Thursday, October 25, 2007

Institutional storage and defrauding metal investors

I’ve lashed out a few times against the idea of paper silver but nothing I could write would be any more compelling or accurate as this article by silver expert Ted Butler. If any of you have bought or have considered buying paper silver as an investment then I ask you to read the article in full.

If you currently hold these products please make the effort and demand proof of real, physical silver to back your claims. If silver appreciates these organizations likely have enough money to redeem your certificate, but that’s not the point! Simple supply and demand requires that a product bought on the open market decreases supply, as supply shrinks the price should go up. If the purchase is not made supply does not shrink and prices will not rise.

So while you might still see silver rising and you may have made some money your personal purchases and those of countless others who bought paper silver have taken no metal off the market therefore you’ve lost potential profit.

In this one case Morgan Stanely has potentially defrauded 22,000 customers by charging storage on metals that don’t exist. They also robbed these clients of potential gains because their purchases did not alter the price 1 iota. Granted these 22,000 clients were not all silver investors, probably the majority were not silver investors but if on average these 22,000 held only 100oz(a modest amount considering Morgan Stanely storage claims) that would be 2.2 million ounces less sitting in the Comex. The defence that this was standard procedure in the industry makes it safe to assume other companies representing tens of thousand other investors have not bought silver to match their pool accounts or certificates. With my meagre understanding of the law I would say this is fraud; criminal charges should be levelled against Morgan Stanely and regulators should demand full accounting of all products claiming to represent metals. The Judge involved should not allow a settlement that does not make Morgan Stanely admit guilt or make them immediately buy all outstanding metals.

Is it possible that there are more paper claims on silver than there is real silver to back them? Hell Yes.

Futures alone represent much more silver than exists but since few people trade futures to take possession it never seems to matter. This level of storage fraud however opens up the possibility that certificates, pool accounts etc. also represent all or at least a good portion of existing silver. Silver that has not been bought, silver that remains on the market to suppress the price, silver that enriches companies with so few ethics they will sell you nothing with a straight face or sell the same thing twice, thrice ……..!

If you know anyone with paper silver share this article, and the link to Ted Butler

If you have paper silver, demand proof it exists, demand delivery or cash it out and buy physical.

If you deal with Morgan Stanely, don’t!


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