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 Market Update 7-13
by Edgar J. Steele

September 17, 2007  

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My name is Edgar J. Steele.

Keep in mind, always, that what I do here is suggest what I would do or have done regarding investing.  This is not a paid service, heaven knows, though I think I have helped some make a great deal more money in recent years than big-bucks analysts.  Just wish I had the capital always to follow through with what seems so obvious to me.  You make your own decisions and I assume no responsibility.

That said, anybody who owns shares of SLV, the silver ETF, should sell them immediately, preferably when the market opens in the morning tomorrow.  I have, as recently as ten days ago, suggested that I could tolerate the risk inherent to the SLV and GLD ETFs, even though I recommended liquidating them in favor of buying their equivalent in physical metals.  I now consider that latter move to be essential.

The British banking crisis is deepening with bona fide bank runs, just like early last century.  The British government is bailing out one of Britain's larger banks, but that doesn't mean it will continue to do so, with other British banks showing signs of distress.  Barclay's is a British bank, too.  Barclay's created and stands behind the SLV ETF.  Yesterday, rumors began swirling about Barclay's ceasing loans and heading for bankruptcy.  Recently, the news hit that Barclay's is in serious trouble (click on the link and read between the lines).  If Barclay's goes BK, it is possible for SLV shareholders to end up waiting a very long time to receive just a portion of their investment.  Remember that an ETF shareholder can become just another unsecured general creditor during a bankruptcy.  The risk is too great.  Sell SLV and sell it now!

Also, I only just saw an article authored by the venerable James Turk, written months ago (don't know how I missed it at the time), in which he closely examines SLV and explains why it might not be the best investment and why it cannot be trusted to actually possess anywhere near all the silver for which it has issued shares.  At the time, it was an understatement.  In light of the revelations of the past few days, it is an absolute alarm siren. 

Legend-in-his-own-time Bob Chapman recently stated outright that he believes Barclay's has less than half the SLV shares backed up by actual silver, with the rest simply futures (derivatives) ... fractional-reserve silver, in other words, or Ponzi scheme, if you like.

What to do now?  Buy physical silver.  Take possession.  Secure it (artifice is best and physical inaccessibility is nice, too, but absolute secrecy about your ownership of it is of primary importance to ensure your safety).

I still had/have some SLV in an IRA.  Not much, I admit, but then I don't have much of anything.  I liquidated most of it just prior to the market's close today and already have entered the order to dump the rest in the morning.  I have moved over to PAAS and SSRI, two fairly-well thought of silver mining companies.  As I explained just recently, I believe "they" now have made plain their intent to support the stock market at all costs, so mining shares seem less risky to me today than they did before WhirlyBen tipped his hand of his apparent intent to sacrifice the dollar to save the financial markets.  Mining stocks are more volatile than are the spot prices of precious metals, but I consider them infinitely safer than SLV, in light of recent revelations.  

-ed

Copyright 2007, Edgar J. Steele

Forward as you wish.  Permission is granted to circulate both the written and audio version of this Nickel Rant among private individuals and groups, post on all Internet sites and publish in full in all not-for-profit publications.   The audio version of this Nickel Rant may also be freely used in its entirety by for-profit broadcasting entities, but is not to be included in any recorded format which then is sold to others.  The audio version may be rebroadcast, either live or archived on the Internet, either copied or linked directly to my web site, profit and nonprofit alike, so long as it is used in its entirety.  In fact, I encourage any and all radio hosts to use it freely.  Contact author for all other rights, which are reserved.

 

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