The best way to leverage silver in lieu of default risk

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#1 Sun, Jun 26, 2011 - 11:05pm
Warren Peace
Silver City, AZ
Joined: Jun 14, 2011

The best way to leverage silver in lieu of default risk

The best way to leverage silver in lieu of default risk.

When we consider what we know about the comex, the LBMA, derivatives, etc. It seems there is just too much risk of complete loss to make it worth trading the aforementioned vehicles.

Comex- Regularly trades more contract silver than is mined in an entire year. JP Morgue and others, have sold far more contracts than they currently have physical to deliver. Comex has been having difficulty delivering for the past four months, and it's only getting worse.

LBMA- At a CFTC hearing on position limits, it was disclosed by an analyst friendly to the cartel, that the LBMA routinely trades contracts that equal 100 times the physical stocks held by the exchange..... enough said.

SLV- Merry go round with the COMEX where SLV shares are used to settle comex contracts, and comex contracts can be used as equivalent physical backing of the SLV shares.

Derivatives- These are derivatives of the previously listed vehicles of different forms and shapes (AGQ ). The more complex instruments are usually triggered by IF=THEN payouts. I must ask, when all these triggers happen due to defaults galore.... how many of these entities will still be solvent to honor the payout??? Maybe the ones owned by GS, perhaps?

Obviously, the best, and surest way to own silver is to physically stack it in your own possession, and that should be the core of anyones precious metals portfolio. It is however nice to get some extra bang for your buck. To this end lets take a look at the miners.

The miners deal in physical, so when you own stocks in a miner, you are part owner of oz in the ground... future production and sale of gold/silver. The likely future price of the metals will provide very good leverage in and of itself. Accumulating good quality stocks seems like a no brainer. Some believe that the miners will follow the general stock market down. I understand this thinking but I think it highly unlikely due to the fact that these high quality stocks are already trading at absurd levels based upon the spot price and relative low production costs. As these miners start paying out fat dividends, they will once again become the safe harbor of the stock markets. IMHO, ownership of these stocks is the best, safest leverage of silver.

Of course the options on these miners add even more leverage, and look quite alluring. The draw back is that the decay towards expiration can be brutal if prices are stable or lower short term. Keep this in mind, don't allocate a very large percentage of funds to options (<5%).

Those are the types of leverage I have thought about so far, and the risks. Please add more that I have not mentioned and their pros and cons based on a likely fiat universe implosion and likely consequences.

Edited by: Warren Peace on Nov 8, 2014 - 5:09am

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