Question:
Recently I read a commentary announcing numerous accounting irregularities at SLV (EFT). I sold my shares only to see them go up a dollar since. Why didn’t the market react to this “news,” or did someone hoping to go short con us shareholders?
John from Barnumville
Answer:
John, the playing field for trading markets is clearly not level. Governments, corporations, large investment firms, mutual funds, analysts, pundits, and the ultra-wealthy manipulate markets every day. Does this mean we should all stop trading? Of course not. It simply means we have to be aware of this reality, and be on guard for those of a lesser caliber who can and do manipulate individual markets every day. Is your commentator of the latter group? Here is what I found, and then you and the other readers can decide.
You used the word “commentary” in your question. Commentary can make news, but it is not news. Real news is easy to track down every day, and, as a trader, you should be doing so. It is possible, and likely in some cases, that commentators have an agenda, such as the one you suggest. The particular commentary you mention, however, derived from a “research” project designed to test for fraud in the inventories of two specific ETFs. The author of the research, Project Mayhem, developed its own software to do the research. I could not find much information on Project Mayhem, so, in my eyes, their status is dubious, but here is the conclusion of the research.
During our research into the inventory lists of the iShares SLV and London-based ETFS physical silver funds, we discovered multiple anomalies, which cannot be easily dismissed. These included the presence of internal duplicates, rough internal duplicates, weight duplicates, statistical clustering, and cross-reference duplicates … We cannot recommend these shares to anyone to do (sic) these glaring anomalies.
A web site called zerohedge.com then printed this conclusion in a commentary. Zerohedge.com appears to be a political forum with a mission. Part of that mission is to “widen the scope of financial, economic, and political information available to the professional investing public.” Noble true, but often, entities such as these will print just about anything to support their mission. My conclusion is that Project Mayhem and Zerohedge.com are minor players in the world of trading. Keep in mind, to move an ETF, such as SLV (iShares Silver Trust) someone would have to have an incredibly large following. The average daily volume is roughly nine-million shares. Thus, the reason the stock did not drop and continued to rise after you sold it is that no other research corroborated Project Mayhem’s conclusion. Even though many other websites ran with the story, it was not enough to drive the price down.
The bottom line is that all of us traders must be aware of the reality in which we trade. Markets are inherently unpredictable because people buy and sell markets, and people often don’t do their homework—they simply react. Instead, we all should find real news, research our markets, follow reputable analysts, follow our strategies, and listen to commentators that we know can be trusted, at least to the degree that they are bound by contract to fully disclose and to act honorably.
Trade in the day; invest in your life …
