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David Jensen: Silver Shortage Could End Paper Pricing

Tom welcomes a new guest to the show David Jensen. David is the owner of Jensen Strategic and a Mining Executive and Metals Analyst.

David monitors the London bullion banks and the metal lease rates. The LBMA claims to be very liquid, but there are concerns with their unallocated spot contracts. He prefers to focus on bar availability instead of the price. The best determiner of this is the lease rates. Usually, these rates are negative, but rates have sparked into positive territory in the last few weeks. He says, “We will have to watch closely and see what changes occur over the coming weeks.”

David explains how backwardation implies a developing loss of confidence in the market. This loss of confidence may stem from ETF’s rehypothecating bars, creating the illusion of a secondary metal supply.

Ronan Manly at BullionStar often writes about the concerns surrounding the ETF’s and inventory levels. ETF’s appear to be selling bars back into the market instead of securing them on behalf of clients. There are serious concerns about multiple claims existing on every ounce.

A liquidity event could occur if there are multiple claims to bars as a result of covering shorts. In theory, there should be a forced short covering, but the reality is there are a lot of insiders that cover for each other’s illegal activities.

David discusses the claimed inventories in both New York and London and what might be available from China. The WallStreetSilver movement is driving massive demand for physical in the United States, and premiums are rising across all silver products as people get fed up with the existing system.

He discusses palladium and rhodium metals and how they trade independent of the manipulation of the futures markets. Ultimately this will also happen for silver and gold. We see inflation occurring across the commodities sector, but of course, that’s not how “The Fed” likes to measure inflation.

Time Stamp References:
0:00 – Intro
0:37 – Silver Market Tightness
1:30 – Silver Lease Rates
3:37 – Backwardation
4:40 – Inventory Levels
5:48 – ETF’s Shorting Metal?!
7:59 – Shanghai Deliveries
9:23 – SLV Prospectus Concerns
11:10 – SLV Regs Un Vs. Allocated
13:19 – Could ETF’s Close?
15:08 – The Big Eight’s Shorts
17:44 – Fiduciary Risks
18:42 – WallStreetSilver & Phys.
20:33 – Default & Delivery Terms
22:20 – Rhodium A Free Market
25:53 – 2008 Warning Signs
29:09 – Debt Parallels to Today
30:38 – Digital Money & Control
31:10 – Fed & New M2 Index
32:13 – Wrap Up

Talking Points From This Episode

  • LBMA bar allocation and lease rates.
  • ETF’s, shorting, and rehypothecation.
  • Wall Street Silver and physical sales.
  • Contrasting rhodium as a free market.

Guest Links:
CNBS Jeff Currie Interview:
Blythe Masters Interview:

David Jensen, P.Eng., LL.B., MBA, is a Professional Engineer with a degree in Engineering from the University of Waterloo in Canada. He worked through 1993 on the F-5 Fighter Overhaul program and the Bombardier Regional Jet programs. Mr. Jensen then graduated with an LL.B. degree in corporate and commercial law from the University of Calgary and an MBA from Univ. of B.C., majoring in Logistics and Supply Chain Management.

Returning first to aviation, then, after reading Austrian School Economics, Mr. Jensen transitioned to the mining industry in 2004. First through his mining industry consultancy, then as Vice President of Corporate Development for Western Copper Corp., and most recently as President and COO of Skyline Gold.

Mr. Jensen currently serves as President and COO of a private mining company and provides strategic, operational, risk assessment, and precious metals consulting services through his consultancy, Jensen Strategic.

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