Silver-Backer Sprott Still Believes. Deeply.

[Serpo]

By Carolyn Cui

Everett

After silver suffered its worst one-week drubbing in three decades, one of the biggest silver bulls gave a pep talk to hundreds of followers on Monday.

“Silver will be a currency just like gold. It’s logical to expect silver prices to go much higher,” said Eric Sprott, chief executive officer of Sprott Asset Management LP, which oversees a $1-billion silver fund that was $327 million larger at the beginning of last week.

As for the recent plunge, Mr. Sprott pointed at speculative short-sellers as the prime culprit, eliciting applause from the crowd of nervous believers. Silver skidded 27% last week, but poor man’s gold leaped 5.2% today, underscoring its rodeo-like allure.

Mr. Sprott, a big advocate for precious metals, trotted out familiar themes to back up his points: the Federal Reserve’s loose monetary policies, relentless bank failures and the fragile housing market.

Instead of U.S. dollars and other currencies, which are “questionable currencies backed with nothing,” people should buy precious metals, he said in a speech at the Hard Assets Investment Conference at the New York Marriott.

Silver kicked off its nasty week by falling $6 an ounce in 13 minutes last Sunday night, when both U.K. and Chinese markets were closed for national holidays. “But I was awake, throwing my guts up,” he said.

It’s been quite a week for silver — and for Mr. Sprott’s fund. Its value stood at $1.3 billion on April 20, slid to $922 million on May 6 and climbed back above $1 billion today as silver rebounded.

“If this was not the script for somebody wanting silver down, I don’t know what is,” he said, stressing his short-seller meme and alluding to the big moves on light volume at the start of the week. Trading activities in silver’s futures market and exchange-traded funds have well exceeded the amount of silver in the physical market, he added.

Mr. Sprott also addressed one of the most contentious questions between bulls and bears in the silver market: how much above-ground silver is there? Many bulls think all the silver being produced has been consumed and disappeared. Therefore, silver is facing a shortage.

However, mainstream commodities analysts think that some of the silver used in photographic films or batteries has been recycled and come back into the market as “secondary supply.” In other words, there’s more silver than bulls argue. Globally, total bullion stocks should at least be 1.5 billion ounces, including silver held by exchange-traded funds and private holdings in the form of coins and bars, according to GFMS Ltd. a London-based metals consultancy.

“Why shouldn’t silver appreciate more than gold if there’s less silver around,” asked someone in the audience.

“Do you want to come up to the stage?” Mr. Sprott quipped. “If gold goes to $3,200, silver should be at $200.”

With gold at $1500 and silver at $37, that would mean a bit more than a double for gold and more than a quintuple for silver.

http://blogs.wsj.com/marketbeat/2011/05/09/silver-backer-sprott-still-believes-deeply/

[Serpo]

20110507 - Bob Chapman - Explains Silver Take Down


http://www.youtube.com/watch?v=u6JoFsDwTv0

[bellevuebully]

^^^Re: Serpo's post on Chapman.

If I played futures through a brokerage who pulled that stunt, and I could ride out the margin requirements, I'd pony up, take delivery, then go into the office and have the branch manager personally close out my account. I'd do it even if I had contracts in another commodity.

People should be walking to send these brokerages a message that they exist because of their clients, not because of JPMS or HSBC.

[optionT]

Thanks Serpo, you always post great news on the metals!

Keep it up!

[Serpo]

Thanks ,one thing I have noticed is that 321 gold web site has never had a positive review of silver as far as I know.Its always bad news for silver over there, and fact is I dont think Ill be visitng there web site again.I dont mind bearish articles on silver when deserved but at their web site it seems to run in a pattern.

[Neuro]

I don't trust Sprott. He claims that SLV has the silver. Further something funny was going on with him selling shares in his own fund at the peak of the silver price a couple of weeks ago...

[bellevuebully]

I don't trust Sprott. He claims that SLV has the silver. Further something funny was going on with him selling shares in his own fund at the peak of the silver price a couple of weeks ago...


Nothing suspicious there Neuro. Smart move, and likely one that will pay his clients handsomely. By historic standards, silver has ran along quite nicely and it's doubtful we will see a double from here on the physical metal. However, the mining equities have seriously lagged. Not because of lack of earnings, but more likely because they are being shorted by the hedgies against their long positions in the futures. Take a look at some of the earnings of these guys......they are printing money.

Endeavour 1st quarter made 14million profit. Net cost to mine silver per ounce was $4.95 cents and sold at an average of $33.00. Reserves are increasing, production is increasing, commodity price is increasing. Do the math going forward.

Now 14 million may not sound large in todays business, but you need to realize the size of these businesses compared to the Dow 30. They are minute. I believe the # I heard was that the market cap of all of the gold and silver mines in the world is around the same market cap as Starbucks. Barrick made a billion dollars in profit first quarter.

The bottom line is that these miners are at extremely low valuations and it is only a matter of time before smart money moves in and starts to help the stock prices catch up. I have a feeling within 18 months you are going to hear a lot more equity talk around here, where historically there has been very little.

Sprott only sold to chase value. Smart move imo.

edit...
One other point on that Neuro. His fund is set up so that you can actually take delivery of your holdings should you chose, and should you have a set holding size. It would seem rather risky to have a fund set up like that, and then play games with inventory.

[Neuro]

Yes probably but then he said he didn't...???

[Serpo]

Yes $1.3 billion of silver and then looking at that chart before it dropped Sprott sold some and said he didnt mean it basically...... ;)

[bellevuebully]

Yes probably but then he said he didn't...???


I thought it was a pretty unequivical statement that every dollar of the sale went into related equities. What instance are you referring to?



edit grammer

[gunDriller]

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/5/3_Eric_Sprott_files/Eric%20Sprott%205%3A3%3A2011.mp3

Sprott was quite specific, he didn't pull any money out of the silver sector.

he did buy & sell within the sector, e.g. selling physical & buying miners.

of course, someone with Sprott's experience could probably look at all the charts and determine that the downtick from $50 to $40 was high-probability & that it was wise to book some profits to get some dry powder to increase holdings.

[bellevuebully]

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/5/3_Eric_Sprott_files/Eric%20Sprott%205%3A3%3A2011.mp3

Sprott was quite specific, he didn't pull any money out of the silver sector.

he did buy & sell within the sector, e.g. selling physical & buying miners.

of course, someone with Sprott's experience could probably look at all the charts and determine that the downtick from $50 to $40 was high-probability & that it was wise to book some profits to get some dry powder to increase holdings.


Just a smart move. These friggn miners should be moving 1.5 to 2 times the moves in silver. I owned Pan American at 8 bucks when silver was at 6. When silver broke 20 the first time, the market put a $40 dollar price tag on it. Granted, that may have been an overshoot, but the highest it ever got when silver hit 49 was 38. It should be at $55-$60 conservatively. And that is just one example.

The market just has not gotten it's head around the fact that silver is high, and going higher. Why would they? They didn't even know what silver was until last October.

There is going to be big money made when reality sets in. Imo, they are already 50% undervalued. And that's at $37. Jmo, but I'm buying every chance I get.

[Neuro]

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/5/3_Eric_Sprott_files/Eric%20Sprott%205%3A3%3A2011.mp3

Sprott was quite specific, he didn't pull any money out of the silver sector.

he did buy & sell within the sector, e.g. selling physical & buying miners.

of course, someone with Sprott's experience could probably look at all the charts and determine that the downtick from $50 to $40 was high-probability & that it was wise to book some profits to get some dry powder to increase holdings.
Miners however, have been known to hedge their future production by short selling. I don't know if this is true in this case, but it is not totally unlikely that Sprott buys a miner, that decides to lock in their profits at let's say $45/oz. In that case Mr Sprott is actively engaged in supressing the silver price, but on the surface it looks entirely kosher...

[bellevuebully]

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/5/3_Eric_Sprott_files/Eric%20Sprott%205%3A3%3A2011.mp3

Sprott was quite specific, he didn't pull any money out of the silver sector.

he did buy & sell within the sector, e.g. selling physical & buying miners.

of course, someone with Sprott's experience could probably look at all the charts and determine that the downtick from $50 to $40 was high-probability & that it was wise to book some profits to get some dry powder to increase holdings.
Miners however, have been known to hedge their future production by short selling. I don't know if this is true in this case, but it is not totally unlikely that Sprott buys a miner, that decides to lock in their profits at let's say $45/oz. In that case Mr Sprott is actively engaged in supressing the silver price, but on the surface it looks entirely kosher...


Neuro...you are missing one fundemental point. It's obvious you trust the physical and for good reason. But the fact remains that hedging is not something that is done behind closed doors. When a miner hedges production, the market decides if it is shortsighted or if it is prudent, and punishes/rewards them accordingly.

There are also indexes that seperate the two...the xau for the hedged and the hui for the unhedged. I would have no problem today buying a miner that was hedged to $80 dollar silver even if I thought that silver was going to $150. It takes the risk out of an inherantly risky asset and gives an investor an option to own something valuable with some predictable future performance. Likewise, if I owned a miner today that hedged 2 years worth of production at current prices, I sell them in a heartbeat. I might even put my ask a little low just to spite them, haha. ;D

[bellevuebully]

As a matter of fact I'm gonna hedge.

Silver's going up.

[bellevuebully]

Silver's going down.

;D ;D

[Neuro]

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/5/3_Eric_Sprott_files/Eric%20Sprott%205%3A3%3A2011.mp3

Sprott was quite specific, he didn't pull any money out of the silver sector.

he did buy & sell within the sector, e.g. selling physical & buying miners.

of course, someone with Sprott's experience could probably look at all the charts and determine that the downtick from $50 to $40 was high-probability & that it was wise to book some profits to get some dry
powder to increase holdings.
Miners however, have been known to hedge their future production by short selling. I don't know if this is true in this case, but it is not totally unlikely that Sprott buys a miner, that decides to lock in their profits at let's say $45/oz. In that case Mr Sprott is actively engaged in supressing the silver price, but on the surface it looks entirely kosher...


Neuro...you are missing one fundemental point. It's obvious you trust the physical and for good reason. But the fact remains that hedging is not something that is done behind closed doors. When a miner hedges production, the market decides if it is shortsighted or if it is prudent, and punishes/rewards them accordingly.

There are also indexes that seperate the two...the xau for the hedged and the hui for the unhedged. I
would have no problem today buying a miner that was hedged to $80 dollar silver even if I thought that silver was going to $150. It takes the risk out of an inherantly risky asset and gives an investor an option to own something valuable with some predictable future performance. Likewise, if I owned a miner today that hedged 2 years worth of production at current prices, I sell them in a heartbeat. I might even put my ask a little low just to spite them, haha. ;D
I know about it, Barrick was punished severely at the stock market a couple of years ago for holding a portfolio where they have sold their future production several years into the future at way less than the spot price, as part of their gold price suppression scheme, together with their banker buddies... What I am saying is that what would stop Sprott from selling shares of his Sprott fund, which was overvalued at the time, go in and buy a major share in an undervalued silver miner, get a board position, and convince the board that, from inside knowledge he knows that there will be a severe smackdown this May June, probably not all that difficult since he is THE SILVER GURU nowadays, and that they needed to lock in the next years production at $48 or so, whatever the price was at the time. Most probably as the price goes down to $25 or so they buy their commitment back, and they have made probably a billion or two from doing it, he gets a hundred million in bonus. Which he buys back shares in his Sprott fund for.

Now selling shares in his Sprott fund forces his Sprott fund to sell Silver = market negative . Further hedging the price means that the mining company sells futures in silver = market negative... Who is to say that it isn't a Sprott effect that the market went down from $48 to $42 last Sunday in 13 minutes? Yet he can come off clean as a whistle claiming that he has more physical ounces than ever. I am not saying he did this, because I have no evidence either way, but if Sprott is really smart, that is exactly what he should have done! ;D

[bellevuebully]

I know about it, Barrick was punished severely at the stock market a couple of years ago for holding a portfolio where they have sold their future production several years into the future at way less than the spot price, as part of their gold price suppression scheme, together with their banker buddies... What I am saying is that what would stop Sprott from selling shares of his Sprott fund, which was overvalued at the time, go in and buy a major share in an undervalued silver miner, get a board position, and convince the board that, from inside knowledge he knows that there will be a severe smackdown this May June, probably not all that difficult since he is THE SILVER GURU nowadays, and that they needed to lock in the next years production at $48 or so, whatever the price was at the time. Most probably as the price goes down to $25 or so they buy their commitment back, and they have made probably a billion or two from doing it, he gets a hundred million in bonus. Which he buys back shares in his Sprott fund for.

Now selling shares in his Sprott fund forces his Sprott fund to sell Silver = market negative . Further hedging the price means that the mining company sells futures in silver = market negative... Who is to say that it isn't a Sprott effect that the market went down from $48 to $42 last Sunday in 13 minutes? Yet he can come off clean as a whistle claiming that he has more physical ounces than ever. I am not saying he did this, because I have no evidence either way, but if Sprott is really smart, that is exactly what he should have done! ;D


Haha. You should go into banking.

Nothing is impossible, but Sprott is pretty high profile these days. He has massively bullish fundementals on his side. Why would he risk his capital and his name to pull something like that when all he has to do is to keep doing what he is doing to make a fortune beyond most peoples imaginations. I don't buy a car that is on sale for a good deal with the hope to repair it and make $500 profit when I can go and work an overtime shift or two and make the same money, you know what I saying?

Not to mention the risk and completely unknowability if the market truely will go up or down. Now if he could forcast the future, that's different, but he can't.

I think in the recents downturn, Sprott is one of the least likely culprits. There are many others, cough, cough (jpm), cough (hsbc), ehem, that I would pay much more tribute to having affected the paper price. Just my opinion. You may be right. But I have made a note to self....Neuro definitely needs to be watched! lol. ;D

[Neuro]

Well, I have sold about 450 oz of silver, so maybe I am a bigger culprit than Sprott to the recent downfall ;D. But he has basically protected his good name by buying silver miners instead of his fund... And he supposedly has more ounces to his name than before, but most of them hedged at above $45 and still in the ground...

The thing though that really makes me doubt his sincerity, is the fact that he claims that SLV has some 350 million oz's of silver, the majority they supposedly took off the market in 2008... I think he is a liar!

[osoab]

Well, I have sold about 450 oz of silver, so maybe I am a bigger culprit than Sprott to the recent downfall ;D. But he has basically protected his good name by buying silver miners instead of his fund... And he supposedly has more ounces to his name than before, but most of them hedged at above $45 and still in the ground...

The thing though that really makes me doubt his sincerity, is the fact that he claims that SLV has some 350 million oz's of silver, the majority they supposedly took off the market in 2008... I think he is a liar!


Neuro, I think you have made some good points. Could you point me into some of Sprott's interviews/op-eds where he states SLV has the silver? I don't recollect him defending SLV. I thought the whole reason behind PSLV is that it wasn't SLV.

[Neuro]

Osoab, I saw it about a month ago, here, he was giving a speach to silver investors, and he showed what the buyers were, and how much they held in supposed physical ounces, SLV was on his list, the idea was that the biggest funds allready had all above ground silver bullion, so price could not go anyway but up.

That is what I remember...

[bellevuebully]

As a matter of fact I'm gonna hedge.

Silver's going up.






Silver's going down.

;D ;D


Actually, as far as investments go, I don't really understand hedging. I can see how it works for miners and producers of goods, but investors, not really.

You always hear of funds hedging the opposite of their primary position. I don't really get that. Does anyone have any good insight into this?

I mean, when I bet, I bet to win, not to lose against myself. ???

tia

[Mouse]

You hedge within a range, which is your appetite for destruction. If you are comfortable risking x amount on a move in your portfolio, you hedge based upon that metric. Most spec hedging is to lock a profit on inside or insight information. If you are a producer, you hedge within your appetite to lock price. If you are a spec you have an idea about where the market is going and you spend some money to hedge your downside risk, lock existing profits, and keep open to participate in upside potential.

Value-at-risk or VAR is the most commonly used metric which weighs a portfolio statistically against potential shocks to price and provides a "within 95% (or higher) confidence, the most that this portfolio will lose in a day is X amount". That is what most of the risk managers are running on, and it is a questionable metric. Many risk managers run more detailed VAR as well as Capital at Risk, Credit VaR (counterparty risk) and other metrics that are all essentially statistical based models that look at the portfolio and apply various scenarios on price, correlation and cross-correlation across commodities and all kinds of other fun stuff that I won't go into here (the greeks and etc.). The "tail risk" is that an event occurs that breaks your confidence interval and you exceed your VAR, at which point you will have a very concerned risk manager calling a meeting first thing as soon as the runs print out.

For individual investors that don't have fancy trading systems like Openlink, or Triplepoint and etc., the hedging game is basically buying collars around price ranges so that you can lock into a profit and/or limit losses. It is well beyond the scope and capability of most individual J6P investors.

[Ponce]

Glad that I am not a silver "expert" like you guys or I would be changing my shorts every ten minutes, all that I care to know is that the coat and ties are plying a game that they cannot win.....I only ride the silver train going on the right direction and it is a fun ride ;D......."A bump on the road does not mean the end of the road"... Ponce

If you are nervous or scared of what is going on you are then playing the wrong game or playing it the wrong way.

[Serpo]

http://www.youtube.com/watch?v=QX-9U86XFJI&feature=player_embedded