Thursday, December 1, 2011

Q&A With The Doc: Is PSLV Safe From Confiscation, or Should I Hold My Own Phyzz?

Dr. Mark writes:

Doc, I have been wondering if my PSLV is safe from confiscation by TPTB? I have been seeing articles on eligible to registered lately in the vaults especially the JP Morgan vault. December is a big delivery month as Harvey organ says. My concern is whether PLSV is stored in the JP Morgan vault in New York (heard it was), and if so, is it eligible status and can it now be counted as JP Morgan registered for delivery via Comex to a contract holder? And would Eric Sprott really truly be able to do much of anything about it after it is delivered?

It looks like if you hold segregated gold or silver in a large commercial vault you could loose everything even if you are Eric Sprott and it is supposedly segregated. This could consolidate the large commercials' PM holdings with your silver, and then you would have to spend years and millions in trying to get it back legally all while someone like JP Morgan gets to not only make money on your silver but further manipulate the market price of the PM.

Sorry for being so long winded, but if it is on my mind then it certainly is on others and will need to eventually be addressed.
Dr. Mark-DC

Dr. Mark-
Great questions. As to your question about the storage of Sprott's silver, it is not stored in COMEX vaults as was MF Global clients' silver, but in LBMA approved vaults in Canada.  The fund states:
The Trust’s physical silver bullion is fully allocated and segregated in a secure LBMA-approved third party storage location in Canada. 
The Trust’s physical silver bullion is stored and fully allocated by the Royal Canadian Mint, to which we refer to as the Mint. The Mint is a Canadian Crown corporation, which acts as an agent of the Canadian Government, and its obligations generally constitute unconditional obligations of the Canadian Government. The Mint is responsible for and bear the risk of loss of, and damage to, the Trust’s physical silver bullion that is in the custody of the Mint. The physical silver bullion is subject to periodic inspection and audits. See “Custody of the Trust’s Assets” in the prospectus. Under certain circumstances, the liability of the Mint may be limited. From Sprott Physical Silver: About the Trust

So while the fund's silver is not held in JPM vaults, it is stored in LBMA approved Royal Canadian Mint vaults- so "inside the system" if you will, and easily accessible should TPTB decide to make an executive decision in the interests of the western financial system, which would doubtless be labeled one of the "certain circumstances" in which the liability of the Canadian Mint is limited.

Personally, I don't believe any major store/fund of precious metals is completely safe from the cartel which will become increasingly more desperate as the noose tightens around their necks.  Funds such as the SLV, GLD, PSLV will be confiscated and mining companies will be nationalized MUCH SOONER than any door-to-door confiscation would ever take place.

Just look at the recent theft of 1.4 million ounces of REGISTERED silver held by MF Global clients in various COMEX vaults (registered silver was confiscated from every single vault except JP Morgan's!).  One day your laptop informs you that you have 10,000 ounces stored in a Brink's vault, the next day your broker is on the phone advising that "your" silver is unaccounted for. 

Gold and silver MUST BE SUPPRESSED by the cartel in order to support the US dollar.  This is obviously not a viable long-term policy, particularly when the US continues to run $1.5 Trillion deficits, and total official public US debt will pass 100% in the next week.  TPTB and the cartel will continue to completely IGNORE THE RULE OF CONTRACT LAW as the breakdown of the western financial system intensifies. 

PSLV typically trades at roughly a 20% premium to physical silver.  You should be able to safely take delivery and store your own physical silver with this premium.  Always remember that POSSESSION IS 99.9% of the law! (Although the 20% premium would only apply if you sold the shares, a taxable event, and then plowed the proceeds into physical bullion stored in your own possession- negating much of this benefit after 15% capital gains taxes are paid)

Sprott's About the Fund indicates that investors' units may be redeemed outright for physical silver bullion (at only 100% of NAV- no 20% bonus for you!) subject to minimum redemption amounts.  Sprott's fund states it only purchases good delivery LBMA bars, so we are talking about taking delivery in multiples of 1,000 ounces- meaning this is likely not an option for your typical small retail investor.
Unitholders have the ability, on a monthly basis and as described herein, to redeem their units for physical silver bullion for a redemption price equal to 100% of the NAV of the redeemed units, less redemption and delivery expenses, including the handling of the notice of redemption, the delivery of the physical bullion for units that are being redeemed and the applicable silver storage in-and-out fees, and subject to certain minimum redemption amounts.

The Doc is not an investment adviser and cannot give investment advice, but as the saying goes-
He who has the gold (or silver) makes the rules!

Hope this helps!