RANTING ANDY – In fact ,this RANT was inspired by the conversations I had with investors yesterday, but particularly one whom owns both GLD and SLV. When I mentioned the lawsuits against JPM for naked shorting silver, he had no idea what I was talking about, but of course gave the smug, apologist answer that “the shorting is not for JPM’s account, but their customers.” Yes, their “customers” have for ten years been massively shorting silver into the strongest bull market anywhere, losing of hundreds of millions if not billions in the process, yet keep coming back for more. RIIIIIGGGHHHTTT.
Better yet, he told me he “trusts JP Morgan” – and in fact owns JPM stock as well! Perhaps he’s not aware that many others do not trust JPM as he does…
Nearly all the people I speak to in the “real world” (as opposed to the shadow world of “Planet GATA”) believe GLD and SLV are the only ways to own gold and silver, in many ways associating them with ACTUAL Precious Metals. Any attempts to reference their shady trading activities or swiss-cheese prospectuses are shunned, much less the conflicts of interest involved in its custodians being notorious gold and silver short sellers, with absolutely ZERO metal auditing requirements. It feels like I’m speaking a foreign language when trying to explain the potential (and highly likely) frauds which surround these evil securities, which were created, in my view, solely to generate PAPER gold and silver shorting tools for the Cartel.
For those that have an interest in actual DUE DILIGENCE, the two links below discuss all you need to know about the potential fraud in GLD (and SLV, which has essentially the same rules). The first was written in late 2004 by one of the world’s true authorities on PHYSICAL gold and silver, James Turk, whom operates the LEGITIMATE online bank www.goldmoney.com.
The second, by my friend “Dave from Denver,” also of GATA fame, is a shorter synopsis of GLD’s hazards, penned in early 2009. Please read these two articles carefully, as understanding the loopholes in these fraudulent securities could mean the difference between PROTECTING your wealth and LOSING IT ALL.
And for those that don’t read these articles, the four main issues are as follows:
The gold in GLD are NEVER required to be audited.
There are ZERO prohibitions against encumbering said gold in the trust (i.e. leasing it out to short-sellers).
The fund custodian (HSBC) is allowed to use “subcustodians” to store the gold, whom have no obligation to give proof that they hold such gold.
The fund custodians (HSBC for GLD and JP Morgan for SLV) are the subject of numerous lawsuits alleging naked shorting of silver (http://www.youtube.com/watch?v=H8ok4fqblQ8), which appear highly likely of being successful given the evidence submitted by whistleblower Andrew McGuire (https://babybulltwits.wordpress.com/2011/08/08/ranting-andy-demystifying-andrew-mcguire/) and OFFICIAL comments from CFTC Commissioner Bart Chilton himself! (http://www.bloomberg.com/news/2010-10-26/silver-market-faced-fraudulent-efforts-to-control-price-chilton-says.html).
As for GLD and SLV, I sense most people won’t realize they are just PAPER DERIVATIVES until it is too late. I’d bet 98% of Americans won’t realize that PHYSICAL GOLD and SILVER are the only REAL MONEY until it is too late, and likewise 90% of those invested in GLD and SLV to lose everything before realizing warnings such as these should have been heeded.
Thus, my FIRST piece of advice is to SELL ANY AND ALL SLV AND GLD, IMMEDIATELY! And for that matter, stay away from IAU, SGOL, and any of the other PM ETFs (especially the “double-long” and “double-short” ETF derivative monsters).
Secondly, how should you invest in PHYSICAL gold if you are looking to protect purchasing power from the deleterious effects of accelerating, and potentially hyper-inflation?
Here are my answers, in no particular order:
The aforementioned www.goldmoney.com. Goldmoney.com stores your gold in OFFSHORE, ALLOCATED and AUDITED gold accounts, to be held at depositories of your choice in either London, Zurich, or Hong Kong (DO NOT choose London!). The pro of this method is you do not need to worry about storage or security, and the con is you must TRUST that the operators of those vaults will not in some way compromise your gold or silver. Goldmoney.com is run by one of the true leaders of the movement to own gold and silver, James Turk, so be comforted by the fact that his stellar reputation stands behind it.
The five closed-end gold and silver bullion funds operated out of Canada, three by the Spicer family and two by Sprott Securities.
Phillip Spicer created the first of these funds, the Central Fund of Canada (CEF), in 1961, which has been managed by his son, Stefan, for the past 14 years. Phillip, at age 73 is still Chairman, and Stefan, a friend of mine, is as honorable a man as you’ll come across. I trust him fully, and have thus owned his funds and recommended them to countless others. In fact, until creation of the Sprott closed-end bullion trusts roughly a year or two ago, none other than John Embry was the Chairman of the Central Gold Trust (GTU), one of the other two Spicer bullion funds. John Embry is well known throughout Canada as a leader in the Precious Metals industry, and he too is a personal friend in whom I’d trust with every cent of my capital.
i. CEF, the largest of the five funds, holds essentially half gold and half silver, with a market cap of $6 billion and daily trading volume of 2.2 million shares. Throughout the decade-long bull Precious Metals bull market, I’d estimate It has historically traded at an average premium to Net Asset Value (NAV) of roughly 5%-10%, but today trades at the bargain price of an actual 1.5% DISCOUNT to NAV, in my view due to gold Cartel naked shorting aimed at preventing it from doing further equity offerings (the proceeds of which are used to purchase additional gold and silver). Irrespective of such activities, CEF is perfect for institutional accounts due to its large size and liquidity. Moreover, given the aberrationally low discount valuation, the stock has upside from BOTH the prices of gold and silver AND increased premiums as REAL supply becomes increasingly scarce. CEF and the other Spicer funds are ALLOCATED, AUDITED, and STORED IN CANADA in LEVEL 10 UNDERGROUND VAULTS.
ii. The other two Spicer funds are the Central Gold Trust (GTU), which holds 100% gold bullion, and the Silver Bullion Trust (SVRZF), which holds 100% silver bullion. These are newer funds, and are thus smaller, but do a fantastic job preserving wealth and are also currently trading at the low-end of their historic NAV trading ranges as well. GTU has a market cap of $1.1 billion and trades at a 4% premium to NAV, while SVRZF has a market cap of $140 million and trades at a 10% premium. By the way, SVRZF is fully eligible to be AMEX listed (requires a $75 million market cap), so I would expect this to happen sometime soon.
The other two funds are administered by Sprott Securities, the brainchild of Eric Sprott, the reigning “General of the Global Precious Metals Army”, whom has none other than the aforementioned John Embry as his Chief Investment Strategist. They are roughly a year old, with the first, Sprott Physical Gold Trust (PHYS), holding 100% gold bullion and the second, Sprott Physical Silver Trust (PSLV), holding 100% silver bullion. Like the Spicer funds, the gold and silver behind PHYS and PSLV are held in secure vaults (in this case within the Royal Canadian Mint), ALLOCATED, and AUDITED. However, unlike CEF, GTU, and SVRZF, the gold and silver in these funds are DELIVERABLE UPON DEMAND under certain predetermined conditions. PHYS has a current market cap of $2.2 billion and trades at a 2% premium to NAV, while PSLV has a $1.1 billion market cap but trades at a 20% premium. The large premium, which has held up remarkably while the Cartel mercilessly attacked the CEF premiums, is perhaps the best possible signal that demand for REAL, PHYSICAL silver is sky high.
Actual, PHYSICAL gold and silver bullion (preferably one ounce coins rather than bars or fractionals, such as ½ ounces, ¼ ounces, etc., as fractionals have much higher premiums, and NOT collectible, “proof”, or “authenticated” coins)
Owning gold and silver are as natural as, per the iconic singer Sade, “the way we came to be.” A generation’s worth of propaganda has brainwashed Americans to believe DOLLARS are money, when in fact DOLLARS are just one of hundreds of unbacked, depreciating fiat currencies, ALL of which have collapsed throughout the centuries. Supported by 5,000 years of history, only GOLD and SILVER are real MONEY, and once one gets over that mental hump, he NEVER turns back. Gold and silver may not be able to pay for groceries (a common concern I hear), but are among the most liquid assets in the world. Moreover, don’t be surprised if one day soon, DOLLARS cannot be used to buy groceries!
i. When buying gold and silver, there are numerous outlets to do so. Obviously the safest and most secure route is via your local coin shop, however coin shops typically have relatively small supplies, and generally only accept cash or money orders at banks that are OPEN when you walk in to confirm their funds. In other words, if you wish to buy in size, you need to go to more “institutional” sellers. Here are some of the names I trust most, in no specific order.
Miles Franklin (www.milesfranklin.com) – based in Minnesota, is one of the largest coin dealers in America. Founder David Schechtman and his son, Andrew, are as honorable as any people in the business, and like myself strive to educate their clients about PROTECTING THEMSELVES via their wonderful newsletter.
DBS Coins (www.dbscoins.com) – head salesman David lives in California, and their main warehouse is outside Boston. Countless successful transactions and super-prompt delivery.
JH Mint (www.jhmint.com) and Mom’s Silver Shop (www.momssilvershop.com) – Both based in California, JH Mint is operated by none other than Jason Hommel, one of the top silver experts on earth, while Mom’s Silver Shop is operated by, take a guess, Jason’s mother. Jason has exquisite knowledge of the physical metals market, and unparalleled integrity.
Sprott Money (www.sprottmoney.com) – Headquartered in Canada and also run by the Sprott group of companies. I have not used Sprott Money yet, but would not hesitate to do so based on the firm’s reputation in its other Precious Metal businesses.
APMEX (www.apmex.com) – Headquartered in Oklahoma, APMEX is the largest bullion dealer in America, and provides excellent service albeit a bit more impersonal due to the firm’s large size.
Long-term readers know I have espoused the virtues of PHYSICAL gold and silver ownership for years, while simultaneously panning the fraudulent ETFs that are nothing more than empty promises of gold and silver backing, in my VERY, VERY STRONG OPINION. However, I wanted to lay out all these options in one article to help those new to the game (such as those watching this month’s climb to record levels), as well as to reinforce the importance, and surprising EASE, of deciding to switch from DOLLARS to GOLD and SILVER.
Additional benefits of PHYSICAL ownership are the gradual mindset change of viewing GOLD and SILVER as MONEY, and thus one’s NET WORTH in terms of OUNCES, not dollars (as much of the Eastern World does). Times like the last two days are much more bearable when you realize your bullion has not tangibly CHANGED at all, as opposed to brokerage accounts that drop precipitously.
Additionally, bullion ownership guides you toward spending more time RESEARCHING what is REALLY going on in the world, as opposed to what the talking heads in Washington, on Wall Street, and throughout the media are saying.
And finally, it predisposes you to LEARN more about mining history and the mining process, so that you will be more prepared to make investments in the WORLD’S CHEAPEST SECURITIES, gold and silver mining stocks!