Recently (3-07-09) I was interviewed on Financial Sense Online, and the discussion revolved around the Silver Exchange Traded Fund (ETF). Mr. Jim Puplava, who hosts the show, asked some piercing questions about the gold and silver ETFs.

Something Jim and I discussed was that Barclays changed the words in the original prospectus from "Silver Bullion" to just "Silver," which reading as a lawyer would, begs the question Why? To me it implies there might be other silver investments that count but are not necessarily bullion.

One benefit I stated early on is that the silver ETF eliminates two major problems of purchasing large quantities of silver.

• Where do I store it once I have bought it?
• How can I buy a large quantity at once in the "physical" market?

But I never will consider it to be a primary silver investment. Knowing that the SLV is ALWAYS cash settled should raise an eyebrow or two. Certainly the SLV was set up primarily for larger institutional types to participate in the silver market. The tax consequences are also something any investor would be smart to determine before making an investment.

On balance it does bring attention to the silver market, has provided much more participation into the metals market, and has a fairly low risk if all you want to achieve is a paper gain. But under no circumstances do I consider it to be a silver investment. It, as with a mining stock, futures or options contract, or anything else that you do not hold in your own hand, is a derivative!

Also, as has been pointed out on the Internet before, SLV added 20M oz of silver to their "inventory" on December 31, 2007, only to remove it on January 1, 2008. Either they hired an entire fleet of armored cars for two days or that silver was a paper scheme all along.

I wish to digress here a bit to say that the Central Fund of Canada does have the real silver and gold they report, but the process of moving a new silver purchase takes time -- lots and lots of time. As pointed out, it is impossible to move 20M oz of real silver that quickly, not with all the checks and balances required -- let alone the manpower and small work space.

James Turk and others have also addressed the unanswered questions about these ETFs in earlier interviews. In fact, when it finally was introduced into the investment arena a few years ago, I asked James to help me with some of the finer points on the SLV.

As many others and I have pointed out numerous times, there are bar lists and the bars are likely real and do exist. During the interview with Jim Puplava, I gave one of numerous possibilities that could put bars into "inventory" and yet still have several claims against them. Again, the issue with them is whether the ETF really owns them free and clear or they are encumbered or otherwise compromised.

Another point is, the SLV can be "shorted" and this silver does not have to exist in inventory.

I have a fantasy about the paper precious metals markets; in my case obviously it would be focused on silver. I imagine myself standing in a large football stadium -- something like the Rose Bowl would do nicely -- and all participants with silver holdings (metal or paper) of one thousand ounces or greater fill the stadium. I draw a line at the fifty-yard line. I take all the silver on paper and place it on the east side of the fifty-yard line; all the physical silver I place to the west of the fifty-yard line. Then I calculate the value of each side.

Guess what! The dollar amounts of the two sides will not match -- not even close -- I guarantee it! There is far more paper silver than physical silver. This can easily be proven and has, by some of my earlier articles and by numerous other writers in this space.

The controversy surrounding the gold and silver ETFs continues and there are proponents both for and against the GLD and SLV. In an effort to remain consistent personally, my original "take" on the silver ETF remains, which is to state that any "investment" involving silver would have an overall positive effect because it would draw more and more attention to both professional and private investors that indeed silver is not only a worthwhile investment but also has all the monetary qualities of gold and has an industrial component that will remain, under any economic conditions.

For a good presentation of differing viewpoints, I suggest reading A Problem with GLD and SLV ETFs, by Trace Mayer, whose interview I conducted in Phoenix at the Silver Summit and will post at a later date. If you are interested, go to http://www.runtogold.com/2008/12/welcome-new-readers/. Trace also prepared an article titled, "Oil Majors Should Just Buy Real Gold,"http://www.runtogold.com/2008/12/oil-majors-should-just-buy-real-gold/.

It is an honor to be.

Sincerely,