the short interest in sso is now up to 3.285 million shares, up another 15%. this represents 5.25% of the outstanding shares. whether or not this is hedging by owners of the converitble notes, it is weighing on the share price now. the strength sso showed earlier in the week was not due to short covering, it came despite additional shorting.

so if anyone is wondering why sso is underperforming some of the other silver stocks, you need look no further than the short interest. as to why this is occurring, given the lack of transparency in the financial markets, we can only speculate as to the motives of the short sellers.

it is clear that the world is awash in dollars, and money supply growth is continuing to accelerate. foreign countries have enormous forex reserves denominated in dollars, and wish to diversify out of their exposure to the declining us dollar. some countries have established sovereign wealth funds for that purpose, and i believe some of those funds will find their way into commodities and commodity-based stocks like sso. this is a relatively large-cap, liquid stock, so it is a prime candidate for shorting. if they can convince people to dump their underperforming shares in mining companies, so much the better for them.

a year from now i think we will look back at this as an opportunity to buy, not sell sso.