Submitted by: Francis Soyer
I came accross an article at Seeking Alpha from an analyst named Todd Johnson. To discuss this article and his thesis that you should sell your physical gold and silver specifically PHYS and PSLV here are my takes on his work.
On PSLV: Article from Todd Johnson's Seeking Alpha saying to sell PSLV:
Original Article at Seeking Alpha Here:
http://seekingalpha.com/article/295093-sprott-insiders-are-selling-pslv-and-so-should-you#que=http%3A%2F%2Fa.collective-media.net%2Fadj%2Fsek.target%2Farticle%3Bsz%3D728x90%3Bx%3Dx%3Btile%3D1%3Bd%3Dtarget%3Bt%3Darticle%3Ba%3Dtodd-johnson%3Bt%3Dfinancial%3Bt%3Detf-long-short-ideas%3Bt%3Dus%3Bt%3Dinvestment-brokerage-national%3Bt%3Dsa-exclusive%3Baid%3D295093%3Bd%3Detfs%3Bd%3Dsectors%3Bs%3Dgtu%3Bs%3Dcef%3Bs%3Dgld%3Bs%3Dslv%3Bs%3Dpslv%3Bs%3Dphys%3Bp%3D1%3Br%3Df%3Bqc%3DD%3Bqc%3DT%3Bord%3D266261595%3F%22&par=article_dashboards%3D%40etfs%40sectors%40%26article_sectors_themes%3D%40financial%40etf-long-short-ideas%40us%40investment-brokerage-national%40sa-exclusive%40
From Todd Johnson at Seeking Alpha spoke with Carolyn at Sprott, phone number (888) 362-7172. "I asked why there was so much insider selling of Sprott Physical Silver Trust (PSLV). Carolyn advised me that Sprott Asset Management, and perhaps Eric Sprott, were selling because of Sprott Physical Silver Trust's (PSLV) 20% premium to net asset value. Then bought physical silver and precious-metal-producing equities."
"I asked if there was a chance for a secondary. Carolyn said a one-year trading history is required prior to a secondary. Carolyn advised me November 1st would be the first time a secondary could be considered for a Sprott Physical Silver Trust secondary offering."
Todd Johnson’s sell recommendation, issued on July 24th, was to sell Sprott Physical Silver Trust at that time PSLV’s price was: 18.83 Close price as of Yesterday 9/21/11 was 19.04: a sell loss recommendation of 1%
Todd Johnson’s disclosure: “I am long GTU, CEF, GLD, SLV” The fact that he is long GLD and SLV to me says that he has not done his homework on 100% of his article stated holdings in that if he needed delivery of the metals he will not have a snow ball’s chance in hell of taking delivery of either GLD or SLV. Good luck Todd when JPM (The Custodian) goes belly up because of their short exposure to both and when the holders of GLD and SLV demand delivery. JPM has no audited holdings, has on paper holdings of 1 ounce for every 100 claims to that ounce for both GLD and SLV for equity shares and 1 ounce for every 1000 claims in derivates. Read the prospectus for GLD and SLV. As for Todd's "better alternatives" to PHYS and PSLV being his holdings of GTU and CEF as stated in his disclosure of holdings read on from these fund's stated fund summary here:
http://finance.yahoo.com/q/pr?s=GTU+Profile
Take notes on the following:
“Business Summary
Central Gold-Trust primarily invests in unencumbered gold bullion. As of September 30, 2003, the company’s gold holdings were 82,619 fine ounces of physical gold bullion and 4,581 fine ounces of gold bullion certificates. The trust is taxed as a mutual fund trust for income tax purposes, pursuant to which it distributes all taxable income earned by it to the unit holders and deduct such distributions for income tax purposes. Central Gold-Trust was established under the laws of Ontario in April 2003; and is headquartered in Ancaster, Canada.”
Todd, the bold red text above means by owning GTU, CEF that you will be taxed for capital gains at the nominal rates listed below:
Capital Gains Calculator
Capital gains rates are designed to encourage long-term investing. Most people can get a significant advantage from holding stock investments for more than one year:
Tax Bracket Capital Gain Tax Rate
Short Term Long Term
10% 10% 0%
15% 15%
25% 25% 15%
28% 28%
33% 33%
35% 35%
The Sprott Physical Silver trust is NOT TAXABLE because you CAN NOT TAX CURRENCY. Yes this means that Silver and Gold Bullion is considered CURRENCY. While the “22% premium” may seem extravagant if you are in the 35% tax bracket the 15% you will need to deduct from your returns and 35% to deduct for a short term gain on a sale to me hardly seems like you are in a losing proposition by owning either PHYS or PSLV.
Shoddy research man… How did you get that Job at Seeking Alpha anyway?
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