Grave Warnings to Precious Metal InvestorsSubmitted by jforfreedom on Mon, 11/15/2010 - 13:24
I am a palladium bug, not a silver bug or gold bug. Although I do like silver and gold, and I like all precious metal investments, my favorite remains palladium. But regardless of what precious metal you like best, I urge all precious metal investors to own only physical metals and stocks of their favorite precious metal mining companies.
I strongly discourage owning any Exchange Traded Funds (ETFs) that invest only in futures contracts or other paper instruments. I cited The United States Natural Gas ETF (UNG) and The United States Oil ETF (USO) as perfect bad examples. At one point of time UNG was the second largest long position in my portfolio, right after Stillwater Mining (SWC). I still cannot help but pat myself on my back for promptly realizing the fundamental problem with a paper-based "commodity" ETF such as UNG, and sold without hesitation. Had I held UNG till this day I would have been much poorer. Unfortunately such ETF funds continue to make many unsuspecting investors poorer by the day. So I urge every investor to carefully read why paper-based ETFs do not work.
I do expect that 99% of people will attack my viewpoint that paper ETFs do not work. I don't mind as I know 99% of people simply won't grasp the concept until they have lost all their money. I will be very happy if 1% of people feel that I have helped them to avoid costly mistakes and to make smart investment decisions.
Like advocators Jim Sinclair and Ted Butler, I always encourage people to directly own physical precious metals. I do not trust the physical gold ETF, GLD, and the physical silver ETF, SLV. Like some other folks I expressed skepticism whether these funds actually hold the physical precious metals as they claimed. These ETF funds were hosted by entities known to be hostile to precious metal investors and known to have large short positions in silver, so why should people trust them? At one point I went as far as scrutinizing the almost 10,000-page-long silver bars list posted by iShares Silver Trust (SLV), and discovered plenty of red flags.