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Give Me the Real Thing

By: Charleston Voice


-- Posted 31 March, 2006 | | Source: SilverSeek.com

I don't know about you, but I have a hard time wrapping my head around this whole ETF thing. Whether it be gold, silver, copper, oil, or any of the other commodities yet to be represented in the vehicles known as ETF derivatives, I just can't grasp buying something physical and given slips of paper. In every instance I am required to sell my ETF paper to get the dollars and then go on a hunt of my own in the world of real commerce to get the real thing. The ETFs are not 'showing me the beef'.
 
What is a home builder requiring copper piping do? What if he's told by Home Depot that 1" copper pipe is on backorder, and won't be in stock for several weeks? But, the builder needs the copper NOW! Does he wave his ETF certificate for copper shares in the salesman's face and demand redemption in the real thing? Of course not. While an ETF may give a builder some comfort as a hedge vehicle it does not assure, or even promise availability of the real thing. And, without the real thing he can't build any new homes. It really is a non sequitur to exchange your dollars for shares in an ETF that you are assured has the physical commodity behind it - - but, a commodity that you can't claim with ETF shares at any price! Furthermore, in every instance the medium of exchange must be the US dollar. For now.
 
We all know that there are considerable delays in delivering silver under contract. Often, months are required before a large investor or end user can expect the actual physical delivery, if at all. The buyer just has to grin and bear it. Producers such as mines or drillers (we've yet to see a flurry in soft commodities, i.e., agricultural products) can withhold delivery while protecting their bottom line with ETFs or hedge equivalents. Why should they readily deliver into a market that they know really craves the availability of the physical while their profits escalate by holding the dollar equivalent paper? But, you can't heat your home or drive your car with oil ETFs. See how many loaves of bread you can  get for your wheat ETFs. I see severe shortages of critical commodities in our future.
 
What happens when an ETF such as the new Barclay's silver proposal is unable to physically acquire the underlying asset now or down the road? Do they resort to some other form of exotic derivative IOUs removing the investor even further from the real thing?
 
If you're not as baffled by this whole ETF thing as I am at this point then we're on different philosophical planes as to our trusting in markets that are managed and refereed by a private banking cartel. A cartel which has a death grip on our political leadership which obeys their every whim.
 
We can't "hoard" oil or bread for our future needs, yet we need these things for our daily living. Do we demand of our employer he compensate us for the increases in these things? Try it. We may get some form of COLA (cost-of-living-allowance) from our boss, but never enough and always lagging. Ask someone on Social Security. Labor unions may re-negotiate greater compensatory agreements, but they're never enough. You'll just be running in place with no forward progress.
 
Still we must look after the daily needs of our families. We want to maintain the living standards of ourselves and those we care for. Every paper currency in the world is now losing value in relation to commodities. Even the Swiss franc, once a safe haven from US dollar devaluation is no longer a refuge of purchasing power safety.
 
We still must save without wanting to lower our rate of consumption. Political leaders scold us for being 'addicted to oil' while their standard of livings consume as much if not more of the same commodity. Blaming the people and their "greed" is the centuries-old whipping boy for tyrants. Get used to it.
 
For right now the US dollar is still universally acceptable, easily divisible, and portable, but has rapidly casting off the trust once afforded to it as a store of value. It's not something you want to rely on for your future commodity security.
 
Gold and silver coins have been used for thousands of years as financial refuge. Those that save dollars are called "investors", and those that save gold and silver are called "hoarders".
 
They're what you're going to need in the years to follow in order to maintain and improve the world you live in now.
 
- - CV

-- Posted 31 March, 2006 | |


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Last Three Articles by Charleston Voice


Silver on the See-Saw
22 September, 2007

Silver COTs & Barclays
17 September, 2007

Boil Them in Oil Over a Slow Fire
5 June, 2007

Charleston Voice - Article Archive List

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