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Sprott Physical Silver Trust ET (PSLV) Message Board

  • petechamps21 petechamps21 Feb 3, 2012 3:43 PM Flag

    Ted Butler's Reply

    "I’m not interested in debating anonymous posters, particularly when they are not familiar with the facts. But this guy doesn’t know what he is talking about.

    Short sales in PSLV, because it is a closed-ended fund, will have an impact on its premium to NAV, but not necessarily on the price of silver. SLV, on the other hand, is open-ended and ten times the size of PSLV and the largest stockpile of silver in the world. As such, it is naïve to overlook SLV’s impact on the price of silver.

    More to the point, the lender of SLV shares is not relinquishing ownership of his shares when they are lent because he is not the one doing the selling, the short seller is selling. I agree that when shares are sold, the new buyer gains ownership and the seller loses it. But in a short sale the short seller never had ownership to begin with; all he did was sell what belonged to someone else. The original owner, whose shares were borrowed, still retains ownership. That is reflected in the brokerage account statement of the original owner. When shares are borrowed from the real owner most times that owner doesn’t even know the shares were borrowed because nothing is reflected on his brokerage account statement. That’s why it’s important to hold shares in your own name, not street name, so they can’t be lent out.

    The problem is clear – in an SLV short sale, two owners exist for every shorted share; the original owner whose shares were borrowed and the new owner who bought from the short seller. Two owners have simultaneous claim to the same original share and the silver backing it. The only problem is that there are two claims on the same silver. If someone refuses to see this, I can’t help him.

    Ted"

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    • TF Metals spells it out for those who have trouble getting it.

      "I asked Ted about this when we did a podcast. His main thesis is that, by shorting, one creates two beneficial owners of the same shares.
      Guy A owns 100 SLV
      Bank A borrows GuyA's shares and sells them short to:
      Guy B who now also is long the same 100 shares that Guy A is long.
      So, now, what happens if both A and B move to redeem the shares? Must Bank A come up with the 100 ounces of silver at that time? If Bank A is only subject to supplying the metal if and when a redemption is requested, the effect is similar to the naked shorting of a Comex contract where the seller (bank) is never forced to deliver, either.
      You see, I think he has a point. Borrowing and shorting MSFT is not the same as borrowing and shorting an ETF which purports to have a 100% physical backing."

    • 1/3 of the SLV short was covered at the end of January. That was quick! The last 2 COT reports showed a lot of new commercial shorting on the COMEX. Is there any connection?

    • For the too dense to comprehend. One more time...

      "But in a short sale the short seller never had ownership to begin with; all he did was sell what belonged to someone else. The original owner, whose shares were borrowed, still retains ownership. That is reflected in the brokerage account statement of the original owner. When shares are borrowed from the real owner most times that owner doesn’t even know the shares were borrowed because nothing is reflected on his brokerage account statement."

      The shares are being shorted by the custodian, in lieu of buying silver, not shareholders.

      • 2 Replies to petechamps21
      • But in a short sale the short seller never had ownership to begin with.

        BUMP,... you can't hold it down forever.

      • I just felt the urge to interject since te topic is focused on short selling. I think short selling altogether should be made illegal, like it was many years ago. It's like this. I cannot hop in my neighbor's car, drive it around all day, make money with it and then put it back in his garage at the end of the day. I would go to jail. Short selling is the exact same thing. Can a shareholder instruct their brokerage to prevent anyone from borrowing their share with the express intent to short sell?

    • Butler's reply as to what the "problem" is, is factually incorrect. Undeniably, factually false.

      "Two owners have simultaneous claim to the same original share and the silver backing it. The only problem is that there are two claims on the same silver"

      false. that's what Silverbars spent 8 messages trying to explain to you in the other thread titled "Paper PSLV?"

      If you lend out your SLV shares, you forfeit your claim to the silver backing it. The borrower inherits that claim, and when he shorts the shares in the market, he transfers that claim to the new buyer.

      If you want your claim back, you can recall your stock loan, at which point the short will either 1) buy back his short 2) borrow the shares from someone else or 3) create new shares of SLV by delivering bullion to the Trust.

      In any case, it doesn't matter how many times Ted Butler repeats falsehoods - they don't get any truer by repetition.

      If Butler refuses to see this, I can’t help him.

    • The problem is clear – in a PSLV short sale, two owners exist for every shorted share; the original owner whose shares were borrowed and the new owner who bought from the short seller. Two owners have simultaneous claim to the same original share and the silver backing it. The only problem is that there are two claims on the same silver.

      So is PSLV paper silver?

      • 1 Reply to SoFlaStocks
      • Well then you tell me, is there a difference between doubling up the paper (flawed hypothesis) on the physical verses 20X the amount of paper to physical?

        You implied having twice the paper to physical is a problem so what happens when it is more than 20X?

        Your hypothesis is also flawed because even though a share may be borrowed, only one person can control it (trade it) at any time.

 
PSLV
6.88-0.18(-2.55%)Sep 30 4:00 PMEDT

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