What's the real premium for bulk silver purchases?

Strewth, cobber, the controversy surrounding premiums for bulk buys of silver continues to rumble on.

The basic premise was that the seriously wealthy would face huge premiums of up to 30% if they wanted to buy silver in large quantities. This figure is not as random as it might appear: it first started doing the rounds when Sprott's PSLV hit a premium of above 30% (peaking at 35% before his secondary offering on 18 January). In other words, such an extraordinary premium had to be justified in the silverogosphere by grounding it in fundamentals, viz. such an astonishing premium must imply a huge shortage in the silver supply.

This shoddy thinking reached its glorious nadir in Zero Hedge's abysmal pump of PSLV, as discussed here by Screwtape's Brian O'Flanogan; a number of commenters also waded in to patiently add to the debunking.

If that wasn't enough, Sprott's second issue caused the premium to collapse to 6%. This really should have been the death-knell for one of the most ludicrous of all the silver memes floating around on t'internet. I mean, if a premium of 35% implies a shortage, then presumably one of 6% implies a sudden glut in supply? Which would mean that Sprott's sudden large purchase of silver had somehow increased supply! It's enough to make one weep. This chart (courtesy of gotgoldreport.com) shows quite clearly just what a bad deal the holders of PSLV got in comparison with those of SLV:

But, one should never underestimate the resilience of silver religionistas memes. The facts never get in the way of a good bit of propaganda, even if all it takes is about five seconds' thinking to realise that the propaganda makes no sense at all. The great and the good of the silverogosphere continue to chant the new axiom that silver is unobtainable for less than a 30% premium when buying in bulk. The meme has legs, and all efforts to kill it at birth by the more rational parts of the community have failed.

I'm going to have one last go, before giving up. In recent private correspondence I was challenged to find ways of buying a million ounces of silver without incurring hefty premiums. So, I borrowed $34,000,000 from GM Jenkins (using the indentured slavery of my first born as security, as per his usual terms) and decided to do a bit of silver shopping. Here's what I found:

1. I could buy some silver futures contracts on the COMEX and stand for delivery. This way, I will get the silver at a spot price that I think will be a good price in the future (e.g. a few weeks ago, I could have easily picked up some futures for silver at $28 an ounce, which would have been a great deal; but even today, I could buy some futures at $34 an ounce quite cheaply). The costs associated with this will be the broker's contract fee and commission for the trade (a tiny fraction of a percent for such a large trade) and some storage or delivery costs once the contract is closed (again, this would be a tiny fraction of my $34 million order), plus some insurance. A bonus for conspiracy fans out there is that by doing this I'll be contributing to the collapse of the COMEX [/sarcasm].

2. I could buy and redeem SLV. Basically, this needs to be done in 'baskets' of 50,000 iShares. So my $34,000,000 will get me 1,031,553 iShares of SLV (before open of play on 29 January, silver is at $33.99 per ounce and SLV is at 32.96). So, let's say that I'll buy a round million iShares which will get me 20 baskets. The 'premium' will be what the iShares prospectus describes as 'applicable fees, taxes, expenses and charges'. One of these fees is $2000, which is neither here nor there if you're splashing out on $34 million of silver with GM's hard-earned cash. The rest adds up to just a few percent [if anyone can do this calculation more precisely, then I'll be grateful, and will add it to this post with an acknowledgement].

3. The Perth Mint is (at the time of publishing) selling silver 100-oz bars at 2.4% over spot (i.e. $34.65 as opposed to their last quoted silver spot price of $33.84 spot price) So, I'd need 10,000 of those. However, the Perth Mint Depository’s standard premium for 1000-oz bars is $0.20 per ounce over spot, which in practice would usually be stored in their vault. But for buyers of size (High Net Worth individuals), they will do “cash and carry” if requested and - for delivery to the USA by sea - an additional three to five cents over spot should cover freight. So purchase and delivery would come in at a rather tasty 0.74% premium. [Many thanks to Bron Suchecki of the Perth Mint for this information.] I'm sure every other major bullion seller around the world would also have similar fees and services for HNW clients and I wouldn't be surprised if there were some quantity discounts of list prices.

4. GoldMoney: If you don't trust the evil SLV, then perhaps you'll have more confidence in a White Knight in the form of James Turk. Here you can see GoldMoney's rates. Not surprisingly, the more you buy, the lower the rate. So a million dollars or more will get you a rather nice 'premium' of 1.99% for physical silver. And they'll deliver it to your house, if you like (although that will cost you a couple of percent extra).

I found about a million (well, half a dozen) other ways of getting my bulk purchase of silver for a low premium, but I don't want to labour the point...

So, to answer the exam question, 'what is the rate for bulk purchases of silver', it is between almost zero and 2%. That's quite a long way from 30%, I think you'll agree. Now, the die-hard cynics amongst you might say, 'well, that's all well and good in theory, but can you give an example of someone who has actually recently bought a large amount of silver without paying 30% premiums?'

Funny you should ask that. In fact, I know of a certain Mr E. Sprott of Toronto, Canada, who - according to the publicly available records of the PSLV Trust - has just bought 8 - 9 million ounces of silver (and rumour has it that he didn't even need to borrow the fiat off GM to do so...) I don't want to blatantly plagiarise someone else's work, so please check out Kid Dynamite's analysis, which shows quite clearly that Eric picked up his shiny stuff at very close to sp(r)ot(t) price.

Now this should come as no surprise. There are three incontestable facts about billionaires. The first is that they are very, very rich. The second is that they didn't get to be very, very rich by paying a 30% premium for something that they can get for almost no premium at all. And the third is that they tend to employ very smart, efficient people, who lose their jobs very quickly if they waste their employer's money.

So Sprott probably just got his people to buy his silver on the COMEX, at virtually no premium. Sprott cheerleaders on the silverogosphere then went around implying (again) that silver was in a shortage, and the premium-to-NAV proved this (even after it crashed).

It is, in fact, precisely this level of chutzpah which distinguishes filthy-rich billionaires from unpaid small-time bloggers whose eldest children are now condemned to spending the rest of their years darning GM Jenkin's socks...

Bankster Shills

The thing I love the most about this blog is that the contributors are a collection of very different individuals, with very diverse views. I think it's fair to say that we're all generally bullish on the PMs, and that we have declared positions in gold and silver, but apart from that our only unifying trait is that we love debate, getting to the heart of the matter, and seeking to dispel myths and shoddy thinking as often as we can. If we see something we disagree with, we probe and challenge - including our fellow contributors' views.

Unfortunately, this approach has done little to endear ourselves to certain quarters of the PM community. Although that's a shame, it's perhaps understandable given that we're often a bit cheeky and polemic (or just good old-fashioned devil's advocates). However, what is less understandable is how a brand new PM meme has started doing the rounds: i.e. that the Screwtape Files is a fully paid-up psyops front for bullion banks.

The abuse in some parts of the blogosphere has been predictably banal and depressing, spiked by Brian O'Flanagan's recent question about the relationship between ZeroHedge and Sprott's PSLV. Here are a few of my favourite recent comments about Screwtape, taken from a number of sites, including ours (the asterisks are my addition, for those of a nervous disposition):

Tyberious: Those little piss ant, SLV, GLD, c*ck suckers[...]What the f*ck! They shall have no quarter here![...]I know these guys a paid shills for JPM, or whatever banks' d*ck they suck! Look nothing against homos, but these guys are whores! For all those that are new, these guys (KID D*CKINMYASS [sic], and butt buddies) pray on the ignorant and pretend that all is well, like there is no manipulation in the PM markets, that SLV and GLD actually have the metal they report to have and they attempt to spread misinformation and worst of all they f*cking do it for money!

PaidInFiat: Jeanne, eat a d*ck. How's that for an explanation? [and, later] Jeanne darc, gobble a donkey d*ck, you elf.

Silver Stacker: I don't doubt what you say, but I don't believe it either. It equates to me stating that the contributors to this blog like to suck each others d*cks and blow loads in each others faces.

Bay of Pigs: They are useless tools on gold or silver, IMO. Better off to ignore them. They have deadpanning gold and silver and supporting the MSM status quo since I can remember. They don't acknowledge anything being wrong/corrupted in the markets (especially the COMEX).

Green Lantern: That must be where the trolls go after they have finished flaming Turd on the main blog. I guess they need a place to wet their whistle also. From simply a journalistic point of view, did you notice that his entire blog is dedicated to flaming individuals/sites and point of views and rarely puts forth his own world views?

Ledbedder: Looks like the boys and girls at the other blog are green with (fake gold) envy.They think because they write "articulately" that they can fool some folks. Go right ahead, try. I honestly do not know anyone that can make an argument against the PM's not going higher over the next few years. Yes, 2011 wasn't their best, but look at the 10 years before that. Guess a decade isn't enough data to go on. That was my roughly written 2 cents as I didn't get a degree from Brown or HAAAAAAAAAAAAAAAvard. One last thing, look down your noses at us because we type swear words, who cares? Tell us you don't let out a good "F*CK" when you bang your shin on the coffee table. Liar.

SGS: Yeah. These morons, especially kid dynamite [sic] are part of a paid JP group to discredit us.

Anonymous: Screwtapefiles is just a front site run by the Bankers. Zero credibility there.

Anonymous: screwtape has zero credibility. The people authoring there have been exposed and countered many times before. It's a site of the banking shills, by the banking shills and for the gullible.

SGS: Dont come back here. You realize that I know who you are now. My tech seems shitty on the front end, no[t] so bad on the backend. You've been warned.

Lovely. What is very striking about such posts (and there are many more) is the level of visceral hatred for those who do not necessarily share their world view or - more importantly - the world view of their heroes. It is also hard not to pick up on a certain amount of deep-seated auto-erotic tension, which I imagine would be better released in a more amorous rather than aggressive way - but I'll leave that train of thought to the psychologists.

However, what is utterly conspicuous by its absence is any attempt to engage with the question at hand, to refute it through evidence, or to present a coherent counter-argument. Responses are limited to either "you're a c*ck sucker" or "you're a bankster shill".

Now that's a bizarre approach. Let's say for a moment (for the sake of argument) that they're right, and the only things we love in life are violent oral sex and getting fistfulls of dollars from JPM. How, exactly, does that refute the facts we have pointed out, or answered the questions we've posed? It's simply a diversionary tactic to avoid answering the difficult questions. So we are forced to ask: why would such diversionary tactics be used by certain elements of the PM blogosphere? If what they say is an open-and-shut case, why respond with abuse and allegations, rather than simply presenting their evidence and explaining their reasoning?

It is obvious to anyone who has ever read Screwtapes that we are not paid up Bankster Shills. We all give our time free to this site, despite us all having extremely busy day jobs and family lives. You will notice that there are no adverts on this site, and there is no donation button either. We make not one penny from this site by any means. We strive to hold the highest levels of integrity, and make full disclosures when necessary.

Sadly this cannot be said for other elements on the web. Some sites earn serious cash from their traffic, and others have direct links to those with a corporate interest in promoting precious metals. Not all sites - and I want to stress that. There are good guys out there. But suffice to say that the supposedly 'independent' content and advice peddled on certain PM sites is often as partisan and sponsored as that which emanates from certain parts of the MSM about which they scream foul on a daily basis. Corporate shills by any other name. I will expand on some of these themes in future posts.

Most of us are long the PMs, and most of us accept that there is a degree of manipulation in the PM markets. But we refuse to subscribe to the cartoon version of evil empires and wicked witches; a world of Zionist plots and farting bears. If a claim is made, such as Sprott's delivery problems or DSK's imprisonment at the hands of the Cartel, or a problematic gold bar in a vault, then we will investigate it. If we find it to be true, we say so. If we find it to be false, then we say that too.

This refusal to blindly accept all we're told, or to unthinkingly cheerlead the latest silver memes does not make us 'anti gold' or 'anti silver'. It does not make us 'perma bears'. And it certainly does not make us Bankster Shills. We value your comments, and we want you to challenge us (politely). If shown the evidence we will change our views on the spot.

We are beholden neither to the banks and Wall Street, nor to those with an interest in selling as many coins and bars as possible.

And it is that which makes us the most independent PM site on the web.

More Questions (Tin Foil Hat Special Feature by Warren)

DISCLAIMER: THIS IS JUST MY THINKING, NO ONE ELSES. I AM TRYING TO FIGURE IT OUT IN MY HEAD TO CONNECT ALL THE DOTS WITHOUT GOING INSANE.

I woke up this morning to find a message on my post from 'hiptwist', who suggests that the doc366 sounds like a variety of 'astroturfing'. I looked it up. Looks good (thanks hiptwist). Musing on that all day long. Stuff not adding up so my brain so I do some more digging - I'm not satisfied with the depth to which I analysed it all (for those not initiated, we are discussing this thread about jpm/comex).

So I looked up the 'Read this story -->' pattern, because this is obviously done with software - the question I could not answer is 'what software is it?'. It looks like something someone has custom-built, but one of my research vectors was it might also be some kind of messenger-style add-in*, in which case, many people would be using it and (per my reasoning) the pattern should be identified elsewhere.

* .. which is still a possibility - anyone familiar with similar?

To my surprise, I did find the patterns I sought to find. I dug a bit deeper and identified (surprising) a handful of users who have lots of posts in the same [Abstract] + 'read this article -->' pattern. Here they are, with links so that you can confirm this pattern for yourself. For convenience I have also put the date that the user's first post appeared.

'truth_trader' 301 Messages (since 04-July-2008) [link]
(originally started posting as 'truth_trader53'

'doc366' 357 Messages (since 25-June-2009) [link]

'fxtrader00' 189 Messages (since 26-June-2009) [link]
NOTE: Not all his messages are the 'Read this article -->' type.

'cancelled_reservation' 314 Messages (since 29-June-2009) [link]

'casino_trade' 132 Messages (since 13-July-2009) [link]

NOW:, watch three of these guys have a 'discussion' together:

"END GAME FOR MORGAN'S SILVER SHORT" post by [truth_trader], with replies from [cancelled_reservation] and [fxtrader00].
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_J/threadview?m=tm&bn=10073&tid=384907&mid=384907&tof=-1&rt=2&frt=2&off=1

What conclusions to draw? Well. Sheesh. I'm sure you can come up with some. What links these user accounts is the same pattern of posts, and a all-too-coincidental occurence of them all giving replies to the same post. So basically, whoever controls all of these accounts has an agenda, but they have tried (failed) to make it look like background noise and regular users. There ARE a few other possibilities, but whoever comes up with a theory has to explain the correlation and patterns (i.e. primarily the question of whether these 5x users are centrally controlled or not, and secondarily: the motive behind their posts). [[ I'm sorry Louis and Harvey but I don't (personally) think that 'doc366' is legitimate, given the close links with these other users. ]]

Now for me, I'm all over the appearance of ideas and the way 'memes' regulate the flow of public opinion. To me, it's a modern thing where if you control the flow and quantity of various memes in circulation then you control the direction of public consciousness. Because of this, I'm incredibly suspicous of everyday things. For example my wife (who I've mentioned before) comes home and informs me that gold had a big spike up because of the Japan disaster - she had seen it on the news on the ferry coming home (this is the same gold price which is still trading sideways as we all know, and the same gold which typically gets no mention in the news when it reaches new all-time-historic highs every other week ... ?!!).

But lay it all out ... Silver is difficult to get (we know that - someone big has gone long physical and restricted supply). Comex is having issues (we can see that). Gold is undervalued (we know that), FIAT is fraudulent (we know this) - so the arrow points in the same direction as all this stuff ... the question for me, is WHY promote stories about the Comex default? and thus grease the wheel to its eventual demise? i.e. get the momementum rolling on something which is going to happen anyway. Or rather - PRIME PUBLIC OPINION about a specific set of events in order to direct the outcomes.

My own conclusion (dons Tin Foil Hat): Comex (a scapegoat) is about to default, and of course - someone, somewhere has known about it for a while and has prepared and directed things accordingly. It would seem that SGS is largely vindicated (content from Bears videos) and - get ready for Freegold, folks, this is going to be EPIC.

Random Thoughts (Guest Post by Warren)

Just some random bits - since Louis has this nifty soapbox here and because I’m sulking. Amber won’t return my calls, but perhaps she is still hanging out on the Yahoo boards? Check this out if not already – another story about a premium (70%) to not redeem physical silver from COMEX. Again, it’s just someone’s claim, nothing documented [update: we are doing some forensics on this poster - see comments below]. Authenticity aside, the online community seems polarised on this issue, an entire spectrum with Kid Dynamite leading the charge holding his rulebook high; and being bitten on the leg by SilverGoldSilver forthwith. I get the impression now that many are no longer averse to the idea of premium-in-lieu-of-redemption. Even more believable if it is true that part of the ‘money’ handed back is in the form of SLV shares. HAHAHAHAHA. Remember kids (like SGS so eloquently put) they own you if you play in their sandpit. And if you think you're being clever blackmailing JPM then bear in mind that whatever action they take, they are just humouring you. If they were really threatened then you will more likely receive a petrol station mishap than a premium.

Strong Hands. I was musing tonight about how others are keen to get their hands on your money and the old adage ‘a fool and his money are soon parted’ really is talking about strong hands vs. weak hands when it comes to fiat. I had always thought the ‘strong hands’ terminology was applied to gold & silver but technically it’s no different. As I got into Silver and Gold land I noticed I became more like Scrooge McDuck - my hands have a stronger grip on all my asset classes.

Connecting the Dots. If you accept the idea that a human brain operates much like a quantum computer then we are all at work busily connecting the dots. Snippets of news, comments, opinions, rumours, egos, claims, but all put there by people who are contributing to the mess of memes that we call the modern internet. But each of us are operating like a cell inside some bigger organism – reacting to ideas and collectively shaping our own perceptions of reality. It is this perception that TPTB seek to distort and hijack. You are feeling sleepy – you will respond to neurolinguistic programming, and when I snap my fingers, you will awake and go and buy shares.

Television Rubbish. I don’t normally watch, but caught a bit of free-to-air TV this morning (we don’t have cable) and the stuff I saw there convinces me that everything in Japan is fine. Mostly it was the juxtaposition of the information – you know the standard method where they place two seemingly related (yet unrelated) items close together and because of the proximity, your brain unwittingly parses them as a single item. The information was seemingly good news about the reactor situation coming under control, promptly followed by a summary of how many estimated deaths in total from the disaster (the quake + tsunami part).

Brainwashing. It reminded me of similar brainwashing efforts - remember those television ads that ran about a year ago – the ones from the United Nations which talked about cow farts being bad, and flicks pictures of cattle next to images of burning rainforests and melting icebergs. The text was in about 6 (or more) mainstream languages. If your eyeballs see it, it goes into your head. Our 8 year-old kid sings the supermarket jingles with perfect mimicry, but we know we’re winning against the brainwashing because he occasionally asserts that the ‘.. burgers aren’t actually better at Hungry Jacks .. I like the Happy Meal better’.

Recapitalize the world with $100 Trillion? Now remember all those articles about the 100 trillion dollar recapitalization? With Debt money that would be suicide – but what about a gold revaluation (aka Freegold)? 5 Trillion dollars’ worth of gold in the world (give or take) ... revalued x20 gives about the right figure for a Freegold starting point. My view is they are planting these ideas in your head now so that when it happens we just shrug and nod like we always do. Just like the United Nations no meat ads which obviously work because for some reason the same kid has gone off all forms of steak and beef.

Would you like some salad with your Gag Order, sir? A few people at the Watchtower have mused about what happened to McGuire and the ‘bombshell that would put people in jail’. Today I read on MaxKeiser.com this interesting snippet: ‘ Andrew told me he had a bombshell but was bound by a court ordered gag-order’. Huh? A gag-order? Interesting. Ok, so either the excuse is just a cover for Mr. Keiser. Or it is real. Nothing quite like freedom of information hey? So what are they hiding? By the way, that same Cheviot Conference has video online here.