What makes this so bullish for silver is that there is only one good reason for anyone to naked short sell SLV shares - because the available silver needed to be purchased and put into the custodian’s vault doesn’t exist. Rather than go out and aggressively bid up the price of world silver, it is infinitely easier just to sell shares of SLV short. No one would be the wiser and it keeps the price nice and orderly. But this also confirms that real silver may be unavailable in wholesale quantities. In other words, this would be proof of a wholesale shortage of silver to go along with a retail shortage.

What is disturbing, if my numbers are as correct, is that the same fraud and manipulation of the concentrated shorting in COMEX silver futures, has now spread to the SLV. And, if so, probably by the very same entities. Think about it - why would anyone willing to be short hundreds of millions of ounces of COMEX silver futures, hesitate to sell tens of millions of ounces more in SLV to keep the scam going? In for a penny, in for a pound. In fact, the pressure that has been put on the concentrated COMEX shorts may have forced the manipulators to sell the SLV short, in order to keep the COMEX short position from growing.

But what is most disturbing of all is that, aside from the manipulation connection, the short selling in SLV shares represents something that was only expected to be realized in the future in COMEX silver - a delivery default. If there is the equivalent of 25 to 50 millions of silver sold short in SLV (maybe less, but maybe more), that is equal of 5000 to 10,000 COMEX contracts. If buyers stood for the delivery of 5000 to 10,000 contracts of COMEX silver, and the sellers failed to deliver within the required contract period of time, everyone would know that was a major default and it would result in the most serious (bullish) impact possible for the price of silver and the exchange.

I ask you to use your common sense. If buyers bought and paid for 25 to 50 million ounces of silver in the SLV, as I claim, and the sellers did not deposit the silver as required, but instead just sold shares short, is that not a clear default? Is that not the same as 10,000 contracts defaulting on the COMEX? Just because no one knew it happened, until it was explained to them, does that make it less of a default?

Finally, even if my calculation of how much naked shorting of SLV shares is wide of the mark, I have laid out a scenario that could happen easily and that, to my knowledge, has never been publicly aired. Short selling (and naked short selling) of these shares does exist and those shares do not have silver behind them. At the very least, this should all be nipped in the bud by Barclays and the SEC and any short selling of SLV shares of any type should be strictly forbidden. Keep the short sellers confined to the COMEX and derivatives cesspool. All silver (and gold) investors should be concerned because the unique nature of these ETFs, with their direct connection and convertibility into metal, renders them as potential tools of fraud, manipulation and default.

What should SLV investors do about this? I think a few things. First, don’t rush to sell your SLV shares in disgust and walk away from the silver market. That would be like cutting your nose to spite your face. Silver is close to exploding in price, in my opinion, and to sell out just before that happens would be foolish and cause you to rue the day you did so. But neither should you sit passively with your SLV shares and pretend this short selling is unimportant.

If you can, make the switch to real silver, either in your own possession or in bona fide professional storage. A switch means a simultaneous transfer of one asset to another. Make the arrangements to buy real silver before you sell your SLV shares. Don’t get cute and try to time the market. And for the umpteenth time, professional storage (of 1000 oz bars) involves getting the serial numbers, weights, hallmarks of all bars certified to be specifically owned by you, having the ability of taking actual delivery of these same bars at your demand and storing your silver apart and distinct from the dealer you bought it from. Please don’t ask me about this or that program, just make sure it conforms to these rules.

For those who can’t switch out of SLV, hold your shares, but press Barclays and the SEC to the wall on this issue. I believe this can be fixed if you force them to fix it and demand no short selling of any kind, due to the unique nature of these securities and the clear representations in the prospectus. You succeeded when you asked Barclays to list the serial numbers and you will succeed on this issue. That even such a thing could happen is an outrage and if Barclays drags their feet on this issue, you should give them holy hell. Even if you can switch, please inquire yourself and give Barclays a chance to comment on all this - isharesetfs@barclaysglobal.com

Further, here’s a suggestion for large investors in SLV, those holding quantities in basket increments (50,000 shares or 500,000 ounces). Switch your shares to direct ownership of silver, by making a few phone calls and having your broker or AP, convert your shares to allocated silver held in your name. It will be cheaper for you to pay storage directly than pay Barclays management fees, it will be safer, and it will immunize you from these naked short selling games. The funny thing is that your silver will not even have to be physically moved, it’s just a matter of changing the ownership paperwork. Just have your BS-detection meter handy to measure the idiotic excuses you will be given when you initially propose this to your representatives.

Lastly, I’d like to review some of my past thoughts on the SLV, beginning when it was first proposed. I was wrong when I doubted that the silver ETF would come at all, but I was right that it would have a good impact on price if it came. I was right that the SEC would never approved another ETF that involved the physical buying of the commodity involved. Perhaps my biggest mistake was in stating that 130 million ounces of silver could not be purchased at anywhere near the current price, then around $7. I even questioned what the people at Barclays were smoking to suggest that 130 million ounces could be bought without fireworks. While it’s true that a tripling in price (at the highs) does meet the definition of "nowhere near current prices," I admit that I expected much more price-wise. And since there are now 195 million ounces in the SLV, maybe it wasn’t Barclays who was smoking something. Maybe it was me. Then again, maybe not.

This is not intended as a way for me to weasel out of a past misstatement, as that is sure to occur, as I try to write unique and provocative stuff about silver nearly every week. When you are quick on the draw, and try to stay current and out in front, you sometimes miss the mark. It’s an occupational hazard. The trick is not to hurt anyone, even if you miss the bulls-eye. While it would appear that I was way off in my lambasting of Barclays about them securing 130 million ounces easily, I’d like to review my contention again, strictly for analytical purposes, in light of what I now know versus what I couldn’t have known then.

I had assumed back in 2005, that there were not 130 million ounces of available silver in the world to be bought near $7 an ounce. Of course, I knew that more than that amount of silver existed, as I always quote a billion ounces of silver bullion equivalent to be in existence. But there is a difference between what exists and what is available for sale. I thought it was impossible to buy 130 million ounces in the single to low double digit price range. With the benefit of hindsight, I now see where I was wrong. And where I was right.

I never imagined that Warren Buffett would willingly sell his silver (said to amount to 130 million ounces, coincidently) so cheaply. Of course he didn’t exactly sell his silver willingly, he was more snookered out of it due to him speculating and miscalculating on short-term price fluctuations. But the net effect of him losing his silver was that it ended up in the SLV.

Therefore, of the 195 million ounces in the SLV, as many as 130 million ounces may be from Buffett, leaving only 65 million as having been bought elsewhere. Am I doing this just to save face about a bad prior prediction? Absolutely not.

I am making these calculations to analyze what might be the real significance of the short selling in SLV shares. Had we all know that Barclays had somehow secured Buffett’s silver prior to the launch of the SLV, instead of calculating how much silver could be bought and at what price effect, starting from a zero base, we would have all made our calculations starting from a base of 130 million ounces. In other words, with the benefit of hindsight, removing the one-time snookering of Buffett, the actual amount of silver bought in two years by SLV was 65 million ounces, not 195 million. Taken Buffett out, the price of silver tripled because only 65 million ounces were actually purchased on the open market. That suggests a market tight beyond description.

I believe this is important because if my calculations are accurate, we may be in the eye of a world-wide silver shortage. That’s what the real motivation may be behind the shorting of SLV shares. The big shorts on the COMEX are now shorting the shares of SLV because they have no choice - there may be no silver available. If true, this is beyond profound for the price. If you are holding as much silver as you can hold, you are correctly positioned, in my opinion. If not, you are missing out on a remarkable opportunity.