Silver Shorts Reported
(And what to do about it
Silver Stock Report
Jason Hommel
June 17th, 2008
Antal Fekete responded again, and I was going to take the time to continue our debate on the dangers and harm of debt and usury and whether the silver shorts are naked short, but there is too much to report about short selling to get into the theory of that today. Also, there is an easy and practical solution that we can do to fix things. Buy physical silver, take delivery, and store it yourself! And contact Jim Sinclair! If you are interested in my continuing discussion with Dr. Fekete, please let me know.
Ted Butler reveals the scam of short selling the silver ETF. Ted came out with a blockbuster report on how the iShares Silver ETF is allowed to be naked shorted, which is an entirely new form of short selling silver. http://www.investmentrarities.com/06-16-08.html
That the silver ETF can be shorted is revolting. You can see the current short sales position here: Nasdaq.com
Currently, with 256,000 shares sold short, that's worth 2.5 million ounces of silver.
A lot of people have trouble understanding the concept of a short sale. The way it's supposed to work is that a person will borrow shares from a broker, who is holding shares for clients who have agreed to let their broker lend out their shares. If you use a margin account, you have likely already agreed to let your broker borrow and lend out your shares. But it's not always done that way. Many times, the shares are sold short without borrowing, and in that case, the short position is said to be a naked short sale, as distinguished from a real short sale. But either way, this creates extra shares on the market which can put a downward pressure on the underlying security, as two or more people will think they own the same share. In come cases companies have reported proxy votes of up to 80 million votes when there are only 60 million shares outstanding, which creates problems.
So, since the silver ETF can be shorted, I'll explain it like this: Imagine a silver bank that operated with 100% integrity, with 100% precious metal backing of all the accounts for all clients. But then, they installed a back door in the vault, and let other people walk out with the bullion and replace it with a piece of paper that says "IOU".
That's not exactly the same, since no physical silver leaves the custodian when a short sale is made, but new customer accounts are made, and no silver is deposited when new investors buy the newly shorted shares. So it turns the silver ETF into a form of fractional reserve banking, all the same. So, to allow the silver ETF to be sold short circumvents the entire purpose of the ETF in the first place, unless the purpose all along was to create another way that silver could be sold short.
If you own shares of the silver ETF, I suggest you slowly sell your iShares for real silver. Don't do it all at once, because silver prices could move up 5-10% per day while you are waiting for your cash to clear and before you can find or get delivery of real silver.
There is another story I must share: the Hunts have sold Hunt Petroleum for $4.2 billion. There is speculation that they may buy silver again, and it would be poetic justice if they did it right this time, with no debt and no leverage. If they did, they could increase their fortune by ten times or more, and grow their wealth to be comparable to Bill Gates and Warren Buffett, or even surpass that. http://arabianmoney.net/2008/06/12/will-the-hunts-buy-silver-again-after-selling-hunt-petroleum/
It is my belief that the reason the Hunts were blamed in the silver price run up to $50/oz. in 1980 is that their leveraged positions made them a target, and left them vulnerable, both financially and politically. But if they buy real silver, directly from refineries, before it ever gets to the COMEX, and pay for it in full, then they will have the full protection that silver offers. Their wealth would be anonymous, hidden, and not confiscable.
My advice to the Hunts is to buy real silver as fast as possible, without moving up the price more than 5-10% a week. They should send agents to the Penoles refinery in Mexico, or over to other refineries Peru, the top two silver producing nations in the world. Or event to Poland, another top silver producing nation. Or perhaps they should go to China. They should buy directly from the refineries listed here:
THE GOOD DELIVERY LIST OF ACCEPTABLE REFINERS: SILVER http://www.lbma.org.uk/good_delivery_silver.html
Another thing the Hunts should consider this time is minting silver coinage, as close as possible to the cost. They should use their pool of silver, as a real pool, to help fill customer demand to drive the price up. The last time, they tried to issue silver bonds, but that's a failed and failing strategy. If they sell real silver, it will continue to put pressure on all who have sold short phantom silver that does not exist. I've considered doing that myself, but my own capitalization is barely sufficient, and I lack the needed time and help, and I'd rather focus on writing and investing in mining and exploration stocks for now.
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Again, the best way to protect your wealth, and make sure it cannot be borrowed and sold to both risk the integrity of your wealth, and hurt the value of your wealth, is to buy physical silver, and take delivery. I provide instructions on how to do that at my first link below, "find your local coin shop" dot com.
Jason Hommel
www.silverstockreport.com
www.miningpedia.com
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