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Sprott Speaks, Discusses The Global Ecoonomy, The Imaginary Recovery And His New Physical Gold Trust
Eric Sprott was discussing the global macro picture earlier in an interview with Bartiromo. Here are his key observations:
I still have a deep, deep concern about the leverage in the banking system. I look at the inability of governments who are spending vast amounts of money to generate much growth in GDP. I can give the example of running a $1.5 trillion deficit last year and GDP goes up $200 billion. So we are not getting much bang for the buck but we still owe the buck at the end of the year. I also worry about what's going on in China. The Chinese government has asked the banks to cool down their lending, the latest data in March show that lending has gone down from $300 billion per month to $100 billion. That's $2.4 trillion a year less. And obviously it has to have an effect on their economy as the lending of $2 trillion did positively last year. When you look back at China in 2009, they had a $4 trillion economy, they lent $2 trillion to people, they had a $600 billion stimulus: those should generate some GDP growth. I am not even convinced that 10% growth which would be $400 billion is a good response to all the measures that were taken.
Sprott then goes on to discuss something very dear to gold holders: physical gold and specifically his gold trust, the PHYS (Sprott Physical Gold Trust) which competes with SPDR's GLD. The main difference, as most people know, is the PHYS actually has real, auditable physical gold to back the underlying, not to mention the 15% vs 28% tax differential. Sprott goes on to defend why gold, which has been the investment of the decade, looks even better today than it has ever looked:"We have sovereign risk on the economic risk today, that we didn't have before. As I look at the problems in Greece and I see poeple take $4-8 billion out of the banks, where do the people put that currency? It is obvious that lots of them putting it into gold."
Sprott also loves silver, which he thinks will act better than gold as there is not as much silver inventory in the world as there is gold inventory.
The ultimate catalyst for PM price explosion "We'll just see how long those governments' people will continue to buy their sovereign debt. When they stop buying that sovereign debt, then the reason why we are liking gold will become more and more apparent."
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Lets get PHYSical... PHYSical.. PHYSicall. Hey isn't that a song?
Crap song, great idea.
try this cool head bangin version:
http://www.youtube.com/results?search_query=revolting+cocks+physical&aq=f
i nominate it for the zh theme song.
What will happen when it all looks dismal, and all the currencies decide to run to gold? Will it all fit? 330 billion $ or so (my guess) in gold in the world and how many trillions of currency?
"Will it all fit?"
...that's what she said.
I knew someone would "bite" lol
330 billion $ or so (my guess) in gold in the world.
Way not true. Estimates run to 161,000 tonnes of the stuff mined throughout history. That would be 5 billion troy oz of gold. At $1,150 oz thats just under $6 trillion. This does not count silver, but theres a lot less above ground silver than gold. In any case, way more gold than $330 billion. However, it is still small compared to the total money/debt that is out there represented in paper money.
I absolutely believe you, I was just using the US gov. price, and guesstimating from there (embarrassed). I really hope there is a "run to gold" and silver, if only to stabilize currencies so to speak. Jim Rickards spoke of this in his latest on King world news, stating that IF there was a stablization of the money supply to gold, it may legitimize currency, or something to that effect. My only fear of that is that gold is interrelated to the price of oil, so there is too many forces pulling on each other for it to actually right the ship.
http://fofoa.blogspot.com/2010/04/21st-century-bank-run.html
"The first problem that struck me with this idea of repairing US credit with a gold revaluation was the use of M1 as the measuring stick of dollars in existence. Again, this could work under normal circumstances, but most of the world's perceived wealth held in dollars is not in M1 holdings. And in the case of credit reparation, I intuit that M3 would be the bare minimum starting point. And to his credit, Jim points out that a mere $20,000/ounce would take care of this concern.
But this is not the big problem I see with this plan. The biggest problem is what stands in the way of this controlled revaluation. And that is the paper gold market that is already fractionally reserved at 100:1 if we define reserves strictly as physical gold in immediate possession.
A Fed revaluation of gold is different than [true, free-market gold] because it aims to control the revaluation and set a new fixed parity. As nice as this sounds to those of us with some gold, it will always be unsustainable and in the case of today's gold market, is completely impossible without wiping out all of Wall Street and the dollar in the process.
Don't get me wrong. I'm not saying that NOT doing it will save Wall Street and the dollar. I am simply saying that this Catch-22, no-win situation the dollar finds itself in just doesn't have an out as easy as that.
Here's what would happen if the Fed tried this tomorrow: For those that own gold today, gold would suddenly become their most prized possession. And all of those paper gold holders would suddenly start thinking about what we have been saying for 12 years now. There would be a run on the Bullion Banks and the scramble to find physical gold and stay alive would drive its price well above $5,500 or even $20,000/ounce, driving the dollar and the Fed/US credibility into the dirt simultaneously...."
I am a HUGE fan of A/FOA and have found what I have read of FOFOA very sound.
I'm still confused about what did/didn't happen with respect to gold-backing the Euro on a floating-priced gold holding -- is it just a question of how long they wait until they pull the trigger? Or is something going to prevent them from doing it?
M1 money supply is currently 5 times the amount of gold (priced in todays dollars).
" ...theres a lot less above ground silver than gold".
Actually, this is a misconception. As Sprott said, silver "inventory" may be less than gold, but there is a huge amount of silver above ground, maybe 8-10x as much as gold - it is all in stuff like family silverware, christening mugs etc and when the price of silver shoots up, an avalanche of scrap silver will find its way onto the market.
That said, I still think silver will appreciate more (in % terms) than gold will over the next few years.
You are of course correct that the TOTAL aboveground stock of silver is almost certainly more than gold, but not by 8 or 10 times . The total amount of gold mined throughout history is around 5 billion ounces (maybe 80-90% of which is still floating around in some form or another), whereas for silver the figure would be more like 45 billion ounces mined, a fair amount (10 billion? 20 billion? 30 billion ounces?) of which has been effectively consumed by industry, and which for all practical purposes is today unrecoverable. So the total aboveground stock of silver is probably more on the order of 2 to 5 times that of gold.
Gold + silver + copper
I have been a China watcher for 25 years and believe they will ultimately back their currency with a basket of these metals.
Could very well be.
It will "fit" just fine, the only question is at what price. THAT is why SPROTT is long gold!
Why would the capital gains tax rate on Sprott's Physical Gold Trust be less (15%) than the tax on gains from GLD (28%)?
I read an article saying it's something complicated about its structure that allows this, and basically you need an accountant to figure out how to get the 15% rate. Perhaps this article was written by an accountant ;)
In any case, if there is a 15% loophole it will be closed soon. Gold is not taxed at 28% because it's a "collectible," it's taxed at 28% to discourage people from using it (instead of US $$$) as a store of value.
Physical precious metals, including gold, fall under special accounting for collectibles. Gains from sales of collectibles that are held less than one year are ordinary income, just like your W-2 income. Long-term gains on collectibles are taxed at a higher capital gains tax of 28%. http://www.irs.gov/taxtopics/tc409.html
And here is a link that discusses why gold-backed ETFs fall under the “collectibles” taxation rules: http://www.greencompany.com/EducationCenter/GTTRecPreciousBaseMetals.shtm
Maria got soooo hard for Eric. Did you see her rub her ballpoint pen when he was talking about his physical gold trust? Dirty little gold digger. Go ahead Maria! Take a whiff of that big bear dick!
What we didn't see in the clip above was the minute after the clip ends (literally 60 seconds). Maria goes on to say the the gold ETFs are also backed by physical gold. What a downer after such a nice interview. Her saying that illustrates one of 2 things: 1. CNBC interjected that (teleprompter) to offset the "rumor" that the ETFs ain't got no gold, or 2. Maria is uninformed and a shill. Well, it could be both...
Eric Sprott is one of the few white hats to be found in this wild west movie. PHYS is what GLD pretends to be, i.e. they really have the bars, numbered, audited and available for inspection. In answer to Hamurobby's question, yes, there will be plenty of room in the gold market for FRN holders to get out of currencies and into metal---but only at much higher prices.
.
Silver hi ho
Somebody else recommended PHGP as a reputable gold ETF trust.
Any knowledgeable opinions on that from anyone?
Get the physical gold. This may be the safest paper, but in the end it is till paper.
www.Gold-Silver.US
I too would recomend taking physical possession.
However, PHYS may be best suited for qualified funds like an IRA.
The tax issue of 15% vs. 28% becomes irrelevant in this situation but it allows you to hold it along side your other qualified assets in the same brokerage account, as oppossed to opening a seperate account.
My oh my! Avatar of the year!
May explain the lack of comments by Master Bates.
Sprott is bang on. Perhaps Harry (there is no bubble) Wanger should comment.
if there is so much gold in the world, why is the price higher then the price of silver.
gold has an estimated 150,000 mt vs Silver which has very little above ground reserves so lets call it 1 billion oz above ground.
gold mining is around 2500 mt or 80 million oz vs 680 million oz for silver.
so why is silver worth less then gold?
because there is less gold for immediate delivery then silver by just looking at the comex inventory levels which can equal the LBMA to some extent
gold 0.04% (1.9million oz of 150,000 metric tonnes which is all gold in the world in all forms) while silver is 7%
(47million of 680million - because there are no reserves) of all available metal for reserves is ready for delivery
or 157 times more silver then gold.
gold is also believed and stored by the wealthy and the CB's. Silver is not.
Silver might well outperform gold, maybe reach 15 to 1 but it will be short lived just like in the 80's. silver is way more important today as an industry metal compared to gold, silver will not be money. gold will always be money and power.
if you have 20% of your physical metals portfolio in silver and the other 80% in gold, i think that is just as much leverage as you need. silver might outperform gold 4 times from 60 to 1 to 15 to 1. i am sure that you will get rid of your silver before your gold when this is all done.
I read recently somewhere that there was a huge draw down of deliverable silver? It may be in anticipation of a larger demand for silver eagles? The usgov is sure good at looking too far forward of reality.
Here it is from Ed Steer:
http://www.caseyresearch.com/displayGsd.php
The "getting rid of it" part of the strategy still eludes me. Say you buy into the gold/silver thing. Then, as luck has it, gold starts climbing, up to say $5,000. At the same time, the $US is tanking, possibly the last one left standing. Once you think it's at the peak, where do you go? It's so long since the last global financial collapse that I can't remember how it goes anymore.
Use it to buy whatever you think is recovering. Real estate and equities will probably be good choices after everything is finished collapsing. If the collapse is complete, then you can use it to hire your own private army and start your own little fiefdom.
All I could think about was the Jimmy Durante sketch where he is playing George Washington (such casting) and was told a state would be named after him, to which he replies "The State of George!".
Trying to decide what to name my fiefdom since my 'state' already has a city with my surname. Maybe 'The (natural, not corporate) Person's Republic of Dave!
I'm running it up the flagpole. Will anyone salute it? Better suggestions?
P.S. There are much more effective weapons than guns, i.e. headology.
just hold on to the gold ,
this time around it will keep the values ,, not plunge off the edge of the earth
so a gradual paydown of gold ,, over a period of time for living expenses ,
trade for valuable assets ,
a little will go a long ways ,
Maria still gets it.
When Sprott says "Were essentially all in." Can you hear the silence? Bartiromo is speechless. LOL that was great.
I like how Canadians pronounce "resource".
I notice a lot of Americans also like how we pronounce the name of the capital of Saskatchewan: Regina.
Could this just be a possible front to forward supply? meaning a bypassing of banks (capitalization) of future mining?
Proof is so hard to come by in this fraudulent stricken world, so many will come forward as the newest and greatest, hiding behind their convictions or lack there of. I was wondering what other great bullion storage places had to offer so I looked with a jaunted eye at The Perth Mint.
From The Perth Mint website FAQ, (this is hand typed by me because It would not copy and paste, and the bold is by me)...
May I audit my deposit?
ALLOCATED precious metal holders may inspect or collect their deposits at the Perth Mint subject to satisfactory personal identification and account (for PMDS) or certificate (for PMCP) verification.
Alternatively, a third party nominated by you wil be permitted to audit your deposit on presentation of an acceptible instruction from you to the client relations executive of the Perth Mint Depository. (so who regulates them from multiple issues of the same bullion? (it does not say so, just implies such?)
The UNSEGREGATED nature of unallocated deposits, which are backed by the working inventory of the mint, means ITS NOT POSSIBLE for an individual to audit them. Unalocated investors will need to rely on the Mints audited annual Reports, which are signed off by the State auditor General to ensure compliance with the FINANCIAL ADMINISTRATION & AUDIT ACT 1985 and the gold corporation act of 1987.(should you to read them?)
in other words,
"trust us", its there for you if you need it.
How can unallocated be 100% backed, yet there is no storage fee? Unlike other depositories, which are merely wharehouses, The Perth Mint is a manufacturer of precious metal products and through its interest in AGR Matthey, one of the worlds largest refiners. Accordingly, the Mint has a SUBSTANTIAL requirement for physical metal to support these operations. To fund this work in progress inventory, the mint traditionally BORROWED metal from bullion banks, at cost. At the same time, there were investors storing metal with bullion banks and others, at cost. At the same time, there were investors storing metal with bullion banks and others, at cost. The mint realised that if it took deposits directly from investors, it could cut out the intermediary and create a win-win situation: the Mint wins by obtaining free funding for its inventory and investors win by getting free 100% backed storage. (A rolling storage?) In order tfor the Perth Mint to utilise a clients unallocated metal, the PMDS and PMCD client agreements are structured so that a client PERMITS The PERTH mINT to USE the clients unallocated metal "for its own account as if it were the owner" As this usage provide a small commercial benifit to the MINT, it is able to offer a FEE-FREE storage and provide simpler transaction proceedures that many clients find attractive. //////Maybe Im reading into all this a bit much, but after hearing all the buzz about the lack of physical gold in the world for delivery, I am a bit worried. To summarize, the Perth mint is a bullion bank now of its own, rolling its inventory, and if your gold is not allocated, you dont own jack, if the shtf, and you can read that right here... http://www.perthmint.com.au/investment_invest_in_gold_storage_options.aspxAmen hamurobby! Say it again brother! Paper is Paper! Metal is Metal! All else is delusion (lies, sales pitches, telemarketing).
PHYSICAL OR NOTHING!
P.S. hamurobby. Nice name and I bet you're hot! I'm really tired of the hetero-sexist tittie shots attached (presumably by men) to too many ZH posts.
Tyler! Silicone titties make me puke!
I use Firefox and copy/paste worked just fine.
You might try using "Readability" for your copy/paste use.
http://lab.arc90.com/experiments/readability/
The "Clippable" mod works in some instances as well
http://brettterpstra.com/share/readability2.html
They don't download anything to your computer, it just installs on your toolbar and uses javascript.
What would giving equal access to the fed discount window do exactly? All financial institutions (and then probably all persons) get primary dealer access. From my limited musings it seems I might be OK with the federal reserve system if this were to happen. I'm not exactly sure how or what would change, and certainly the spirit of equal access would need enforcement should the fed suddenly decide some are not allowed to borrow ad infinitum, but if this didn't end the fed I think there's a good chance it might fix it. If everyone's TBTF then no one will care. The paradigm shift is unfathomable to me (would the currency go to infinity or 0?), but if I were currently a PD I'm pretty sure I'd oppose.
And it's a *much* easier sell than “end the fed”, you're fighting discrimination. Equal opportunity, good wholesome and American. “Stop discrimination, support equal access to the fed discount window!”
That would take velocity of money from "0" to 299792.458 km/s in an instant, and last one in's a rotten egg. With interest rates effectively negative, that would be pretty interesting to watch. That would pretty much end fiat in a moment of epic mathmatical detonation. beautiful.
All member banks of the Federal Reserve System have direct, unbridled access to the Discount Window, whether they be Primary Dealers or not, Period.
Further, in the past the Fed has from time to time opened the Discount Window directly or indirectly to "other" financial intermediaries as they have seen fit and under differing terms and conditions. For example, when BofA "merged" with ML, BofA was granted ability not only to continue to use Discount Window borrowings for own activities, but to "downstream" such borrowings to affiliates. Read ML. And such power was extended to all other Fed Member Banks.
Importantly, it thus became entirely appropriatefor a commercial bank to borrow at the Discount Window and transfer such borrowings to its dealer activities (fund the dealer), theretofore, a no-no. Essentially, the last vestige of Glass-Stegal to meet its demise.
Therein was a major reason that GS and MS found accepting charters as a Fed member bank so attractive.
The PD window facility was instituted to ensure access by select PD's prior to becoming or in the event of choosing not to become, Federally Chartered Commercial Banks. Since the PD facility could be withdrawn at any future time, the likes of MorganStanley and Goldman found an incentive to become CB's.
Aka, virtually unlimited access to dirt cheap money since the Fed was not considering Discount Window use as a penalty activity at the time.
Your Power Elite Doing Gods Work, For You
Not all the PDs are U.S. based banks. I recently discovered my bank, RBC, is a PD as well. Would they have all the same access? Would they also therefore have the same risks and exposures? I have not been able to get any info on this, especially not from the bank itself.
If you are interested in position limits in the precious metals markets here is an online petition:
http://www.petitiononline.com/goldcftc/petition.html
From Seeking Alpha:
In the words of Star Wars' Admiral Ackbar: “It's a trap!”
I guess you know your town is on the map when the carnies show up and start taking the rubes.
Last week, the “Sprott Physical Gold Trust” started trading on the New York Stock Exchange under the ticker PHYS. Almost immediately, the media starting singing its glory: “New Gold ETF Prospectus Reveals Exciting Feature,” wrote Seeking Alpha contributor ETFdb. Invest with an Edge had similarly glowing coverage.
Unfortunately, PHYS is not an ETF. And its “exciting feature?” Well, that turns out to be a trap.
Not An ETF
I define an ETF as an open-ended mutual fund that trades on an exchange and uses a creation and redemption mechanism to keep its share price in line with its NAV.
PHYS trades on an exchange, but the comparisons stop there.
The company doesn’t try to hide this. The prospectus states:
As a closed-end fund, PHYS comes with all kinds of warts that do not apply to ETFs. For starters, PHYS was sold at a 5 percent commission. That is, the price offered to initial investors in the fund was $10 a share, but the NAV took an immediate haircut to $9.50, because 50 cents went into the hands of the good folks at RBC Dominion Securities, Morgan Stanley Canada, BMO Nesbitt Burns and other underwriters. ETFs never come with initial underwriting commissions.
That might not matter to investors who purchase it on the open market, but there are other warts that do.
For instance, as with all closed-end funds, there is no way for PHYS to issue new shares, which means there is effectively no way for the security to actually track the price of gold. Sure, it might, but if the shares trade at a premium, it’s impossible for an arbitrageur to go buy gold, turn it into shares, sell them on the open market and drive the market price back to NAV.
PHYS does have a redemption feature, but it’s severely crippled. The PHYS redemption window is only open once a month, and it comes with a lag. Investors who want to redeem shares of the fund can submit a request to the company on the 15th of the month. If the redemption request is large enough (bigger than a single gold bar), the redemption will be processed at least in part for physical gold at NAV at the end of the month (13-15 days later). If you’re redeeming lots smaller than a physical gold bar or just want cash, you get dinged for at least 5 percent off of the value of the fund.
That’s not exactly a liquidity option. Let’s just say that market makers aren’t lining up to ride this “lightning-quick” 15-day flawed redemption process to ensure that the fund stays close to fair value.
But those flaws pale in comparison with the “exciting feature” that ETFdb notes in its article: the tax treatment.
According to the fund’s prospectus, “Any gains realized on the sale of units by an investor … may be taxable as long-term capital gains (at a maximum rate of 15% under current law).”
It sounds like the Holy Grail. One of the vexing problems of funds like the SPDR Gold Trust (NYSEArca: GLD) is that, no matter how long you own it, you will owe 28 percent taxes on gains because the IRS considers all gold investments to be collectibles. PHYS claims to have found a way around this problem, creating a gold bullion fund that qualifies for true long-term tax treatment. Brilliant!
Except it’s not.
The IRS isn’t stupid. It’s going to get its money somewhere. And in this case, it looks like it’s reaching into the pockets of PHYS’ most loyal, buy-and-hold investors to grab that 28 percent for the U.S. Treasury.
Understanding why gets into the weeds of the prospectus, but it’s important to do, because the implications are huge. Here’s the relevant paragraph:
Let me parse that for you.
You, Mr. Long-Term Buy-and-Hold, purchase shares of PHYS and stuff them deep in your portfolio, confident that you’ll only pay long-term gains of 15 percent when you eventually decide to sell. Meanwhile, a hedge fund buys shares of PHYS, rides them while gold is rising, and then redeems them back to the fund company.
To meet this redemption, the trust either sells a pile of gold to pay cash or redeems out physical gold bars. Either way, the trust will book that sale with the IRS based on the current price as gold, and will be taxed at the 28 percent collectible rate on any gains. But funds never actually pay taxes: They pass them along to shareholders. So that 28 percent gain accrued by the hedge fund activity? That’s going to be paid by you, even though you never sold a share.
I guess I’ll have to agree with the headlines—that’s certainly an exciting feature. I suppose getting a root canal without the gas is “exciting” too.
ETFs treat all investors fairly. PHYS not so much.
http://seekingalpha.com/article/191523-sprott-physical-gold-trust-not-really-a-gold-etf-and-a-bad-deal-to-boot?source=from_friend
But the fund itself is established in Ontario so why would it have to pay U.S. taxes at all? I can see that unit-holders in the U.S. would have to pay the relevant taxes on their own capital gains when they sell. Can you clarify?
Thread hijack:
Alex Jones has Paul Craig Roberts, Lord Monckton and supposedly, gerald celente on today. The Roberts interview is a must listen
Monckton very good too
Here is the celente interview, from yesterday, on youtube
http://www.youtube.com/watch?v=HPx3exHN0PU
http://www.infowars.com/
Four quick notes from the Canadian Prospectus (PHY.U) as it pertains to physical delivery. (going from memory here)
1, You can only take delivery of your gold to the extent the redeemed units amount to whole integers of London Good Delivery Bars. One of those is about 400 or slightly more ounces. Any balance is handled in cash. Naturally there are fees and charges.
2, Also the physical delivery redemption documents have to be received before the 15th of the month.
3, The redemption price is calculated at the end of the month!
4, The delivery of the physical may only be made to an institution that may receive armored deliveries.
No doubt one wants substantial physical gold holdings in a stable, free financial zone..
So where is that? - Singapore, Dubai, Uruquay, Panama, Hong Kong...?
and what is the solution for storage? can you trust ANY deposit box companies with substantial gold holdings
or do you entrust your physical gold to a bullion management company that stores it for you in Canada, for example Sprott?
or are Perth Certificates good enough?
Answers would be much appreciated
To my knowledge, I have never heard of the physical gold holdings in recognized vaults in stable countries having lost their gold during a severe financial crisis. The countries you list are some of the few who seem to provide those services.
If I was truly worried about global financial meltdown, I would want to be as close to physical as possible, so the best you can do with tax-sheltered investments is something like PHYS. Certificates provide little in the way of guarantees in the event of a systemic collapse.
This is a "How bad is it going to really get?" question.
The extend-and-pretenders want us sheeple to think that everything is still so '90s and we can still buy-and-hold stocks and bonds and yadda yadda. If you agree, then paper promises like ETFs would be fine, and it really doesn't matter who watches your stash.
Assuming for a moment that the situation is liable to get quite a bit worse than as described -- use your imagination. Say you choose to put your half-dozen bars in a vault in Singapore; after TEOTWAWKI you manage to make your way there and walk into the facility -- what odds do you give that the nice nodding people will produce your bars? Or, instead, maybe forget how to speak English?
Would you trust your cousin to watch it for you? Your next-door neighbor? Why would anyone else anywhere in the world be more reliable?
If you think it's going to get so bad that whole societies melt down and nothing and no one can be trusted, gold may not be the priority at that point. You may just want to head for the hills, barricade yourself in somewhere and invest in stocks of food and water enough until Mad Max goes away and the new Dark Ages are over. That couldn't be more than a few hundred years.
Oh, come on! That kind of simplistic, black-and-white, polar extremes argument is logically absurd --- the kind of crap one reads from Jon Nadler and other disingenuous bankster shills of his ilk.
A society would not have to "melt down" into Mad Max mode for one's OVERSEAS investments in it to become imperiled --- it has happened countless times in just the last 100 years. I think the concern is a valid one: if we experience a worldwide financial collapse, which however falls short of roaming cannabilistic zombie hordes, just how safe would one's holdings in ANY bank, fund, or third-party vault really be? I don't know, but the question is a very valid one.
Perth Certs, only if they are allocated, see my post up above, and the link to their site.
Perth Mint is owned by gov of W Australia i think, something along those lines & as i see it is effectively a gov dept. in the last 18 months many complaints from people collecting their physical, long delays. why the delay if allocated is stored on the vault shelf with the customer's name tag? must be some kind of a problem there.
Also from Seeking Alpha, regarding the pro rated tax issue mentioned above. From Hedged in
It's great to see that someone has actually done the work to read the prospectus! You're right that:
- PHYS is a closed-end fund and not an ETF
- redeeming shares for the underlying assets is costly and inconvenient,
- so the fund can trade at a premium or discount to NAV.
- redemptions count as sales and capital gains are assigned to remaining shareholders pro rata.
However, this isn't as bad as you make it sound. First, who cares if it trades at a premium or discount to NAV? Just be careful when you buy it not to buy at a premium.
Second, the cost and inconvenience of redeeming shares for cash or gold will reduce the likelihood of tax-triggering redemptions. So the probability that you'll be hit with someone else's tax bill is low. And since most investors never want to take delivery of physical gold, the cost and inconvenience of the redemption process is largely irrelevant.
When might there be large redemptions? If the fund trades at a deep and prolonged discount to NAV. In that case, a hedge fund will step in, buy the stock while hedging against the gold ETFs or using futures, and will then either sell the stock at NAV if the gap has closed or redeem the stock for gold bars. All of which is good for the retail investor who owns the fund - it is this mechanism (or even the threat that this mechanism will be used) which will keep the share price from getting too out of line with the NAV.
Most important, the shared capital gain of any redemptions is unlikely to outweigh the superior tax treatment. The difference between the 15% and 28% tax rates is a full 13 percentage points. My guess is it's highly unlikely that pro rata assigned capital gains tax from redemptions will be large enough to offset that advantage.
So for many investors this could be exactly what they've been waiting for: an exchange traded gold fund with a mechanism that ensures that it doesn't deviate too far from NAV, with a lower effective tax rate than the gold ETFs.
Full disclosure: no position in PHYS, and no connection with the company that issues it.
PHYS appears on the surface to be very similar to CEF with the exception that you cannot redeem CEF units for the actual bullion. They increase their holdings by periodically issuing new unit offerings. They didn't used to do that very often but now it seems to happen annually.
I get an uncomfortable feeling about a fund that allows you to redeem your units for the gold it holds. I would have a fear that a big bank or country would swoop in and buy most of the units, then ask for the gold and there would be next to nothing left of your fund. They would probably have to sell both my wafers to pay the administrative fees of the shipping to whoever bought it.
Maria mentions "and then you have the Greek issue."
This is akin to the old saw of "its a sub-prime problem."
It is still not palatable to say "The roof, the roof, the roof...."
/snicker/
If he's right, the future for Canada is bright. Mining, PM, oil.
Although Sprott is very smart, he's still trying to sell you something.
and whats wrong with trying to sell you something ,
happens every day with something ,, either say yes or no,
but really why not just go down to the coin shop . grab some take home ,,
tell the coin guy not to pitch you,, just tell him some one oz eagles or kugerands .. lay the paper down . pick up the real . use a 100 oz silver bar as a door stop lol
Eric Sprott's a fine fellow without a doubt.
Just one reservation. He stores all the bullion on Canadian government property. Is this a good thing?
Why not some in ViaMat Zurich, spread it out between a few private vaults in gold friendly countries. What's wrong with a vault in the Caymans? say 10 vaults, 10% in each (with client allocations similarly spread). Insured by AIG haha.
wow ,, big plans .. 10 locations lol
just start if you have not already begun,
with a few ,, hard by the yard cinch by the inch ,
leave no footprints in the path .
Who needs gold when you can just trust in Cramerica? The market genius begs to differ.
Screen Grab:
http://img10.imageshack.us/img10/3909/alliswell.jpg
Sprott is cool. Sprott for Treasury Secretary!
be your own treasury secretary .. buy gold
touche.
From predicting xyz - jeeze you stupid *$@& with the cr@ppy voice - ISN'T THAT CNBS's job? Why would I want to invest in gold NOW? You stupid f*cking moron, go invest in bonds and our dollar with it's 9 trillion GAAP deficit and it's 138 trillion dollar debt.
CNBS S*CKS @SS! Shrills with annoying voices.
What's the catalysts? Stupid f*cking moron!