who knows?

As far as a bug out structure, I am pretty sold on the concept of using a shipping container. The key is to get a used one, clean it thoroughly, install the motorhome/RV amenities, like a propane refrigerator, sink, toilet, shower, folding beds, etc, then have it trucked to the piece of land, and plop it down. Of course, the land needs a bit of prep, like grading, maybe some berm emplacements, drainage, what not, but not too much. Once the container is droped off, it is filled with preps, like water, food, etc., locked and for security, a solar power generated web cam can be mounted remotely to monitor the site. Vegetation can be put in to conceal the container as best as possible, and that is that.

When TSHTF occurs, it is time to bug out. If things just leep marginally getting worse, then the bug out spot and surrounding land can be improved, like citrus tree planting, and other fruit or nut bearing trees, security placements like walls, berms, trenches, and natural barriers like thorny bouganvilla bushes can be planted. Ground can be worked to create rich soil, and berry bushes or similar things can be planted.

That way, in several years, of minimal effort, if things do go to hell in a hand basket, at least there will be some edibles, allowing for some sustenance on a continuing basis. If the soil is prepared, then a vegetable garden can be planted no problem.

Another nice feature would be a well, but I understand that these are expensive. So, my plan for now does not include one, rather, I have Big Berkey water filters and a local source for my family's water needs.

Anyhow, these are just my random thoughts, take care.

Pegasus's picture

Smelly Smoke Wordcloud Post

Worldcloud from the last page of postings

ivars's picture

OK, GSR moving down in

OK, GSR moving down in accelerating fashion, exactly what is needed for silver and its spike. Silver front running gold seriously. Gold price still below levels when GSR was above 51, so all strength in silver. The more silver detaches from gold, the stronger will be the move into the spike ( which we are in already, but its just the beginning, length to max price  about 2-2,5 months).

http://www.tfmetalsreport.com/comment/239240#comment-239240

As can be seen, 51 has been taken out with ease in 2 days , so next real support 50, than 48.

As to silver prices today, I see gradual move up to 35 at market close. I am staying in and looking to add.

clueless one's picture

gee whiz...

seems the Silver price is rising and the Gold price, not so much. 

Always thought, to myself of course, that the GSR would come down in that fashion.  Silver a fast rise, while Gold just kinda chugged along.

Watch it though... even if Silver reaches a really nice price ($80ish??) and some exchange it for Gold...I really feel it will be a fakeout in order to get more Silver to come back to the market...

Silver will fly after that...3 figures easy...maybe 4.

Don't get fooled!!  (then again, maybe I'm fooling myself...)

Peace!!  cool

S Roche's picture

Re PSLV & The Premium...

The obvious corollary to buying PSLV with the high premium if you are a PSLV type buyer is to buy when the premium is low... umm, like now.

@SteveW "I believe Eric himself did that with some of his holdings which is the basis for some of the misinformation above."

I trust that this not directed at my comment above, as it confirms both what I said and what I provided an ETF analysts report of.

victorthecleaner's picture

Sprott

Gentlemen,

I don't have to explain to you how Sprott has traded against the retail investors in his PSLV simply because Kid Dynamite has documented it so well:

http://kiddynamitesworld.com/eric-sprott-sells-the-balance-of-his-pslv-shares-for-his-for-profit-funds/

http://kiddynamitesworld.com/sprott-physical-silver-trusts-premium-is-lower-than-you-think/

Sprott's hedge funds and his charitable foundation purchased PSLV at the initial offering and thereby acquired the underlying silver at close to the spot price. When PSLV finally traded at a premium of 10%-30% over spot, his hedge funds and his foundation sold PSLV and bought physical silver in the spot market instead.

The consequence is that Sprott's hedge fund and his foundation have outperformed silver by some 10%-20% while countless poor retail investors have underperformed by 10%-20%. Nice. Thanks to the regulatory filings (see Kid Dynamite for the links), it is transparent and fully documented.

Victor

S Roche's picture

@Tabberto

"I fear you miss the point somewhat - sure the information is available albeit in a different format now, but they had to stop publishing that information when they did because even their 'indicative' mid-price would have shown a bright red number on Nov 5th.  An 'end of day number' sounds like the worst elements of LIBOR all over again anyway, compounded by the fact that the new end of day curve when backdated to the timeframe discussed shows nothing at all...conveniently.  The fact that you can now get hold of an 'end of day' version of the original doesn't mean something very interesting didn't happen - imo that is shutting the door after purposefully letting the horse out!

Edit: Ultimately this would appear to be an issue of whether one believes in coincidences/the tooth fairy!"

I always fear I miss the point or am otherwise wrong when I trade. Not so much in regard to stacking, that seems to be a no-brainer no matter how you look at it, and those that do disagree tend to reveal that they are not looking at all.

Anyhow, back to SIFO which is more of a trading issue and therefore I like to understand the nitty-gritty. The data is now published in the form of the daily forward silver curves...which, as I understand it, is the series over time of the indicative Silver Forward Offer Rate. If you subscribe to this already please let me know if I misunderstand, because I do not subscribe.

What I do know, however, is that SIFO data was previously reported (a mid-price by each participant, then converted to a mean)  only once a day, it was never continuously traded so I don't see how an end of day report would differ from the previous once a day report...it is still a once a day price indication.

JY896's picture

Word game for late Thursday night

"In casting aside silver the hard money crowd won a temporary victory there. Of course it came to bite them in the ass when the political will of the debtors cast aside gold (1913 essentially) in favour of their newfound glorious easy money, fiat.

Which collapsed again in 1929, the easy money crowd having had a great run....it never lasts long. The hard money crowd took control here again and tried making the dollar good as gold, devalued but still. Their reign lasted till 1971 when the easy money crowds' credit overwhelmed the fix again and lasting till 201?."

Highlights mine, verbiage from the original master. Questions:

1) How many fallacies lies can you spot in the above sentences?

2) After having encountered these 5 sentences (which seem to be be closely held tenets of his/hers after long, hard years of focused study), why put any further stock in the contributions of the author -- at least on the topics of finance, international political economy, history and precious metals?

As for dear old Vic -- you really ought to consider using this avatar image instead:

As much as I love and respect Harvey and his body of work, this particular exercise was a pale shadow of the original. It almost pains me to see Reno's visage associated with the writing you often indulge in, and while seeing Keitel would still sting, it would perhaps be more tolerable, a bit less painful. A sugar coating for the poison pill, if you will.

As much as you claim to debate facts on their merits and issues based on rational argument, and take offense at ad hominem attacks, you choose to present an 'article' from KD -- a vomitorium of personal attacks ascribing negative personal motives to Sprott and a completely unsubstantiated assumption of complete control of the issuer over the price of the publicly floated security? WTF is his (and your) problem?

A 1.64% divergence in the relative performance of two derivative products, over the course of 2 years, during which the underlying asset fluctuated with the volatility of silver? THAT is supposed to support your grand argument that Sprott is a thieving charlatan, while SLV is completely on the up and up and a) people are idiots for questioning the integrity of that fund (SLV), and b) we simply don't understand how it works?

_______________________________________________________________________

Guys, stop taking so many pages out of the book, the covers are beginning to collapse on themselves.

S Roche's picture

@JY

Your chart shows the issue with PSLV very clearly. The premium fluctuates. Why? It is a closed end fund.

Leave me out of all the rest of it, I'm just trying to understand the facts.

Big Buffalo's picture

PSLV

Why anybody would buy PSLV vs opening an account with Forex and buying XAG and XAU is beyond me. IF you're going to buy electronic metals, this is the best I've found. Anybody?

JY896's picture

@Roche

Premium divergence is not in question. My point (fuzzily made) was that there are those who object the loudest to 'unwarranted, uninformed conjecture by amateur/unqualified analysts' making unsubstantiated claims of manipulation, impropriety, unethical business practices by market makers in the financial markets. These same fine folks have few problems ascribing ill motive, manipulative and predatory behavior to THEIR targets, based on the same method of analyzing and forming 'informed guesses', choosing different aspects of the story to ignore than someone else would. I've tried reading KD on many occasions, and while the facts and reasoning are in many cases compelling, the perceived negative bias against the topics of analysis make it difficult to trust in the objectivity of the analyst. One might say even begin to doubt the objective of the analyst.

thurd aye's picture

A real royal flush!

A real royal flush! 400-year-old playing cards made of silver and gold and owned by a princess are discovered

  • They are one of just five known sets and the only complete set
  • Rare, complete set of 'silver cards' sold at auction in 2010 for £2,421,123
  • A Portuguese princess took them with her when she fled Napoleon's armies
  • They were gilded with gold using mercury, a process illegal today///  
  •         :O))

http://www.dailymail.co.uk/news/article-2240634/400-year-old-playing-cards-silver-gold-owned-princess-discovered.html

Silver cards

S Roche's picture

@JY

Fair points, he can be scathing but I found the facts presented and the links compelling. I tend to let all the emotion in anything I read go and find what value I can, as I said, in the information presented.

Speaking of information, Bron Suchecki has posted a thoughtful piece on Andrew Maguire's GLD & SLV article: http://www.perthmintbullion.com/Libraries/Website_Downloads/ETF_Price_Suppression.sflb.ashx

Katie Rose's picture

@ CA Lawyer

Not meaning any disrespect here...

Where can one find a rental property that will allow a renter to have six goats and 13 baby goats wink, a young buckling, an Icelandic lamb/ram, three turkeys, thirteen chickens, a huge garden, loads of firewood, and an orchard?

I live in the country and rentals are impossible to find. Seriously impossible. There simply aren't any!

As for raw rural land, there is a saying in real estate;

"Raw rural land is very, very easy to buy, and nearly impossible to sell. Be careful!!!"

I'm a big believer, especially out west, of purchasing land with an older, ugly, used single/double wide mobile home on it.

Move the mobile off and bring whatever you want onto it, and you have...

- driveway in

- power in

- well in

- septic in

- grading complete

- usually some fencing and landscaping, maybe even a few fruit trees and garden area already there

Around here, those points save you tens of thousands of $'s in permit fees and up front, out of pocket costs.

There's a huge difference between buying a cookie cutter home in the city/suburbs and purchasing a home/land in the country.

We purchased right at the top of the market, pulled money out of our existing small seven acre farm and moved my elderly parents over here. The market fell apart during this process. Yet, after cleaning out 65 years of my parent's accumulation (Depression era children) we still got top dollar for their home. It was the only thing that sold in two weeks in our neck of the woods, and for more than full price. (Bidding war, two families wanted it.)

Why? The purchasers valued and were willing to pay for the mature seventeen year old orchard, two deer fenced gardens, mature berry bushes, barn, etc.

So there are apples and oranges here - mature homesteads vs. suburban sprawl.

My experience is that folks looking for rural properties are much more interested in the amenities the property has to offer than granite counter tops.   blush  And they are willing to pay top dollar for these amenities. 

It takes time to plant/grow an orchard and improve garden soil. It takes time to fence and establish good pasture. It takes time to get to know your neighbors.

I personally would not put off buying a rural farm(ette). The few thousand dollars you may save isn't worth it to me.

The learning curve is strait up. And there are hundreds of mistakes to learn from. I'd rather have the knowledge.

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