Is SILVER The New GME?

Okay, it is Sunday night. It's coming up to 9 PM, uh, London time. I'm actually, uh, joined by Tim, one of our senior traders over in Dublin. How's it going, Tim?

Really good, good stuff.

Excited for tonight and tomorrow?

Yeah, I mean, so the, the Amplify Live kind of Discord room that we have has been pretty busy the last couple of hours. There's been a lot of conversation about SLV, silver, and the kind of WallStreetBets continuation and what could be next and so on. So Tim, why don't you just get us up to speed? What's the chatter at the moment? Sure.

Well, this really started last Sunday, last Saturday, Sunday. I'm a member of the WallStreetBets board on Reddit, just really for skulking purposes and information gathering purposes, if anything. They were setting out to hit GameStop. And as we saw that come true through Wednesday or Monday all the way through Thursday, and then really a lot of that shutdown effect happening on Robinhood. And it's now SEC investigation territory.

However, in the mix of conversation on Sunday, Saturday, Sunday last week on the boards, there was an op-ed put out by the leader of the swarm, if you like, who is called the Chairman. And he had this sort of op-ed about shorting silver, SLV, or via the— by using SLV, which is the BlackRock iShares ETF silver tracker. So it was a pretty convincing argument, and it's been picked up by a lot of people as the world focused in on GameStop on WallStreetBets, really from what happened to get to GameStop and AMC from kind of Monday, Tuesday, Wednesday, Thursday. And so people really are picking up on what they're talking about, but they've also stumbled across this op-ed on SLV. Now I did talk about this Monday morning and we did a little video and, and, um, Eddie recorded something on GameStop, but I've been tracking this SLV And for me, as sort of someone who's tracking what these guys are up to, I thought, okay, it's one thing to move an equity, you know, like GameStop or AMC, and there's a lot of games being played on the book there. You know, I shared a video in our room earlier on today where Cramer from CNBC is talking about his good old days managing a hedge fund and all of the sort of games they used to play with driving equity prices up, fading them down, rebuying them, and putting out news and fake news. And it's a pretty eye-opening video. So do try and check that out on our Discord if you can. But really, coming back to the point of why we're talking now is that Thursday last week, I thought, OK, it's one thing to move equities. It's another thing to move a global commodity market. And I thought, you know what? I like what these guys are doing. I think they're pretty crazy. Michael Burry, who's famous from The Big Short— famously shorted the mortgage market— he's actually been in that trade with WallStreetBets as of, I think, middle of last year. So he was buying about $17 million worth of GameStop. Stock at around $2. And so you can kind of imagine the gains he's on. But there are sophisticated traders in this group, and they do know what they're doing, so they're not to be discounted. Anyway, came Thursday, and on the Reddit boards, they were solely focused on managing the GameStop position by not liquidating, i.e., not putting any of their shares out for loan to short or nothing, anything like that. But then they switched focus to SLV, and the chairman started juicing the war cry, right? And you know what? These guys respond to it. Now, there was a quick calculation done by some people I follow on Twitter, and they calculated that the approximate buying power of the swarm, we'll call them now, Wall Street Bets, is about $1.4 billion. So these guys are not to be trifled with. So sure enough, Thursday, open on the metals exchanges. Silver futures opened up just a little tepid to start with, but then SLV started getting hit. Now, the important thing to realize is that an ETF like SLV, its net asset value is derived by the futures price and the spot price of silver. So like with the oil ETF, I think it's USO, their net asset value, i.e., the price of US oil, is directly mathematically correlated to the price of the spot price of a barrel of oil and a mixture of the front month future and the second front month future, i.e., basically the first 2 to 3 months of all the prices of oil available. And with SLV, their net asset value is pegged to something very similar in terms of the silver market. Why is this important? It's important because once WallStreetBets started to lift, i.e., buy a lot of SLV, well, SLV asset managers and portfolio managers had to then, to offset their risk, take positions in the actual futures market for silver, the SIE contract. And this sort of started this self-fulfilling prophecy in a way. So they're buying the ETF, then the ETF have to offset their risk and commit to their new clients by buying more futures. And then more futures rising, the ETF rises. And so In a way, this is important to remember because we saw the inverse of this happen in January 2018 when we had an incident called volmageddon, whereby the VIX— I won't get too into this, but essentially the VIX went so high in February, Jan, Feb 2018, that the portfolio managers who were hedged on their long equities positions were short in VIX. And the pain on their short side and the VIX trade got so high that they contractually had a puke point of 80% volatility in their short side portfolio that they had to stop. They had to stop selling VIX futures. So what happens when you take the roof off something? Well, it bounces high. Higher VIX, equities go down. So what we're seeing essentially is the inverse of this now happening with the SLV ETF. And as a consequence, this trade has now gotten a lot of air since last Sunday, Monday. Coming into Friday, we've seen record inflows into the SLV ETF. So huge amounts of, of retail and institutional money stepping in there. Essentially, that is having a knock-on effect. So something— I was looking forward to a peaceful Sunday, but I quickly got sucked into some crypto stuff, the Stellar coin, which I'm an owner of. So it was like opened about 10% up. So my friends who I trade some crypto with were on to me. Then I saw people— Nicola Duke, who I follow on Twitter, who's a fantastic trader, She was monitoring that the Tel Aviv exchange, which is open on Saturdays and Sundays, their gold ETF tracker was up 5%. I checked back on it about lunchtime, it was up 6.5%. So, you know, so we're looking forward to a pretty wild week in the metals complex.

Yeah, so there's, there's quite a few articles, as you said, it seems like this is building up a bit of traction. And Bloomberg reporting silver coin sites have grinded to a halt. And Zero Hedge— yeah, obviously those in the market will know Zero Hedge very well. They're obviously coming into their element with these types of narratives at the moment, and they were talking about the same sort of thing. So what's the deal on the physical side? How does that play into this?

Sure, yeah. So I mean, one of the One of the things about WallStreetBets and the swarm is that they are very specific about execution instructions, as in, OK, how do we get into this trade? And there are some guys in there who say, oh, we'll play the options. We'll buy the outright. We'll buy the physical. That's the same with a lot of these trades. They talk about, well, am I better off on options? Am I better off on just buying outright? Do I need to hedge this? And what we're seeing out of the chairman was he was just like, you know what, we want to accumulate so much that there is none of it— there are— there is no available stock to short, to borrow, to short. Because if you want to short an equity or a futures contract, mechanically in the background, you are actually borrowing that contract from someone who is long. Or an owner of the underlying asset to then try and hold it until the premium goes out of that price. So they're buying a load of bullion. So we've seen just before I came on this chat, we had Walmart's site down. They sell silver. A lot of these, like, literally, you know, buy coins, buy like silver Krugerrands. Stuff like that. I know, like, on the Elite Trader team, for best trade of the month, they win a silver Crew grant, which is about £26. Well, I think that's going to be worth a little bit more by the end of the week. So I don't know if my prize giving is going to continue with Crew grants. But the main point is that everyone is buying ETFs. I called my aunt earlier on who does trade. She's traded for 20 years, 30 years. And I said, you know, are you looking at silver? And she's like, oh, I've been so long silver for a couple of months now, and I just re-bought. And I was like, all right, well, I'm late on this one. And, you know, so it's, it's a well-aired trade right now. So I wouldn't be surprised to see a little bit coming off on the open, maybe a gap open, gap fill on a pullback, then maybe that'll be a dip and drive. You know, I have orders in at $25 as well myself. Full disclosure, I am long a miner that you all know about. So it's going to be wild. It's going to be wild because these guys, if there is no open float to short, therefore the price will literally just have to drift up until it finds an offer. And on Bloomberg, you know, I mean, on Bloomberg at the moment, they just released an article saying from one of, one of the largest traders of silver, and he's just saying there are no offers in the market, i.e., there are no sellers. So therefore there's nothing to stop price as it goes.

Right.

So yeah, I've got, got the article here.

It was, uh, the vice VP of Zannia Group in Chicago.

Yeah.

Quote, now we're seeing nothing, no single offer, which is scary. That's what he said earlier.

So mechanically, what happens in a market if there are no— if there is— if there's— if there's very little to no liquidity, if there's zero liquidity, the market actually cannot move up. If there is light liquidity, the market will move up to where that liquidity is. That could be a jump of a basis point, 5 basis points, 50 basis points. And this is when you see these really fast moves because Effectively, the mechanics and the order dynamics going on in the exchange are that price is discovering essentially higher until it wipes— until, until everyone's happy that they're long. And so it's going to be interesting to see. One more point I want to mention just before we wrap up on this is that the ratio of available physical silver for delivery versus the number of contracts traded is 250 to 1. So for every 1 unit of silver physically available to deliver, there are 250 contracts traded on that 1 contract available. So something's going to give and something's going to snap this week.

Yeah, I mean, just, just to finish as well, your, your take on— I'm just watching our own private Discord room, and they're talking about— there's a lot of chat on Twitter pointing out that the silver squeeze is not being mentioned on Reddit WallStreetBets, but rather it could be instigated by hedge funds basically to lure the hordes away from GME stock. Any thoughts on that?

I think that makes a lot of sense, absolutely.

But this is sort of a situation now where it has become a self-fulfilling lie, if you like, or, you know, if, if this is interference being run by hedge funds, well, you know what, they've got everyone's attention and they've got the liquidity. The market has moved liquidity into this ETF. I don't think— well, look, let's see how it opens. Let's see how it opens. I don't think silver is really a bad buy around $25, anywhere from $22 to $25. I don't think it's a bad buy on, you know, on the futures market. SLV trading $24.99, what I'm looking at right now. Um, actually it's trading— sorry, right now pre-market is trading $27. Um, so it's up 1.09% pre-market right now, actually, from NYSE. So whether it's— whether it's WallStreetBets driving it or whether it's hedge funds, we're up 1.1%. Yeah, pre-market.

Cool. Well, look, we'll end it there. I know you've got a couple of hours ahead of you now. Unfortunately. I'll catch you later on.

See you bright and early.

Thanks very much, Tim.

Cheers, man.

Any questions, any comments, let us know below. Thanks very much.

Thanks, folks.

Night night.