TU.SILVER - What are the shares worth?

[Deprived]

So versus someone who just bought silver and held, our investors have done very well.

This single sentence highlights the fundamental problem with your fund - that its performance does NOT reflect the behaviour of silver.  Which means that though it MAY be a good investment it is NOT any use for anyone who actually wants to invest (or trade options) in silver.

When BTC rises heavily vs silver (as has been the case over the period from start of your fund until now) your fund will ALWAYS do a lot better than just holding silver.  But the opposite is also true - that if silver rises strongly vs BTC (most likely largely because of BTC falling vs USD) then your fund will significantly under-perform compared to just holding silver.

So the problems (from an investors' perspective) are:

1.  Silver only represents a minority of your fund's asset value - so to expose 1 BTC to silver I have to invest a LOT more than 1 BTC into your fund.  That's inefficient.
2.  The percentage of your fund's assets that are silver (i.e. if I spend 5 BTC on shares what percentage of that is buying silver?) is neither revealed or maintained at a consistent level.  Whilst I can work out how much I'd have to spend NOW to expose X BTC to silver I can't predict how much I'd have to set aside in the future - even if I knew what silver's price would be (as I don't know how much non-silver there'll be per share in the future).
3.  For options the above is even worse - as if I buy an option on the silver then a lot of the premium I pay is actually on an option to buy the BTC denominated element of the shares.  Paying BTC in premium to get an option on BTC that is settled in BTC is NOT good - yet that's what the majority of any option on your shares is doing.

Getting back to the point - in summary if I invest in silver then I expect the results to be exactly (or as near as possible) the same as if I HAD bought silver and held it.  That's what investing in silver means - and what I expect from a silver fund.  If I want profit from an investment fund that operates in BTC then I'd invest in one of those - not a silver fund.  And if I want a bit of both then I'd like to determine the percent of each MYSELF - not have it some random (from my perspective) mix of the two that's neither declared or maintained (the percentage split that is).

If you really MUST insist on mixing the two then please at least do so in a way that allows informed investors to predict their exposure.  e.g. declare (and stick to) X BTC of investment capital per share (dividending out to keep it at that level).  I'd prefer a defined percentage but doubt that's practical (as you then need a source of BTC if silver rises).

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[Deprived]

The short answer is that when we are overweight BTC we tend to return that money to unitholders in the form of distribution payments.

So what percentage of assets being BTC do you consider overweight in a silver fund?

[usagi]

The short answer is that when we are overweight BTC we tend to return that money to unitholders in the form of distribution payments.

So what percentage of assets being BTC do you consider overweight in a silver fund?

We assume you haven't read our FAQ, since there is an in-detail answer there which explains our cost, investment and distribution policy. That might be a good place to start. Beyond that it's not really possible for us to give you a specific answer because we need to evaluate the answer over time. That's why we're making "modest" distribution payments each week and studying how they effect demand. We just don't think it's a good policy to pick a number out of a hat and make a single large payment like you seem to be asking. There's much more to it that that. For one, should the price of silver suddenly rise or we place a large order for silver, that policy could backfire and we may be forced to shut down.

We didn't decide to go X% overweight BTC. It just sorta happened because we got lucky on a few investments right before ASICMINER started selling hardware.

[jjdub7]

The short answer is that when we are overweight BTC we tend to return that money to unitholders in the form of distribution payments.

So what percentage of assets being BTC do you consider overweight in a silver fund?

That's why we're making "modest" distribution payments each week and studying how they effect demand. We just don't think it's a good policy to pick a number out of a hat and make a single large payment like you seem to be asking. There's much more to it that that. For one, should the price of silver suddenly rise or we place a large order for silver, that policy could backfire and we may be forced to shut down.

We didn't decide to go X% overweight BTC. It just sorta happened because we got lucky on a few investments right before ASICMINER started selling hardware.

And that's I think the answer I was looking for, at least.  And that's good, I like that answer.  As long as you're keeping a solid balance between the BTC-weighting line of the portfolio and publishing the financial reports, I'm going to keep buying shares.

[Deprived]

And that's I think the answer I was looking for, at least.  And that's good, I like that answer.  As long as you're keeping a solid balance between the BTC-weighting line of the portfolio and publishing the financial reports, I'm going to keep buying shares.

It's fine as an answer IF you look at the investment in isolation rather than as part of a portfolio or larger position.

Where it isn't fine (and actual numbers are needed not vaguaries like "overweight") is in the following scenarios:

1.  You want to manage your exposure to various things (X% BTC, Y% silver, Z% LTC etc etc).  You can't do that without knowing what percent of exposure the fund will have to BTC.
2.  If you want to invest to balance/hedge against another investment that's long on BTC - that's entirely impossible if the majority of assets backing TU shares are actually BTC-denominated themselves (you end up increasng your long position more than you counter it).
3.  You have X BTC and want to invest X (or nearly X) in silver - impossible to do.
4.  You want to buy options.  Totally impossible to do so in an informed way - if the price of a share is .06 now then buying calls at .08 is horribly risky - as usagi may decide the portfolio is "overweight" and issue a dividend totally devaluing the calls you just bought.  It's also horribly inefficient as a lot of that price is BTC/equivalent which isn't what you want to buy an option on anyway.
5.  You want to buy silver.  Rather than paying an $X markup for postage/storage/etc you have to pay a Y*$X (with Y being way greater than 1) markup for capital sufficient to generate profit of $X to cover the postage/storage/etc.

The ONLY people the plan actually works for are those who:

a) Believe in usagi's investment skills (as opposed to just his ability to store silver)
b) Don't specifically want their investment mainly or entirely held in silver
c) Aren't fussed about managing their personal exposure to different currencies/assets to any great extent
d) Either don't want to redeem for physical silver or are happy to end up paying way over the odds (compared to buying it locally in cash with no counter-party risk) when they do so.

Now there IS a problem that has to be addressed one way or another - how to pay for storage fees etc if people just buy the shares and hold them (generating no revenue).  Writing covered calls on silver (NOT shares) was the means identified in the original contract - but that's badly flawed for various reasons.  What's happening is an attempt to address it by a different way to what most funds use (which is taking the fee from the actual silver) - which is a great objective but this isn't the way to do as the unintended consequence is that teh fund ceases to be a silver fund in any meaningful sense (i.e. the majority of assets backing each share are NOT silver any more).

Here's the easy way of doing it (there's a more complicated option where you sell BTC-denominated bonds so that BTC assets are cancelled out in terms of exchange-rate exposure by matching liabilities):

1.  Create one security (a bond in effect) which is pure silver.  Shares in it represent silver and are sold at a small markup to spot/cost - designed based on expected split between holders and redeemers so that it has a small positive expectation.  Shares in this represent ownership of silver NOT of the asset itself and pay no dividends.
2.  Create a second asset which owns the first.  Sell shares in it.  This one is a pure BTC investment vehicle - it owns the first one, pays the bills and keeps the profit.  Provided operation of 1. has a positive expectation then this is better for investors in 2. than NOT owning 1.

This way:

People who want to invest in silver or trade options on it or buy it can do so via 1 in an efficient manner.
Those who believe in usagi's investment skills but don't like silver's prospects can invest in 2.
Those who like the current setup can invest in both.

The markup at which security 1. is sold can then be dynamically adjusted so as to make a small profit for investors in 2.

Tyring to mix these two things in one security is just horrible from the perspective of any investor who wants to be able to invest efficiently in specific assets (e.g. silver) and have control over their exposure to different things.

[usagi]

It's fine as an answer IF you look at the investment in isolation rather than as part of a portfolio or larger position.

Then look at it in isolation using the same criteria you use to look at any other investment in isolation when considering the composition of a portfolio.

Where it isn't fine (...) is in the following scenarios:

1.  You want to manage your exposure to various things (X% BTC, Y% silver, Z% LTC etc etc).  You can't do that without knowing what percent of exposure the fund will have to BTC.

Isn't that like saying no one would ever invest in LTC-ATF because they don't know what the individual holdings are? I'm not sure that's right. Anyways, anyone can calculate the non-silver component of the fund by subtracting spot silver, coin premium, and shipping cost from the fund. Vault storage is a marginal cost. An experienced investor will have these numbers on hand but in any case they are easy to research. We don't need to publish them so long as they are disclosed.

I mean yeah I see your point, but we feel it's a non-issue.

Here's the easy way of doing it (there's a more complicated option where you sell BTC-denominated bonds so that BTC assets are cancelled out in terms of exchange-rate exposure by matching liabilities):

1.  Create one security (a bond in effect) which is pure silver.  Shares in it represent silver and are sold at a small markup to spot/cost - designed based on expected split between holders and redeemers so that it has a small positive expectation.  Shares in this represent ownership of silver NOT of the asset itself and pay no dividends.
2.  Create a second asset which owns the first.  Sell shares in it.  This one is a pure BTC investment vehicle - it owns the first one, pays the bills and keeps the profit.  Provided operation of 1. has a positive expectation then this is better for investors in 2. than NOT owning 1.

This way:

People who want to invest in silver or trade options on it or buy it can do so via 1 in an efficient manner.
Those who believe in usagi's investment skills but don't like silver's prospects can invest in 2.
Those who like the current setup can invest in both.

The markup at which security 1. is sold can then be dynamically adjusted so as to make a small profit for investors in 2.

Tyring to mix these two things in one security is just horrible from the perspective of any investor who wants to be able to invest efficiently in specific assets (e.g. silver) and have control over their exposure to different things.

This was addressed in Question 2 of our FAQ. This particular take on it is a little different -- the existence of the second investment (which owns the first) is independent of the operation of the first investment (the pure silver one). So we simply don't see the point in creating a pure silver investment and splitting up the operation of TU.SILVER. We are simply not in the "pure silver" business. We offer investors a complete package. We're sorry if you want a simple silver fund but that's just not what we do.

Since you think that a pure silver fund is what people really want, you're more than welcome to start one. My question is, why you think people even want one, seeing as how both LTC-SILVER and GOLD collapsed due to lack of demand... I mean it seems from where I'm standing that I'm the one who is giving people what they want, why would I want to change what I am doing? What is the case you are making exactly? Increased profits? Greater demand?

[Deprived]

It's fine as an answer IF you look at the investment in isolation rather than as part of a portfolio or larger position.

Then look at it in isolation using the same criteria you use to look at any other investment in isolation when considering the composition of a portfolio.

But that's exactly what I CAN'T do.  As one of the first criteria I use when looking at an investment is to determine to what extent it is effectively denominated in each currency.  Which is what I can't tell for yours over any length of time (I can estimate it now - but have no idea what it'll be at any future point in time).

It's fine as an answer IF you look at the investment in isolation rather than as part of a portfolio or larger position.

Then look at it in isolation using the same criteria you use to look at any other investment in isolation when considering the composition of a portfolio.

Where it isn't fine (...) is in the following scenarios:

1.  You want to manage your exposure to various things (X% BTC, Y% silver, Z% LTC etc etc).  You can't do that without knowing what percent of exposure the fund will have to BTC.

Isn't that like saying no one would ever invest in LTC-ATF because they don't know what the individual holdings are? I'm not sure that's right. Anyways, anyone can calculate the non-silver component of the fund by subtracting spot silver, coin premium, and shipping cost from the fund. Vault storage is a marginal cost. An experienced investor will have these numbers on hand but in any case they are easy to research. We don't need to publish them so long as they are disclosed.

Nah the LTC-ATF comparison is a different issue.  With LTC-ATF they don't know the specific securities being traded but they DO know that the fund's exposure constantly remains within a few percent of 85% LTC, 15% BTC.  With TU.SILVER the point is that we don't know what X and Y are if it's X% Silver, Y% BTC investments - knowing the detail of the BTC investments is a seperate issue (and not actually one that massively concerns me).

Yes - I COULD calculate what X and Y are right now.  But the problem is that I have no way of knowing whether those percentages will be the same tomorrow, next week or next month - or what impact an exchange-rate move will have on those percentages.  It's what will hapen in the future that I care about - NOT what a current snap-shot is.  I don't invest because of what something's current price/composition is - but because of how I expect that to change over the period of my investment.  Without a clear stated policy on those percentages there's zero way I can predict the extent to which changes in the price of silver and/or BTC/USD exchange-rate will impact the price of your shares.

Since you think that a pure silver fund is what people really want, you're more than welcome to start one. My question is, why you think people even want one, seeing as how both LTC-SILVER and GOLD collapsed due to lack of demand... I mean it seems from where I'm standing that I'm the one who is giving people what they want, why would I want to change what I am doing? What is the case you are making exactly? Increased profits? Greater demand?

Well there clearly IS some demand for one - as some people have actually redeemed silver from you.  I have no intention of running a PM fund myself.

But if your argument is that there isn't much demand for one - then what makes you believe demand for your shares would be lower if you didn't bother holding any silver at all?  People investing in your shares are most likely doing so because:

a) It's there - absolutely terrible securities with no prospects get sales (NOT saying yours is one), just being listed gets some sales anyway.
b) It's paid decent dividends - that'll sell anything.
c) Maybe some people invest because they have faith in your investing ability - if so it's DESPITE the silver holdings not BECAUSE of it.
d) Some people day-trade anything which has activity.

I don't see how you have ANY basis for assuming investment is because you happen to hold a bit of silver.  If you believe people want to own a mix of silver/BTC-denominated assets then a pure silver asset satisfies that BETTER than a mixed one - as it adds the ability for them to choose the percentage of each they hold.  A hybrid one gives the worst of all worlds - the inability to invest in just one or the other AND the inability to choose the extent of your holdings in each.

So if there IS interest in silver then a pure asset is attractive to more people (e.g. those who want to own/trade/deal options on silver).
If there isn't interest in silver then you should drop the silver totally - as it's deterring investors who may like your trading but don't want silver.

You widen your potential pool of investors from those who want a fairly random mix of silver/BTC holdings in an asset (they can still get that buy buying shares in both assets).  That's the benefit of splitting it.

[usagi]

Isn't that like saying no one would ever invest in LTC-ATF because they don't know what the individual holdings are? I'm not sure that's right. Anyways, anyone can calculate the non-silver component of the fund by subtracting spot silver, coin premium, and shipping cost from the fund. Vault storage is a marginal cost. An experienced investor will have these numbers on hand but in any case they are easy to research. We don't need to publish them so long as they are disclosed.

Nah the LTC-ATF comparison is a different issue.  With LTC-ATF they don't know the specific securities being traded but they DO know that the fund's exposure constantly remains within a few percent of 85% LTC, 15% BTC.  With TU.SILVER the point is that we don't know what X and Y are if it's X% Silver, Y% BTC investments - knowing the detail of the BTC investments is a seperate issue (and not actually one that massively concerns me).

Not sure -- you could invest in a BTC denominated bond like BTC-BOND, and you would still retain full exposure to BTC. I don't think there is anything magical about currency or silver or hardware or any other asset class that changes how you can value a security based on what % of the asset it is. If you are unaware of the exact percentage of silver in TU.SILVER, and make the argument that you can't value it based on that, then I can say the same thing about LTC-ATF because I don't know what % of the fund is invested in any particular security, which is in turn exposed to currency. I get what you are saying about 85% though -- we're after a similar ratio in silver, so at least once we return the fund to equilibrium the same principles will apply.

Yes - I COULD calculate what X and Y are right now.  But the problem is that I have no way of knowing whether those percentages will be the same tomorrow, next week or next month - or what impact an exchange-rate move will have on those percentages.  It's what will hapen in the future that I care about - NOT what a current snap-shot is.  I don't invest because of what something's current price/composition is - but because of how I expect that to change over the period of my investment.  Without a clear stated policy on those percentages there's zero way I can predict the extent to which changes in the price of silver and/or BTC/USD exchange-rate will impact the price of your shares.

Yes and no. The silver portion cannot go to zero, so if you feel that our units are priced close to the spot price of silver, it is a good time to invest. Unknown upside potential is never a bad thing. You can find information on how much is in what area in our monthly financial report, where we separate the value of silver from the investment position and short term cash accounts of the company.

Since you think that a pure silver fund is what people really want, you're more than welcome to start one. My question is, why you think people even want one, seeing as how both LTC-SILVER and GOLD collapsed due to lack of demand... I mean it seems from where I'm standing that I'm the one who is giving people what they want, why would I want to change what I am doing? What is the case you are making exactly? Increased profits? Greater demand?

Well there clearly IS some demand for one - as some people have actually redeemed silver from you. ...
But if your argument is that there isn't much demand for one - then what makes you believe demand for your shares would be lower if you didn't bother holding any silver at all?

Simple, if we didn't hold any silver we could only offer a subset of the services we offer now, and we could not guarantee the ability to buy back all of the units of TU.SILVER upon demand. Right now, in an emergency, we can offer cash settlement on all units by selling the silver ourselves and buying units back with BTC. In fact, as a silver investor myself, I am more than willing to be a buyer of last resort and repurchase all existing silver of the fund with my own cash at any time. Or, we can simply redeem ALL units as silver. Both of these scenarios would be impossible if we did not bother holding any silver at all, and we would not be as attractive as an investment vehicle for silver.

If you believe people want to own a mix of silver/BTC-denominated assets then a pure silver asset satisfies that BETTER than a mixed one - as it adds the ability for them to choose the percentage of each they hold.  A hybrid one gives the worst of all worlds - the inability to invest in just one or the other AND the inability to choose the extent of your holdings in each.

So if there IS interest in silver then a pure asset is attractive to more people (e.g. those who want to own/trade/deal options on silver).
If there isn't interest in silver then you should drop the silver totally - as it's deterring investors who may like your trading but don't want silver.

You widen your potential pool of investors from those who want a fairly random mix of silver/BTC holdings in an asset (they can still get that buy buying shares in both assets).  That's the benefit of splitting it.

Now we're getting somewhere. I agree with what you're saying. However if I ran the fund that way, then we would have to charge investors when they wanted to redeem silver and that may create a situation where someone is unable to ever redeem their silver. I believe our investors recognize and appreciate why we offer this policy. Secondly, if we split the fund like you suggest we could not preserve the long-term value of our investor's silver. There is simply no realistic alternative to the servcie we offer -- someone can buy shares of TU.SILVER and walk away for 20 years and there is a very real financial incentive for us to watch over the silver for our customer that whole time. Say the customer falls upon hard times and calls us up. We can give him his silver even if he has no money to pay for shipping. Out of all the reasons you presented for people owning TU.SILVER, you missed that one and any kind of "silver story" or "silver singularity" event. That is why we exist and if I were to change how we operate I am willing to bet we'd lose our existing customers.

I don't mind starting a secondary "pure silver" fund, maybe, but it would have nothing to do with TU.SILVER. The real problem with something like that is I just don't see the point -- after another week or two, you will see the price of TU.SILVER pushed very close to spot + coin premium. What would the point of a pure fund be? to beat the price by 5% and then have to pay a 5% shipping charge? I don't think it calls for an entirely new asset. I could always just change the company policy, but at this point I'd probably run a motion to do so. In fact, just running motions to change the policy is probably a much better option than creating an entirely new asset.

[jjdub7]

Let me just say that first off, this conversation has taken a huge leap in a positive direction and the 3-5 of us are actually sounding somewhat like a real mgmt team.

Usagi, I think now that I've looked at things, your only real liability here with the current hybrid form of TU.Silver is making sure the shares do not fall below their 1/10 silver oz valuation in terms of BTC (around 0.02 right now).  Because the asset is backed by silver, you'd need to be willing and able to buy back a certain percentage of the shares at an announced rate (like 90% of silver BTC value or something stated).  This will guarantee the silver-backed portion of the asset.  The rest of the value is based on speculative future gains, so investors are free to trade the remainder of the price based on that speculation, making that percentage of the share price more of an investment fund.

So yeah, again, the shares should only 'officially' be worth an issuer-guaranteed spot price of silver (based on a moving average for cash flow purposes - a large spike in silver prices could force usagi to buyout at the expense of all other shareholders).  Any value above that should and pretty much is set by the market.

However I do like usagi's investment skills and wouldn't mind seeing a pure investment fund in the future.  Keep in mind that this is how Warren Buffett operates too...he says things are worth such-and-such and so they pretty much are...

[usagi]

Let me just say that first off, this conversation has taken a huge leap in a positive direction and the 3-5 of us are actually sounding somewhat like a real mgmt team.

Thanks. I really appreciate your positive energy here. As a result of that, and of Deprived making a good suggestion, I'm holding a shareholder vote to see whether or not current holders want us to drop the free shipping policy. It has it's benefits, but, it is one of the most dead-weight aspects of the fund right now.

I am a big fan of "baby steps". We will see how that motion goes, and I will continue to pay out excess BTC, and we will see how that ends us up in a couple weeks

[jjdub7]

Let me just say that first off, this conversation has taken a huge leap in a positive direction and the 3-5 of us are actually sounding somewhat like a real mgmt team.

I'm holding a shareholder vote to see whether or not current holders want us to drop the free shipping policy. It has it's benefits, but, it is one of the most dead-weight aspects of the fund right now.

I am a big fan of "baby steps". We will see how that motion goes, and I will continue to pay out excess BTC, and we will see how that ends us up in a couple weeks

^This.  Good.

[Deprived]

Now we're getting somewhere. I agree with what you're saying. However if I ran the fund that way, then we would have to charge investors when they wanted to redeem silver and that may create a situation where someone is unable to ever redeem their silver.

Actually you wouldn't have to charge when they redeem - the purchase price in the first place would include a markup to cover shipping.

For investors who wanted to redeem the markup covers purchase.
For those who want to hold it covered storage costs.
For those who want to trade they get it back when they sell.

In reality shipping isn't free in your current model either - at some stage it HAS to be paid for.  Right now it's paid for by them giving up the non-silver part of the assets backing their shares when they redeem: which is essentially no different to what would happen in what I suggested.  Minor theoretical difference is the shares would ONLY 'own' the silver - the markup for shipping would go to the investment 2nd company (who would pay it when necessary) - but in practice that's not really any different.  Where the difference lies is in the seperation of the two elements allowing those who only want to invest in one to do so.

Which brings me to the main point - why does the percentage of each currency matter anyway?

Well there's two reasons:

1.  The general one which applies to many people (I hope).  Some investors like to manage their investment across different currencies so that in the event of a major swing in the exchange-rates/value of one they keep their losses to a reasonable level.  The most obvious such pair being BTC/USD.  Obviously there ARE people who just invest blindly without consideration of that - and no doubt some such 'investors' got horribly burned buying in at the top of the recent BTC bubble (then compounded it by selling at the bottom).  The degree to which each investor spreads their funds, the extent to which they maintain their preferred ratios and what those ratios are will obvously vary from investor to investor. 

Now some will have their USD investment (and for simplicty we'll consider silver to be such - though it obviously isn't precisely) offline.  Those are irrelevant to this discussion as they won't be buying TU.SILVER anyway (not for the silver anyway).  For the ones who keep their silver/usd investments online they HAVE to know what percentage of an investment in TU.SILVER is (and WILL be) silver to maintain whatever ratios of exposure they wanted.  Otherwise they could end in the nasty situation where BTC crashes, they look at their TU.SILVER investment expecting to see a major rise and instead see it's barely risen - because it happened to have more BTC than silver in it when the BTC price crashed.  And so their attempt to mitigate risk totally failed because of something they had no control over and no way to predict (in fairness THEY are largely at fault in that as they must have bought when the shares contained a large BTC element).  So TU.SILVER ceases to be a useful investment for those who want to use it hold the USD-denominated portion of their investment.

2.  The specific which probably applies to few people.  Sometimes an investment opportunity or potential position exists where something is underpriced but bears a heavy risk if exchange-rates move in the wrong direction.  We're talking about something effectively leveraged into a long position on BTC (unfortunately there's not that many such things around).  For me to safely take advatange of that I need to hedge it with something that's short on BTC - which, if done properly CAN lead to guaranteed profit (provided the discount on price exceeds the cost of hedging).  A pure silver asset is one good way to do this - how good depends on my perception of the likley strength of silver vs USD over the period the other side of the pair is expected to last.  As soon as there's any significant BTC element in the asset it ceases to become useful for this - not so much because it HAS BTC in it (I can manage that) but because it becomes inefficient.  I have to tie up BTC to hold BTC and, worse, if I do it through options a large part of the premium is for BTC that I don't want or need an option on.

More interestingly the opposite direction is more useful (because there's far more opportunities to go short on BTC than to go long).  Here's an example (doesn't apply to my fund - COULD apply to some of my personal.  I give a USD-denominated loan to someone paid and repayable in BTC (but obviously calculated based on exchange-rate).  Because it's USD-denominated I can charge a far higher interest rate than if it were BTC-denominated.  What I now want to do (if I don't want to convert other USD into BTC to rebalance my personal ratio across currencies) is protect against a large rise in BTC (a small rise doesn't matter - the extra interest rate covers that).  Buying PUTs on silver could serve that end (there's other ways to do it of course - options on MPEx, a leveraged position on Bitfinex etc) and would likely be cheaper than the alternatives.  But again it's not really feasible if I'm paying a premium that's largely to sell BTC for BTC.

If you're aiming to get the share price back to somewhere near Spot + small markup (small markup being well under 50% of spot) then that's great.  But it then leaves the rather obvious question of where do the funds to buy new silver come from?  I know your initial silver was bought with a (presumably interest-free) loan from yoruself - but that's not really a great business model (a business shouldn't rely on regular free handouts - and an interest-free loan IS a handout).  With the model I suggested obviously the silver is bought by the investors in the second asset - who get the profit on selling it (but then have to pay some it back for shipping/storage etc).

[jjdub7]

If the demand for more backing shares manifests itself, why not have potential investors pre-order?  Of course this also begs the question (which usagi may have already answered) - are storage costs variable or are they a flat percentage of the value stored?

[usagi]

If the demand for more backing shares manifests itself, why not have potential investors pre-order?  Of course this also begs the question (which usagi may have already answered) - are storage costs variable or are they a flat percentage of the value stored?

There's a minimum fee of around $30 US /month, but beyond that it is about 1/2 to 1% of the spot value of the silver.