Macro Tsimmis

intelligently hedged investment

BUY iShares Silver Trust (SLV)

Posted by intelledgement on Tue, 02 Jan 07

The arguments in favor of this position are presented in our earlier writeup on GLD. As with GLD, we see SLV not so much as an investment, but rather as a good way to hedge against a decline of fiat currency in general, and the dollar in particular.

While not in any sense a gold bug, I would be remiss in any discussion of silver in not owning up to having bought a couple of bags of circulated US pre-1965 dimes and quarters during the Hunt brothers’ disasterous attempt to corner the market in 1980. The price ran up breathlessly and relentlessly, briefly hitting nearly $50/ounce (and we are talking 1980 dollars here) before crashing back down to under $4. My purchase was on the way up, at around $21/ounce, so I briefly felt pretty good about it, but the feeling didn’t last. The one silver lining is that whenever I feel myself getting to bigheaded, I can conveniently let some air out just by forcing myself to calculate what the money I paid for those coins would be worth today had I just put it into an S&P 500 index fund. If I am more than usually in need of humility, I compare the ROI on my March 1980 silver purchase to a similarly-timed investment in AAPL.

The objective of the iShares Silver Trust ETF is for the shares of the trust to reflect the price of silver owned by the trust, which constitutes its main assets. The trust is managed by the Bank of New York; the custodian of the trust is JPMorgan Chase Bank N.A., London branch (the silver is stored in the UK). The trust has been operating since April 2006. The market value of the trust is $1.3B and on average 400,000 shares are traded each day.

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