Posted on 02/01/2021 4:35:56 AM PST by NewJerseyJoe
Silver Trust allow authorized participants to issue or redeem large blocks of shares, known as baskets. To create a basket of 50,000 shares, an authorized participant merely has to deliver the appropriate amount of silver — currently, about 46,450 ounces. Similarly, an authorized participant can deliver 50,000 shares to the trust and demand to receive the same corresponding amount of silver bullion in exchange.
Maybe, if you assume everything is static and only the target has changed.What changed?In opposition to that, you have a large number of individuals who made serious coin in the GME trade.
They are feeling their oats.
There are 5-10 times that number of people who wish they were part of something that won and many of those that want in on the action this time.
In addition, the markets are based on being rational - acting in your own interest.
The hoards pouring over the boarder are not rational and are upsetting the rules.And finally, the actions of the hoards have changed the landscape enough and created enough chaos that BIG players will see blood in the water - not to mention GIANT players like sovereign wealth funds and countries.
Crowdsourcing (via technology) and a change in belief about the evil of the system and the power of individuals.
Time will tell. It will be entertaining.
As a side note, I'm glad a younger generation is awakening to precious metals.
Buy on rumor. Sell on news.
So who is overselling paper in the silver market? People try to apply the naked short GME sitution to silver and it's apples and oranges.
In case you dont understand... arbitrage will soak up physicals in case of any divergence.
Things are not static and that is why the GME play is a one trick pony. No hedge fund will get caught like that again. The ones that did are idiots, committing the mortal sin of not properly hedging.
It does potentially pose a systemic threat to the market if this all implodes. These hedge funds will need to sell off other assets (good stocks) to cover their butts and that can lead to losses for people that are not in the game.
So explain with specifics how that will work and somehow make the silver price go up.
“So who is overselling paper in the silver market?”
JPMorgan Chase, the custodian.
It means it will not diverge.
Now consider a crazy scenario in which the price of a fresh turkey went to $500 a pound. That's kind of what happened to those hedge fund people who now find themselves in position of having to buy a whole bunch of overpriced fresh turkeys in order to return what they borrowed.
To finish your example, I think this is where the small investors on Reddit came into the picture.
The hedge funds were hoping for Game Stop shares to drop very low, so they could make a sweet profit from their short-sales. The small-time Reddit investors caught wind of the hedge funds trying to drive down Game Stop, but Reddit came in and bought up the stock (going in the exact opposite direction the hedge fund needed.)
Many of the hedge funds leveraged their short sales, so their losses went into the billions.
If you think the silver market is too vast to be squeezed, the Hunt brothers did it in the 70s running it up from about $10 to about $50.
I would respond that they already have their nuts in a vice... (below)
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'TheHappyHawaiian' cites two reasons to buy - The Short Squeeze and Fundamentals.
The short squeeze:
Buy SLV shares (or PSLV shares) and SLV call options to force physical delivery of silver to the SLV vaults.The fundamentals:The silver futures market has oscillated between having roughly 100-1 and 500-1 ratio of paper traded silver to physical silver, but lets call it 250-1 for now. This means that for every 250 ounces in open interest in the futures market, only 1 actually gets delivered. Most traders would rather settle with cash rather than take delivery of thousands of ounces of silver and have to figure out to store and transport it in the future.
The people naked shorting silver via the futures markets are a couple of large banks and making them pay dearly for their over leveraged naked shorts would be incredible. It's not Melvin capital on the other side of this trade, its JP Morgan. Time to get some payback for the bailouts and manipulation they've done for decades (look up silver manipulation fines that JPM has paid over the years).
The way the squeeze could occur is by forcing a much higher percentage of the futures contracts to actually deliver physical silver. There is very little silver in the COMEX vaults or available to actually be use to deliver, and if they have to start buying en masse on the open market they will drive the price massively higher. There is no way to magically create more physical silver in the world that is ready to be delivered. With a stock you can eventually just issue more shares if the price rises too much, but this simply isn't the case here. The futures market is kind of the wild west of the financial world. Real commodities are being traded, and if you are short, you literally have to deliver thousands of ounces of silver per contract if the holder on the other side demands it. If you remember oil going negative back in May, that was possible because futures are allowed to trade to their true value. They aren't halted and that's what will make this so fun when the true squeeze happens.
Edit for more detail: let’s say there’s one futures seller who gets unlucky and gets the buyer who actually wants to take delivery. He doesn’t have the silver and realizes it’s all of a sudden damn difficult to find some physical silver. He throws up his hands and just goes long a matching number of futures contracts and will demand actual delivery on those. Problem solved because he has now matched the demanding buyer with a new seller. The issue is that the new seller has the same issue and does the exact same thing. This is how the cascade effect of a meltup occurs. All the naked shorts trying to offload their position to someone who actually has some silver. My goal is to ensure that I have the silver and won’t sell to them until silver is at a far higher price due to the desperation.
The silver market is much larger than GME in terms of notional value, but there is very little physical silver actually readily available (think about the difference between total shares and the shares in the active float for a stock), and the paper silver trading hands in the futures market is hundreds of times larger than what is available. Thus when they are forced to actually deliver physical silver it will create a massive short squeeze where an absurd amount of silver will be sought after (to fulfill their contractually obligated delivery) with very little available to actually buy. They are naked shorting silver and will have to cover all at once and the float as a percentage of the total silver stock globally is truly miniscule.
The current gold to silver ratio is 73-1. Meaning the price of gold per ounce is 73 times the price of silver. Naturally occurring silver is only 18.75 times as common as gold, so this ratio of 73-1 is quite high. Until the early 20th century, silver prices were pegged at a 15-1 ratio to gold in the US because this ratio was relatively known even then. In terms of current production, the ratio is even lower at 8-1. Meaning the world is only producing 8 ounces of silver for each newly produced ounce of gold.
Global industry has been able to get away with producing so little new silver for so long because governments have dumped silver on the market for 80 years, but now their silver vaults are empty. At the end of WW2 government vaults globally contained 10 billion ounces of silver, but as we moved to fiat currency and away from precious metal backed currencies, the amount held by governments has decreased to only 0.24 billion ounces as they dumped their supply into the market. But this dumping is done now as their remaining supply is basically nil.
This 0.24 billion ounces represents only 8% of the total supply of only 3 billion ounces stored as investment globally. This means that 92% of that gold is held privately by institutions and by millions of boomer gold and silver bugs who have been sitting on meager gains for decades. These boomers aren't going to sell no matter what because they see their silver cache as part of their doomsday prepper supplies. It's locked away in bunkers they built 500 miles from their house. Also, with silver at $23 an ounce currently, this means all of the worlds investment grade silver only has a total market cap of $70 billion. For comparison the investment grade gold in the world is worth roughly $6 trillion. This is because most of the silver produced each year actually gets used, as I have mentioned. $70 billion sounds like a lot, but we don’t have to buy all that much for the price to go up a lot.
**If the squeeze happens, it would be like 40 years worth of their gains in 4 months **
The reason that only 8 ounces of silver are produced for every 1 ounce of gold in today's world is because there aren't really any good naturally occurring silver deposits left in the world. Silver is more common than gold in the earth's crust, but it is spread very thin. Thus nearly every ounce of silver produces is actually a byproduct of mining for other metals such as gold or copper. This means that even as the silver price skyrockets, it wont be easy to increase the supply of silver being produced. Even if new mines were to be constructed, it could take years to come online.
Finally, most of this newly created silver supply each year is used for productive purposes rather than kept for investment. It is used in electronics, solar panels, and jewelry for the most part. This demand wont go away if the silver price rises, so the short sellers will be trying to get their hands on a very small slice of newly minted silver. The solar market is also growing quickly and political pressure to increase solar and electric vehicles could provide more industrial demand.
The other part of the story is the faster moving piece and that is the inflation and currency debasement fear portion. The government and the fed are printing money like crazy debasing the value of the dollar, so investors look for real assets like precious metals to hide out in, driving demand for silver. The $1.9 trillion stimulus passing in a month or two could be a good catalyst. All this money combined with the reopening of the economy could cause some solid inflation to occur, and once inflation starts it often feeds on itself.
billionaires who make money when the price goes up are battling billionaires who make money when the price falls
That's false, debunked nonsense. JPM is NET LONG silver for their own book. The short positions people like you get confused over are from silver producers (delivering physical silver against those short positions) and JPM holds those trades in their custodial account. Silver miners are not holding empty "PAPER".
Just ask the Hunt brothers....
Buy SLV shares (or PSLV shares) and SLV call options to force physical delivery of silver to the SLV vaults.
SLV prospective states that if they can't get delivery of silver, their NAV simply DIVERGES from the spot silver price. THATS IT, NO SHORT SQUEEZE, there is no forcing delivery. This whole thing is based on ignorance .
You can of course disagree. That is what makes a market.
And welcome to FR.
Just because you say so? Sorry, I have go with iShares says. Did you even read the prospectus? There is no forcing delivery.
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