what happens to money invested in "paper silver" ETFs if the ETF's fail ?
WingedLiberty1957
Posts: 3,009 ✭✭✭✭✭
Any theories? There is not enough silver in the vaults to backup all the paper promises.
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In real life it Sounds like Fraud but the rules can be changed and cash settlements can be allowed.
MIKE B.
I believe you get paid in dollars, not ounces.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
Most holders of an ETF are not wanting metal when they're ready to sell, they want the cash, after all it was a money play. Question is "if everyone wanted to cash in at once would there be enough metal to liquidate to provide enough cash?" We know the futures market works on levergage and has no where near the metal they sell in contracts. ETFs claim they have the metal but how many other players have a claim on that same metal? Anytime you deal with a paper promise, you are playing musical chairs. ETF metal is held in private, usually bank vaults. The custodian of the metal, the bank, has no real accountability on who they are promising it to or who they are leasing it to and how many have a claim to each bar in the vault. JPM is one of the largest holders of promised precious metals.
When gold and silver move together, it signals the coming end of fiat money.
Settled in cash...read the fine print.
Most ETF shares can not be exchanged for physical silver, even if the ETF has the physical silver.
In a crash don't be the last man out.
When gold and silver move together, it signals the coming end of fiat money.
Who would want physical gutter at these levels? At this point it's all about the $$$$.
Stop loss is your friend. RGDS!
The whole worlds off its rocker, buy Gold™.
BOOMIN!™
Wooooha! Did someone just say it's officially "TACO™" Tuesday????
Retiring at 55, what day is today?
Yawn, go back to sleep bro. The forum has been much better. Time for another nap!
COPPER is gutter !
In a crash there is high volatility. High volatility increases the chance of large price movements, making it harder for your order to find a buyer at your desired price.
When gold and silver move together, it signals the coming end of fiat money.
Doesn't always work that way. A stop loss doesn't prevent selling at prices well below your stop during sharp market drops,
nothing to worry about, silver doesn't experience sharp market drops. lol
When gold and silver move together, it signals the coming end of fiat money.
I told you all at 20 that it could hit 100 and he would be saying all the same things, and here we are.
Going back to the original question, and not issues with silver price volatility, Blackrock (ishares) is the ETF Sponsor, Bank of NY Mellon the Trustee, and JPM the custodian of the silver for SLV.
If the physical silver that backs share issuance went missing, these deep pockets would be liable in class action lawsuit. Supposedly there is a confirmation that physical silver is deposited when shares issued and the vault audited periodically.
In addition to physical I have a position in PSLV. This is the Sprott Physical Silver ETF. If you own enough share’s to pay for “10 x 1000 ounce good delivery bars then u can stand for delivery. If you do want to take delivery you need about 28,000 shares to do it.
Mike
MIKE B.
Just as the banks that hold our cash (not enough there for everyone to withdraw).
The whole banking and paper commodity systems survive only because not everyone wants their money at the same time. A "Run" on an ETF will have the same result as a a run on a bank. Banks and ETF issuers are betting it won't happen. Problem is they are betting with the money that belongs to the account holders. SPIC (promise to cover brokerage failure) is no different than the FDIC (promise to cover bank account losses): There is not enough insurance cash to cover anything other than small bank or brokerage failure. FDIC has only $150 Billion on hand to protect account holders in all of the country's banks. SPIC has approximatly $5 billion on hand to protect all securities holders in event of brokerage failure.
When gold and silver move together, it signals the coming end of fiat money.
@derryb
Slightly different scenario. SLV is a market traded security, has to be a buyer for every seller, unlike Banks where our money is in 1 spot and they've lent it out at some multiple. If every paper SLV holder wanted to sell, the market supply will dwarf the demand at current prices, however the bid will meet the ask at some point to absorb all the selling, even if $1. No losses to cover by insurance.
Nobody can settle in cash after they are bankrupted by being short. The physical metal isn't there so shorts go bust and the "cash" in which they settle is pennies on the dollar after it goes through the courts. Shorts are in trouble and increasingly desperate. I suspect a lot of the physical delivery is going to back up promises made by legitimate entities. There are still lots of naked shorts and no one knows how much physical. What is known is that it's being melted at a breakneck pace to supply good delivery bars. It'll will all be gone in a few years then where will Russia buy silver?
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Under this scenario:
How much?
Who pays?
Does the ETF continue trading?
If so, will it continue to track the price of silver?
Can an ETF go bankrupt?
Lots of unknown territory here.
Holders of SLV can only sell for cash unless there is some agreement with the B/D who bought the basket of shares on their behalf. Would think this would only apply to some huge institutions or sovereign funds like the Norway Govt, Abu Dabai, etc. funds.
Unlike a true equity representing shares of a going concern company, SLV does not have a business that can go broke. It would only have issues if the physical bars went missing, JPM lent them to a counter-party who went broke, or the Refiners make fake bars. But again, JPM would be sued and could cover losses unless the majority of the $50B of bars went missing.
SLV isn't a precious metal. It's PAPER not backed by anything lolz. Fake. Fantasy paper! It's incredibly BORING to read about in a precious METALS forum. It's stupid.
Why don't we make PAPER coins? Then we can invade the COIN forum with PAPER coins. hahahah. Let's print all the rare key dates and mints in PAPER!
So stupid ....
COPPER is gutter !
For every seller there is a cash buyer. SLV claims to hold silver to back the positions in the ETF. What's gonna happen if there are no buyers and everyone is try to sell? I would argue the sellers then have a claim on the metal supposidly backing their position. If ETF doesn't can't get access to enough metal to cover all the positions then they are in the same boat as the banks - fractional banking and they fail in a run on the ETF. What puts the ETF in a "franctional banking" situation is if the party holding their metal (JPM) has promissed or leased more silver bars than they hold. Same goes for any ETF that claims to have a physical product on hand to back the shares purchased. Paper PMs are a shell game. As we learned in 2008, financial instituions can fall like dominoes in a panic. I stand by my claim that an EFT will default if enough position holders sell at the same time and their are no buyers.
When gold and silver move together, it signals the coming end of fiat money.
SLV orders get filled in nanoseconds. Those trading there could care less about physical gutter metal, they are there to make $$$. RGDS!
The whole worlds off its rocker, buy Gold™.
BOOMIN!™
Wooooha! Did someone just say it's officially "TACO™" Tuesday????
Retiring at 55, what day is today?
Even if there were no buyers, unlikely as it is, there is no SLV default because of lack of buyers, only because of the loss of the physical bars. ishares doesn't owe the holders of SLV anything, doesn't payout cash to holders upon redemption like a bond, CD, etc. No different then any stock/company going broke. You get in line and divvy up the assets.
If tomorrow something new and better then physical silver was discovered or a unknown horde discovered, and everyone dumped SLV all the way down to $.01, ishares only concern is they no longer earn the 1/2 % fee. They have no losses other then expected fee revenue. JPM would sell the physical bars for what they could get. But this is all beyond realistic.
SLV losses, what you consider a default, is only triggered if the physical bars no longer exist. Then ishares, BNYM and JPM get sued for losses for failure to protect the Trust assets in custody, not that physical silver went to $0.
If no loss of bars, and the price of SLV settled at $.01, that is what silver is worth . 'If', the bars are there in good form, SLV will closely mirror the spot price. If spot is $X, and SLV goes below X by any material $ amount, buyers will step up. SLV will never be defaulted by too much selling on its own.
Most ETF investors understand the "risk." Because you obviously don't, you'll be one of the those left holding the empty bag. Do some research on "Musical Chairs."
How many plaintiffs won their lawsuit in the last banking crisis. LOL
So if SLV closes at $.01, who gets the bars?
Who was the seller when the first buyer appeared? LOL
SLV is selling a promise, traders exchange that promise at current "promise" market price which coincidently tracks spot price. When all the holders of those promises want out where does their proceeds come from? Answer: the vault, but only if there is enough in the vault. Good chance there is not. Holders of metal are primarily banks. Banks know how to fractionally lend. I suspect they also know how to fractionally promise.
When gold and silver move together, it signals the coming end of fiat money.
SLV is garbage. And you promote it. Lolz
COPPER is gutter !
I personally don't think the ETFs are garbage, they offer good investment opportunity with the push of a button. However anyone trading PM related ETFs that are pegged to the price of a commodity need to be awary of the risk. One of those risks is not the underlying commidity, it is the financial stability of the ETF itself. At least with corporate stock there are assets to be divied up among the stock holders. Kinda hard to divy up something that doesn't really exist unless it is done with scissors. For this reason it is imperitive that position holders in ETFs monitor not only the asset(s) to which the ETF is pegged but also the ETF custodian itself.
When gold and silver move together, it signals the coming end of fiat money.
ETF's have NOTHING to do with the real actual PHYSICAL metal. It's all smokescreen and fun house time with the children. And is why its GARBAGE compared to the real deal in the end. Can you profit on this crap? Of course. God Bless America.
COPPER is gutter !
Garbage?
When gold and silver move together, it signals the coming end of fiat money.
It's NOT METAL. Like I SAID. God Bless America.
COPPER is gutter !
A smart investor invests in things that make him money, not just things he likes. Any stacker of silver and gold that does not recognize the role of PM ETFs is shooting himself in the foot. Why can't they both be a good thing? Each has a specific, different role in a portfolio.
When gold and silver move together, it signals the coming end of fiat money.
Metals aren't an INVESTMENT. They are WEALTH PRESERVATION. Do you see the divide? ETF's aren't anything of the like lolz.
COPPER is gutter !
Making profit is another way to preserve wealth. PMs are dollar insurance. More dollars is also dollar insurance. While metals preserve wealth, paper investments, when done correctly can increase wealth. I assume you don't own stocks either.
You seem to believe that you have to choose physical metals OR paper metal ETFs. That's very narrowminded. I own both, But to each his own; you do it your way and I'll do it my way
When gold and silver move together, it signals the coming end of fiat money.
Well, it is a METALS forum. So, there is that!!
COPPER is gutter !
Well it is a PM ETF thread.
When gold and silver move together, it signals the coming end of fiat money.
Precious Metals Paper! lolz always makes me chuckle.
COPPER is gutter !
OMG. The 'paper' is backed by physical bars. You cannot separate the 2 other then the price difference due to the SLV fees being deducted. Yes, there is a daily minuscule premium/discount with spot prices, but buyers will step up to purchase SLV if the discount gets too large.
As said, the only SLV risk, besides the general physical silver price volatility, which is shared with silver, is the loss of bars. Now, I will never state there are no shenanigans going on with JPM and their vault holdings, but they have pretty deep pockets to cover losses. I would be more concerned that the short list of authorized refiners might produce fraudulent bars. If that was the case and the amount of silver we think is available is drastically less, SLV would drop like a rock but spot would probably go up since there is less silver in the world then we think. JMHO.
For short term speculation SLV is better. The price does not keep up with the metal price in the longer term because of fund expenses.
For long term inflation protection, the physical metal is better. Especially when you can acquire formerly desired coins (e.g. BU Franklin rolls) below melt.
What is the difference? "Stackers" hold silver under the belief that the value of the silver will match or exceed the diminishment in the value of the dollar/inflation. I'm not sure how that is not an investment. If I purchase any security my intent is exactly the same, for it to at least pace inflation from a net perspective.
SLV gets to exactly the same place as owning physical silver. If someone wished to purchase 100K in silver today, the safest, cleanest, fastest, and cheapest method is buying SLV.
You are correct. It's definitely an investment. I just don't like PAPER metal. SO I make fun of it. I'm done. Carry on gents!
COPPER is gutter !
This makes no sense. I can put PM's in my retirement account. Isn't that an investment?
I love actual silver and have a bunch but as we all know it’s heavy as hell if you have a bit. So I actually own both physical and PSLV. This is the Sprott Physical Silver Trust and only holds physical silver, NO Paper. I personally think you can have both.
JMHO,
Mike
MIKE B.
Just don't become the guy who hates gutter.
When gold and silver move together, it signals the coming end of fiat money.