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Hinde Capital On Whether GLD Is A New CDO In Disguise
Hinde Capital has expanded on an idea we have been toying around with and wish to follow up on soon (that ETFs are de facto the new CDOs, as the most actively traded products (SPY, GLD, etc) are now merely synthetic representations of underlying securities, as the actual securities are increasingly more thinly traded, thus creating a huge "tail wags the dog" paradox), by penning a presentation calling GLD "the new CDO in disguise." We don't think it is disguised - after all the two products share far too many characteristics, although having CDO-like features does not make something evil per se. The reason why implied correlation hit 0.8 yesterday as we first pointed out, is precisely due to the aggregation of products into such synthetic aggregators as ETFs, of which GLD is merely one of many. Yet Hinde's opinion focuses precisely on the disconnect between the "idea" of owning a hard asset, and the reality of merely having claims to a Cede & Co stock certificate which in turn has no liquid and direct physical collateral, in essence condemning GLD and all non-physical ETFs, by saying "we believe ETFs are a risky way to express a gold view." All this and much more on why GLD has more risks than are acceptable for any sophisticated investor in the attached Hinde Capital presentation.
In possibly the most damning presentation of GLD, Hinde has summarized in a succinct and specific fashion all the key risks associated with having GLD exposure. Namely:
- Alchemy risk
- Accounting risk
- Title and ownership risk
- Indemnification risk
- Counterparty risk
- Audit risk
- Liquidation risk
- Redemption risk
- Disclosure risk
A must read presentation for everyone wishing to get familiar with the finer nuances of what could go wrong.
h/t Bradley
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"We don't think it is disguised"
You mean "We don't believe it is disguised."
This is the most brainwashed, Zombie nation in the history of the world.
http://www.youtube.com/watch?v=5gUKvmOEGCU
Interview with Ben Davies of Hinde capital at King World News on the above report:
http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/8/12_Ben_Davies.html
I'd love to see the increased metrics of that website over the past 2 years. Their visitor count must have at least doubled.
Hinde Capital is pushing allocated gold bullion, (their product); is there anything else you need to know about this "report"; hint, it's propaganda.
Ok, IQ 1.45!
IQ
Hinde Capital may be pushing their own product but they are absolutely right, this is not just propaganda. People investing in gold ETF's are going to get crushed when this goes parabolic. Go read GLD prospectus.
"Hinde Capital is pushing allocated gold bullion"
Thanks Captain Obvious, of course it's propaganda. Do you rely on your 145 IQ for other conclusions like:
My Car Requires Fuel
My Stomach Needs Food
You're missing the point of the article, GLD and SLV are a scam.
Right so when a company sees an opportunity to create something of value that will make people, including themselves money, it can't possibly be good.
Why would any company create anything and then promote it? Ludicrous!
It boils down to this ZH'ers no matter what anyone says:
Gold: If you do not physically hold it you do not own it. Period!
Physical Ownership Bitchez!
Back in 2008, stocks/bonds/REITS traded below (arguably) their private market value. Many companies were simply left for dead (my favorite examples are GGP and DTG). You could buy the auto dealership stocks for less than a handfull of dealerships would cost on the private market.
Now it seems to be the opposite. Much easier to buy an apartment building then EQR. SPG valuation? Ha! A 2.6% yield?
We are heading back to 2008. People will sell whatever they can. ETF's included. GLD included. At some point, there will be no other recognized form of ownership than physical possession or actual title. No 0100101010101's in some Fed-linked computer.
Cede & Co is created and owned by the same people that own the Federal Reserve, need I say more?
I find this odd.
First there is the BBC story
http://www.bbc.co.uk/news/world-us-canada-10783019
Why the US keeps minting coins people hate and won't useIn hidden vaults across the country, the US government is building a stockpile of $1 coins. The hoard has topped $1.1bn - imagine a stack of coins reaching almost seven times higher than the International Space Station - and the piles have grown so large the US Federal Reserve is running out of storage space.
Then I find this
http://www.congress.org/news/2010/08/11/advocates_dollar_bills_lead_to_debt
Advocates: Dollar bills lead to debt The Coalition for the $1 Coin argues that greenbacks add to the nation's debt.The Government Accountability Office estimates that the government could save more than $500 million a year by using the dollar coin exclusively, since it's more durable than the dollar bill and offers the Mint a big profit on every one it makes.
"Taxpayers love to say nobody in Washington is doing anything to cut wasteful spending. This they can do themselves," says Thomas A. Schatz, president of Citizens Against Government Waste, a group more associated with fighting earmarked federal funding than promoting coins, which has signed on with the coalition nonetheless.
Known as the Coalition for the $1 Coin, the group's supporters include PMX Industries Inc., the Iowa-based affiliate of a Korean firm that manufacturers the copper blanks the Mint uses for the dollar coin; as well as the National Bulk Vendors Association and anti-tax groups like Americans for Tax Reform.
Are we being sold on a new currency? Is revaluation just around the corner?
What about this?
http://www.businesspundit.com/the-new-100-bill-colorful-and-counterfeit-...
The New $100 Bill: Colorful and Counterfeit-Proof"Why the US keeps minting coins people hate and won't use" It is the ultimate stimulus job. Hire some workers to run the stamping machines, inspectors, security, etc. Doesnt cost a dime, rather it makes money. Off budget.
Most persceptive good Doctor! The seiniorage on every dollar coin adds about 93 cents to the mint's books, so they have never destroyed the Susan B. Anthony coins as it would "cost" them $.95 book entry per coin to do so, in addition to the melting costs. The minting cost is part of the bid/ask spread on gold/bullion coins (plus extra mark ups, wink/wink).
Inquiring minds should know that the GLD prospectus spells out numerous "problems" with GLD holdings, all in CAP BOLD type such that they guarantee nothing. Ignorance of such is at your own choosing.
damn gull of these bastard whores, everybody in bed 2gether. say it isn't so. what do U think of a $1 coin, solve any of our problems?
Well think of the fire danger. During the 2008 crash they trucked out 400 billion in cash to banks to brace for bank runs. In 1814 the library of congress was burned to the ground by a Britsh soldier setting one book on fire and thowing it into the pile.
All it takes is someone with a gun and matches demanding the vault be opened.
But seriously if we see a huge bank run in US in next couple months it will kick off hyperinflation like never before because all those counterfeited dollars will suddenly be in circulation.
following your point sort of until this
hyperinflation like never before because all those counterfeited dollars.
what counterfeited dollars = the printing press dollars from helicopter BEN?
I finally kicked my GLD habit. Kept telling myself that I just wanted dollars tied to the price of gold and didn't care about physical. Glad I stopped deluding myself before the big GLD collapse...
Good thinking!!
GLD is the new Orgasmatron in disguise. Both are better, faster, and less messy compared to the real thing, as long as you don't have the need to physically hold on to the ass(et).
http://www.youtube.com/watch?v=DeBKJ2ws0Y8 starting at 0:42 of the clip.
in S E X
damn HH, i missed so much in my previous life.
if TSHTF and GLD were to ever meltdown, who in the mainstream would shed a tear, or who would champion legislation to compensate those poor paper-gold bugs that lost everything? the regime and PTB will just revile them as greedy hoarders that wanted to profit by the nation's demise; physical gold holders will be reviled too, but they at least will still have their metal, GLD investors however will be left holding an empty bag
A little OT here but, if GM is raking in the billions like they claimed today, why did the CEO quit today as well? Something sure smells fishy here. We all know they are committing major accounting fraud, so does the CEO think if he leaves now he can escape untouched? What a crock. All of their sales were to the freaking government on taxpayer dollars. WTF is that? I cannot believe Tyler has not done a piece on the GM fraud earnings today.
I find it odd as well. I suspect there was something going on (i.e. furloughs, sales) that was to help the macro numbers look better through Government Motors.
I would disagree with Hinde's recommendation to hold allocated Au and Ag in Swiss banks. Earlier this year the Swiss passed legislation that allowed the government to block the export of assets (including gold and silver) under emergencies.
So, in the event of a currency meltdown the Swiss can confiscate your allocated PM's and give you a paper certificate. This legislation has caused many large bullion holders to move their metal out of Switzerland to safer jurisdictions such as HK, Singapore, Dubai, etc.
How many major league asset managers build up any kind of physical gold position off of these and related concerns? I know this happens/has happened with other commodities - Einhorn was actually taking delivery on oil at one point (although for different reasons). Is PHYS considered "good as gold" in this regard? What are some of the larger, private U.S. holders of gold coin and bullion?
Currently there is no opportunity cost other than the its premium when holding GLD, so why should they bother?
The real question is, how many major league asset managers recognize that the music has to stop eventually destroying the value of this gold proxy?
Ah, gee.... Are we to believe this 50-page presentation when Hinde owns its own vehicle that competes with GLD in the market place?
http://www.hindecapital.com/docs/hinde_gold_fund/Why%20Hinde%20Gold%20Fu...
No fan of GLD due to its ability to hold paper gold in leu of physical, but why didn't ZH point out this obvious conflict of interest?
Isn't an investment in PHYS "the" play to make if one wants a true, physically backed gold ETF?
OMFG, 1.5% and 20 to have some schmuck buy gold for you. These hedgies have absolutely no shame.
phys listed in the us and canada is subject to confiscation under current legislation.
it seems to me that this is possible globally.
get actual physical and get smart about personal security.
There is no gold confiscation legislation in the US or Canada. And if you are worried that someday the gov might buy your gold from to back their new currency, WTF? At that point you have a gold backed currency. Who cares. That was the whole point.
Ka-effin-boom! Bullion and mining shares will be collateral damage when this thing blows.
Zzzzzz... Gold can become worthless too if it's lost, stolen, banned, exploded, replicated, duplicated, supplied or granted.
Yeah, a sudden breakthrough in alchemy is a real danger.
Allocated account at a non-AP bullion bank? If TSHTF, suspect that these accounts would be easy targets for confiscation or delivery suspension. A RCM bar in hand is worth two in the vault.
Mule65, you forgot irradiated.
If Hinde has concerns about SLV it would be interesting to see their opinion of SLW.
SLW and SLV are totally different things. SLW buys silver in advance, at locked-in prices well below spot, from mines that produce it as a by-product. Most silver comes from what are primarily lead or zinc mines. This gives the mine operator up-front cash and a guaranteed price for the silver, and SLW earns a nice spread. It's a great business model. SLW and royalty outfits (RGLD and FNV.TO) are blue-chips compared to other precious metals mining equities.
SLW is also exposed to delivery risk.
ETFs, the big ones at least, are sources of cash for market manipulations by the big banks. They know what coordinated manipulations are to be carried out, so have a nearly sure chance of making money with the cash you give them to play with. They DON'T (unless by pure accident) invest the cash in stocks and/or commodities that correspond to the ETF that you invest in. They just need to make the value of the ETF track the underlying market it is supposed to. They can make a lot more money with your cash than you'll ever see in increases in the value of your ETF. Most likely investments in GLD are used to supress the value of gold by shorting etc. They use up to 100:1 leverage on the cash you invest with them. So if you invest $10000 in GLD, they can short $10000 in GLD and put another $990000 in play wherever they want. If the SHTF and the market fails, your money will be gone. Nothing to back it up. The "holdings" of the GLD are actually swap agreements with the LBMA. The gold doesn't actually exist. If enough people started pulling their money out of GLD, SLV, etc and put their money into GOLD, SILVER, etc instead, it would put a major wrench into their scheme. Any 'physical" that the GLD holds is most likely tungsten filled crap that LBMA/central banks wanted to get rid of.
well said, A X E
Synthetic CDOs were manufactured to enable hedge funds to short the mortgage market. The drive to create them came from the short sellers.
Wonder if GLD is similar. After all it provides a nice liquid vehicle for shorts . And the Fed/ECB clearly like to control gold.
Bottom line is this GLD is about as simple a business as you can get. Store bars of gold in a safe location and sell shares against it and enjoy long 3 cocktail lunches. Why do you need a massive prospectus to describe such a business? Why all the complexity ?
These same "tail wagging dog" arguments were made in the 1980's when index futures were gaining popularity, and baskets of stocks were arbed against excessive or understated futures premiums. At least those products are cleared by the exchanges.
The more subtle issue in many of the etfs is that many hold over the counter swaps that possess significant counterparty risk, but that may be about to change post FinReg... http://bit.ly/bSo7tn
The index futures are also crap. tail wagging the dog still continues.
Look - I think all the "financial innovations" since the 1980s have to be questioned. If it was all so great - how come they have managed to drag a great country and economy to the point we now find ourselves in?
People have been thoroughly scared out of becoming long term owners of fractional interests in businesses. It seems to me that is the primary purpose of the financial markets. It has failed . Thoroughly. Its all crap.
Also the fact that GLD tracks the price of gold tick for tick during the trading day raises questions.
Is the "price of gold" actually being determined by GLD price? Since it is so large - does it in fact drive the so called market price of gold?
The only way to determine this is to actually buy large quantities of physical gold - what price would that trade happen at?
Is this GLD the vehicle being set up in anticipation of a currency reset at some point? To accumulate as much physical in one place that can then be conveniently appropriated? Create a huge scandal/blwup( CDO style). Then the govt - to provide partial compensation to the victims - offers govt issued "gold certificates" ?
A lot of the ETFs trading today are pure crap. They dont deliver what they promise and are riddled with counterpart risks, tax uncertainty etc.
After the events of the last couple years - all synthetic, manufactured, packaged products have to be assumed to be guilty until proven otherwise.
Stocks(long and short), bonds and exchange traded futures - are for the moment somewhat trustworthy. All the other stuff - mostly crap.