October 23, 2008



Re: Response from the CME Group


Ladies and Gentlemen:

We have received an outpouring of support and interest from the recent letter I sent the CME and the CFTC. Before I get into their response, I would like to mention that many investors, individuals, and institutions are perplexed by the unusually tight (in some cases non-existent) supply of investable/deliverable silver in the world. I find it unusual that silver remains labeled an industrial metal when in fact it has become so scarce for investors.

The reasons for owning gold and silver have been well published by many individuals. What I am more concerned with is the inability to invest in an asset class in which there is currently very little availability. Unlike any other conventional market, gold and silver, seem to be getting harder to find as the paper price drops further.

I am worried about the confidence and perception of the paper metal markets. With the physical supply shortage being real and physical demand being so strong, the concern is that individuals and institutions may start to test the exchange’s credibility through outright demand of their inventory. Unlike the government’s bailout programs for many paper instruments, I do not see that type of shared support for the commodities market, especially precious metals.

Trust is a very fragile commodity, itself. Once broken, it may never be restored. That is the risk the paper metal markets are telling me at this point. Unless there is underlying or fundamental reasons beyond margin calls for the drop in paper prices, my intuition is telling me that something is very wrong. Is someone or some entity building a large position in the precious metals? If that is the case, then you may be concerned about the ability to get physical metal in the future. That is why I wrote the letter to the CFTC and CME Group.

Again, the risks are real and individuals must understand the true difference between the physical and paper world. The paper is only as good as what backs it. In this period of history it is evident many investors are now asking “who can I really trust”. It is that mentality that places a premium on the physical metal versus a paper certificate. As this credit crisis unfolds and the bailouts continue, it is only logical that many exchanges will be tested. As a concerned investor, the last thing I want is to be holding a paper promise that may not be fulfilled.

I would like to thank the CME Group for their quick response. In full disclosure, this was their actual reply to me. I am still waiting to hear from the CFTC.


Bob:

Thank you for your October 17, 2008 email where you inquired:

- "...I would like to buy and take physical delivery of 1 to 5 million ounces

of silver a month on a consistent basis...."

The monthly volume (200/1000 contracts) which you would wish to take delivery is currently within the Exchanges Silver “Expiration Month Limit” and thereby acceptable to the Exchange.

-“… Would there be any obstacles or resistence from either the CME Group/COMEX or the CFTC…”

I can only reply for the CME Group and not the CFTC.

As long as any customer follows the Exchange Rules, there would not be a problem.

Vice President
Market Surveillance
CME GROUP

It is obvious that the rules can change at any moment and this is a concern to many individuals. For now, I would strongly suggest if you were thinking about owning silver, the COMEX is certainly the most cost efficient method of procuring the metal. Please keep in mind that transportation and storage of these bars may involve a cost. These costs have to be weighed in your decision making. We can provide an effective and efficient alternative for those who are not interested in dealing with these issues yet want to participate in the precious metals.

Our programs are determined to follow the rules of the exchange and take physical delivery of their inventory for as long as possible. The structure of our programs and vaulting facilities are very unique and have been designed to fully insure and segregate all physical precious metals. The storage is independent from the financial and bullion dealer system. We specialize in providing private storing, safeguarding, and viewing of your assets. We have made arrangements with armored transportation carriers to pick up, transport, and store the metal to many of our available vaults. Please go to http://profitspluscapital.blogspot.com/ for more information.

For individuals, investment professionals, or institutions who are concerned about the unusual nature between paper and physical gold and silver prices and wish to create a more balanced environment that reflects the true supply and demand imbalances in the market place, please contact me at 208-468-3600 or email me at profitsplus@cableone.net.

Bob Coleman
Managing Member, Profits Plus Capital Management, LLC

Taking delivery of 1 to 5 million ounces a month

October 16, 2008


To Mr. Chilton, Commissioner, CFTC and Ms. Troyke, Director and Associate General Counsel, Market Regulation, CME Group:

In full and proper disclosure, I would like to ask the CME/COMEX and CFTC the following question regarding monthly delivery of silver.

I manage a physical gold and silver bullion fund. In order to stay within the “Model State Commodity Code” of many states, an exempt transaction by the purchaser (in this case the Dollars and Sense Growth Fund) must abide by the following code:

A commodity contract for the purchase of one or more precious metals which requires, and under which the purchaser receives, within seven to twenty-eight calendar days (varies depending on the state) from the payment in good funds of any portion of the purchase price, physical delivery of the quantity of the precious metals purchased by such payment, provided that, for purposes of this paragraph, physical delivery shall be deemed to have occurred if, within such 7 to 28 day period (varies depending on the state), such quantity of precious metals purchased by such payment is delivered whether in specifically segregated or fungible bulk form.

In this environment, it has become very difficult and expensive to buy physical silver from the physical dealer market. The difference in paper prices on the Comex and the physical dealer market have widened considerably. In addition, the overwhelming demand for silver has created delivery time delays of up to 4 months. These delivery delays create a direct violation with many Model State Commodity Codes.

My research has led me to the conclusion that it is much more effective and cost efficient to buy silver directly from the COMEX and take full delivery. The spot prices are much cheaper than the dealer market and the CFTC along with the CME/Comex have stated in reports there are ample supplies of silver available for delivery with no market inhibitions. For an individual or institution wanting to accumulate a position, these are ideal market conditions.

The question I have is this:

I would like to buy and take physical delivery of 1 to 5 million ounces of silver a month on a consistent basis. I am not interested in holding warehouse receipts but taking actual physical delivery from your approved depositories/warehouses. Would there be any obstacles or resistence from either the CME Group/COMEX or the CFTC when I begin to implement or during the ongoing process of this strategy?

I look forward to your reply.

Bob Coleman
profitsplus@cableone.net