In case you were curious, Tuesday's 9.4% hope-for-a-stimulus-deal driven uptick in the S&P 500 was the seventh trading day out of the last 12 that the index has risen or fallen at least 5%. That has not happened (seven out of 12) since the fourth quarter of 2008 (specifically, Nov. 12 through Dec. 1 of that year). Four of the days in the current period had moves of 9% or more, which was not the case during the 2008 period I mentioned; most big moves back then were in the 6% range, with one at 8.9%.
One big difference between the aforementioned periods is that the volatility in the fourth quarter of 2008 came after a prolonged, one-year period of market drawdowns that started in October 2007. Investors by that time had experienced a year of falling markets.
The current period came out of the blue, and while it has blindsided investors, they still may be a bit fresher than they were by the fourth quarter of 2008. I, for one, am more hopeful at this point than I was in, say, October 2008.
Elsewhere, silver has gotten a boost over the past week, with the spot price rising 23% through Wednesday morning's $14.62 an ounce. Last week, I wrote about the disconnect between the spot price and physical silver, and while the spot price has risen, so has the price of physical silver.
The spread between the two has not narrowed; indeed, it has widened a bit in the case of "junk silver." A $100 bag of 90% pure silver coins, which contains 71.5 ounces of silver, is now selling for $1,757, or about $24.57 an ounce. That represents a 68% premium to the spot price. Last week, the same bag sold for $1,475, which implied a 63% premium.
Admittedly, I am a bit intrigued by the Sprott Physical Silver Trust PSLV; each share represents 0.3691 ounces of silver. At Tuesday's close of 5.26 per unit, that implies buying silver at $14.25 an ounce, which was below Tuesday's spot price close of $14.44. Interestingly, PSLV is fully backed by and redeemable for physical silver. As of Tuesday, the trust held around 63.786 million ounces.
Unitholders are able to redeem units for physical silver on a monthly basis, but that is subject to minimum requirements. For instance, redemptions are done at the last day of the month and must be for the equivalent of at least 10 London Good Delivery bars (these weigh between 750 and 1100 troy ounces each; that's a lot of silver). The redeemer is also responsible for delivery costs.
Clearly the premium for junk silver is due to the demand for relatively small amounts of silver that investors can hold in their hands. A silver quarter, for instance, contains $2.63 in silver (at the spot price) while a 1000-ounce bar, which is not divisible, is valued at about $14,500.
Theoretically, however, it is an interesting way to get exposure to physical silver at just under the spot price.
