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If you have an investment in 1000 oz silver bars which are stored for you and you don’t have serial numbers and specific weights, you don’t own real silver. If you have a pool account you don’t own real silver. It you have any account where you don’t have the clear ability to demand delivery at anytime with no additional fabrication charges, you don’t own real silver. Period. If the dealer you bought the silver from stores it for you, and it is not an independent storage facility that is holding it in your name, you are taking great risks.

If you have paid full value for your stored silver, including storage and insurance fees, and don’t have the serial numbers and weights on your 1000-ounce bars, you must rectify that circumstance immediately. By not actually buying and storing the real metal to back the customers’ purchase, financial firms can greatly enhance their bottom line profits through the free use of the customers’ funds. Morgan Stanley’s actions were not in any way unique in this practice. In fact, in the court documents summarizing the proposed settlement, one of Morgan Stanley’s defenses was that they were not doing anything unusual by charging storage on metal that didn’t exist, as this is a widespread industry practice.

On a purely financial basis, the institution is given cash by the client and does not have to return it until the client sells his silver, which may not be for years or decades. For the entire time the client does not sell, the firm has full use of his money on a zero cost of funds basis. Those firms who charged, and still charge, storage and insurance fees for the non-existent silver rake in even more from the client. Honest dealings aside, this is a very cash-flow positive business for these institutions. Even if silver doubles or triples in price, there is no margin call to the selling institution, as clients don’t issue margin calls. As long as clients don’t sell on a net basis, the issuing institution still doesn’t experience negative cash flow. In our short-term world, that is all that matters. If you or I arranged to do what hundreds of world financial institutions have done, we would quickly be put in jail, as it is fraud, pure and simple.

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The warning is simply this - if you make, or have made, the decision to buy silver, then make sure you buy or hold real silver in the right form. Make sure you have the real deal and not some pure paper substitute.

This is not an attempt to warn of temporary price risk or reward in silver, that’s an entirely different and separate matter. Every asset is subject to short-term price movement and this is something unavoidable and immaterial on a long-term basis. The danger I am referring to is both very much avoidable and material to your financial health.

In fact, the greatest risk possible to silver investors is not the price of silver, but in holding the wrong form of silver and suddenly discovering that silver doesn’t exist. Investors in such non-existent silver face the very real risk of a total loss, even if silver soars in price. While you must allow for short term prices to fluctuate, there should be no allowance for holding silver in the wrong form. And you can and must rely on your common sense to determine if your silver is in the right form.

Clearly, there is no risk of a total loss to those holding real silver in their own safe personal possession. That’s what makes such silver the very best form of investment silver, and is precisely why investors hold it in that form. The warnings do not apply to this form of silver. The only warning to these investors is that they may not own enough real silver.

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Originally posted by AnthonyT:
http://money.cnn.com/2010/05/27/news/companies/gold_atm/index.htm?hpt=
Sbin

Hello,

I think there is a gold bubble right now. Gold will never be worthless, but it's not worth what they say it's worth in times of panic.

--Anthony

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Originally posted by Fremdfirma:

And the whiskey, Kirk, don't forget the whiskey.

Anyone half competent can make slash or shine, but good whiskey's an investment, and only improves with age.

-F

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