Interesting analysis by blogger Kid Dynamite on the latest Sprott PSLV offerring http://kiddynamitesworld.com/eric-sprott-must-think-silver-is-going-lower/ One point he makes is that there was 0.3920oz per share before the offerring but as Sprott did not buy all the silver, the silver backing the shares is now only 0.3738oz. So Sprott has to buy another 1,858,312oz to bring the ounces per share back up to 0.3920oz otherwise existing holders get screwed (calc is number of shares 101966125 x 0.3920 less ounces already in the trust of 38112409). So Sprott is currently short 1.8 million ounces of silver. His breakeven price depends on how much cash he leaves in the fund. Say he keeps same % cash buffer as before. The calc is $889,768,892 / $898,311,957 = 99.05% or 0.95%, then $1,095,058,167 x 0.95% = $10,403,052. As he has $59,734,563 is cash as per Kid Dynamite's calculation, this means he has $49,331,511 to spend on buying silver (59,734,563 - 10,403,052). $49,331,511 / 1,858,312oz = $26.54. He could hold lower, say $8m buffer (less than he had prior to the offerring) would be the absolute bottom, then (59,734,563 - 8,000,000) / 1,858,312oz = $27.84. So if silver goes any higher than $27.84 Sprott loses money.
Doesn't make sense in view of the second offering. The Sprott spigot will spout a spurting leak. I wonder if he is wetting himself. Note how the PSLV premium has crashed and burned. 'Sprott silver fund (PSLV): Premium to NAV lowered to 2.8% to NAV July 12 2012' It was mid twenties rip off ville not too long ago. Something is afoot!
Beware of the fund manager, crying from his rooftop that the paper silver market is a joke, while down there under the roof he is selling paper silver at a 25% mark-up. - Professor Antal Fekete September 6, 2011 Now Sprott is diluting his own fund towards a pos bottom, even though he promised not to continue to do so, as some have observed. More management fees to come... Who is happy about getting a baby squid bath... The Sprott squid squirt. Put the left tentacle in, and do the soaky pokey.
Well at worst I suppose it could implode leaving the existing investors getting only a % return on their outlay. But Sprott's PSLV has always traded at a significant premium above spot (never fathomed that one) so as to why anyone would buy into the PSLV rather than physical is a bit of a mystery. But I'm sure there's some grubby backroom deals answer to it.
Exactly this. Why would you buy paper from somebody that tells you the paper game is rigged and pay them a premium because the fund is backed by physical? Why not just buy the physical and store it yourself. The other thing that stands out is why is this fund light? They keep saying it's way underpriced and undervalued at it's current spot prices. How does that make any sense to anybody buying PSLV? The price is way too low and you need to buy, but we're not going to buy what we need to cover our fund? :/
Wouldnt they have a responsability to short as a hedge for other funds? Why are they not permitted to short silver like everyone else? Doesnt mean they wont take off the short position if silver turns up. I dont see the contradiction
If you read the Kid Dynamite post he thinks it was because the other traders were (shock) manipulating the price higher to squeeze Sprott, hence he bailed out I suppose hoping for the price to drop rather than getting screwed. That's probably fair but a ballsy gamble. Alternatively, someone emailed saying maybe the ounces haven't been fully updated and all this is just speculation based off wrong numbers. All will be revealed in a few days.
Sounds like we are better off slowly taking physical delivery from reliable SS Sponsors on this site as I have been over the last 6 months. Slowly Slowly catches the monkey.
Your thread heading is misleading. Sprott is not selling silver short, as in shorting it betting that prices are going lower, or trying to force prices lower. The Kiddynamite post simply illustrates that the full order was not placed with the cash raised from the offering. If Sprott was using a limit order to execute within a certain price range, this is no surprise. Sprott is known to buy physical direct instead of on the open market as well. So, it wouldn't be unheard of for the rest of the ounces to be accumulated direct instead. To suggest Sprott is himself a manipulator or misleading in his strategies is irresponsible.
As at this morning PSLV is still sitting on $59m cash and showing no ounces bought http://www.sprottphysicalsilver.com/NetAssetValue.aspx heyimderrick - I'm not saying he is manipulating the market or trying to force prices lower, but the thread heading is a fact, not an opinion. Sprott was given cash by investors subscribing to the new issue of units and he has not bought the silver, therefore he is short the silver price and underinvested in silver. He can use whatever limit orders he wants, that doesn't mean he will get the silver at those prices. If there is some huge political issue over the weekend (eg US bombs Iran) and when we open silver is up $5-$10 then PSLV holders get screwed. If Sprott had bought physical direct (from miners I assume you mean, which I doubt as they rarely hold physical silver in refined form) then that would have shown up in the NAV figures - why were the NAV figures update for all his purchases except this "physical direct"one? I think the Kid interpretation of the figures is highly likely to be true, which just says that Sprott has big balls to bet on the price, although discussing with some offline it seems Sprott himself would not wear any loss, it would just be the PSLV holders who get diluted. Question is, is that what PSLV holders signed up for when they bought PSLV? That Sprott could bet with $59.7m? Suppose the Perth Mint updated its pool allocated page http://www.perthmint.com.au/pool_allocated_bar_listing.aspx and reported a total client Pool Allocated balance of 3,863,336.107oz but only 2,000,000oz of physical silver bars reserved against it and when asked we said "yeah clients gave us money to buy silver but we thought the price was too high so we didn't buy as we think the price will go lower". We would be getting hammered by the blogosphere I'd say. Consider also the ironic type nature of this, Sprott rails against the price being manipulated lower yet instead of continuing to buy the remaining 1.8moz of silver and pushing the price higher (to the net benefit of all PSLV holders) he pulls his purchase taking pressure off the market. 1.8moz is a lot of "buy silver, crash JPM" buying power. On the other hand you can see it as the BBs manipulating the market just to screw with Sprott so he doesn't want to give them the satisfaction so holds back, on the hope he will be able to buy more silver for PSLV holders. Two different takes. Was he right to stop buying or should he have continued to buy? Debate.
Your title is misleading by confusing a trading term that implies Sprott is shorting silver with contracts equivalent to 1.8m ounces, which is not the case. But, looking at the comments from others above, that seems to be what others thought after reading it. The PSLV prospectus doesn't say that the funds will always be fully invested in silver bullion either. In fact, it specifically says that they will retain cash on hand for purchases, liquidations and management fees. What's more, the prospectus says: "Investment in Physical Silver Bullion Only. Except with respect to cash held by the Trust to pay expenses and anticipated redemptions, the Trust expects to own only London Good Delivery physical silver bullion. The Manager intends to invest and hold approximately 97% of the total net assets of the Trust in physical silver bullion in London Good Delivery bar form. The Trust will not invest in silver certificates or other financial instruments that represent silver or that may be exchanged for silver." London Good Delivery bars are available from a select list of refiners, which means The Manager could very realistically go directly to these refiners to make their purchases. The language of the prospectus leads me to believe that the fund does not purchase any of the bullion through a paper exchange like COMEX. Also, buying 1.8m ounces is not enough to crash JPM, and it would actually be more irresponsible for the manager, in my opinion, to continue executing their buy order if there was reason to believe that prices were being manipulated higher at the time. Obviously buying the ounces at a higher price would hurt PSLV holders if silver was to decline following their purchase moreso than holding a slightly higher cash position than normal. The current cash holding is equivalent to about 5.4%, not a considerable difference from the 3% they aim to hold.
I think here, nobody think sprott know a lot of precious metals. And i think he first buy long silver futures and when he lock in the price he put the price in the ipo. Its a very easy thing and i think here a lot of dealers use the same tool to hedge the stock when they think silver is overbought.
Precisely what PeacePeople also highlights. But KidDynamite also pointed out months/year ago that Sprott is a "salesman"...
