LOL – The Paper Silver Manipulation Game at all time Highs

LOL

The silver bears are back to irreverently explain why trying to play the silver market instead of hording physical silver is going to get you in trouble:

The bears make the point that going forward there will be two prices for silver:

The physical delivery price and the fake spot price.

The spot price is an artifact of manipulated silver contracts in the spot and futures market for silver.

http://en.wikipedia.org/wiki/Spot_price

Depending on the item being traded, spot prices can indicate market expectations of future price movements in different ways. For a security or non-perishable commodity (e.g. silver), the spot price reflects market expectations of future price movements. In theory, the difference in spot and forward prices should be equal to the finance charges, plus any earnings due to the holder of the security, according to the cost of carry model. For example, on a share the difference in price between the spot and forward is usually accounted for almost entirely by any dividends payable in the period minus the interest payable on the purchase price. Any other price would yield an arbitrage opportunity and riskless profit (see rational pricing for the arbitrage mechanics). 

In contrast, a perishable or soft commodity does not allow this arbitrage – the cost of storage is effectively higher than the expected future price of the commodity. As a result, spot prices will reflect current supply and demand, not future price movements. Spot prices can therefore be quite volatile and move independently from forward prices. According to the unbiased forward hypothesis, the difference between these prices will equal the expected price change of the commodity over the period.

Let’s see if the bears’ take on things is actually playing out in the real world (prices at the time of posting):

2010 American Silver Eagle Coin 1oz Uncirculated
$64.95

NEW Buffalo/Indian Head Nickel Art Coin 1 TROY OZ .999 SILVER BULLION
$55.95

Sunshine Mint 1 oz (.999) Fine Silver Bar – Eagle Design
$62.99

2011 Canadian Silver Timber Wolf 1 Troy Oz Coin
$61.95

2010 China Panda Series – 1 Ounce Silver Coin
$67.19

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spot price of silver:
$41.66

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yep, looks like the bears are “spot on” – get it? spot on? hahahahaha I crack myself up.