Exchange Traded Fund
Western central banks have tried to shake off the constraints of gold for a long time, which have created enormous difficulties for them. They have generally succeeded in managing opinion in the developed nations but been demonstrably unsuccessful in the lesser-developed world, particularly in Asia. It is the growing wealth earned by these nations that has fuelled demand for gold since the late 1960s. There is precious little bullion left in the West today to supply rapidly increasing Asian demand, and it is important to understand how little there is and the dangers this poses for financial stability.
It is important that one owns physical gold and not paper or electronic gold which could be subject to bail-ins. Owning a form of paper gold and derivative gold such as an exchange traded fund (ETF) in which one is an unsecured creditor of a large number of custodians, who are banks which potential could be bailed in, defeats the purpose of owning gold.
Physical Gold, held in secure conferring outright legal ownership through bailment remains the safest way to own gold.
Led by countries such as Russia and China, central banks have recently become net buyers of gold. Meanwhile, ETF gold outflows have been a temporary source of supply this year, but obviously this cannot persist. It’s also unreasonable to assume that recycling will make up a significantly greater piece of supply without the price of gold increasing substantially. With the grade of current producing gold mines being 32.6% higher than undeveloped deposits, it makes the supply scenario even more clear. Not only is the current yearly mine supply difficult to sustain, but future mines coming online will be challenged by grade and margins to be economical at today’s prices. Mathematically, unless we have high-grade, high ounce deposits that are being fast tracked online, it will be very difficult to find a way to get supply to match demand. Have we reached peak gold?
And yet gold still seems to be stuck in a downtrend. This week's sell off may have been due to trading shenanigans on the COMEX and many, including the UK Financial Regulator are asking questions as to whether gold price rigging is taking place.
Many have wondered why one of the greatest boxers of our generation, Philippines' Manny Pacquiao, has not retired gracefully into hero-dom following his loss to Marquez late last year. For a fighter - it could be pride, ego, or, sadly, lack of funds. In Pacquiao's case it is none of the above, we suspect as a politician, the diminutive boxer has realized the wealth effect-creating impact of his victories of the nation - which at no other time in history needs something positive to reflect on. While in the US, investors have POMO to almost guarantee an up-day in stocks, in the Philippines, stocks rise 73% of the time after a Pacquiao win (compared to 52% average) and rise a stunning 0.5% (against a 0.04% average). Pacquiao is 6-1 on to win against Brandon "Bam Bam" Rios on Saturday (86% likely to win); is there a Philippines ETF?
On October 15, two weeks after the end of the third quarter, David Tepper appeared on CNBC for his semi-annual stock pumpfest, most memorable for his suggestion that a 20x P/E multiple on the S&P was perfectly acceptable. Which would suggest Tepper was very bullish on risk. Which would suggest buying more stocks, not selling. Yet selling is precisely what he did between June 30 and September 30 according to his just released 13F. Specifically, after having a total long equity AUM of $6.9 billion at the end of the second quarter, the Appaloosian lowered the dollar value of his AUM by nearly 10%, to $6.3 billion as of September 30. So what did he liqudate? Here are his biggest liquidations and notable sales.
Many have likened the ETF structure of today to the CDO structure of the last bubble as the potential catalyst for accelerating moves in risk markets. If that is the case, then the collapse in the shares outstanding of the massively popular and liquid Russell 2000 ETF IWM will likley make some ask WTF?
Just when Twitter briefly dipped in bear market territory from its post IPO highs, and threatened to wipe out the retail mania of 2013 (very much as FaceBook did in 2012), here comes the hail mary to provide the most anticipated IPO of the year its second wind. "From its inception in 1974, the intent always has been for the Wilshire 5000 Total Market Index to be the most complete and investable measure of the total U.S. equity market," noted Robert J. Waid, managing director. "As a rules-based index, the Wilshire 5000 does not need to make special accommodations for early entry of large IPOs, like Twitter, as stock additions always have been made monthly for U.S. companies with readily available price data. The Twitter IPO is no exception," he concluded. Of course, how inclusion in the Wilshire 5000 will boost TWTR profitability, remains a mystery.
In the minute preceding last week's highly anticipated payrolls report, Nanex exposes the appearance of a High Frequency Trading (HFT) algo in both the December 2013 Nasdaq (NQ) Futures and the QQQs (an ETF). When it was active, it caused prices to gyrate wildly over a few seconds of time. This is the brief period that also saw Treasury Futures halted (and gold prices jumping) and looking closer at the charts, it appears this HFT algo caused wild price oscillations in the futures in a way that enable it to establish a short position in QQQs. We are sure the regulatory world is already on this blatant manipulation (or simple front-running on information received)...
Last week, Citi's Tobias Levkovich raised numerous concerns about the state of exuberance and "disconcerting disconnects" that is our new normal market currently. In the week since, Citi's proprietary Panic/Euphoria model is sending a clear warning of substantial complacency - its most "euphoric" since 2008. This is worrisome, he notes, since there is an 80% probability of a market decline in the next 12 months based on the current reading.
To many institutional investors, buying the Russell 2000 is merely the highly levered bet with which the bulk of institutions (recall that almost all hedge funds, and a majority of mutual funds, are underperforming the S&P for a 5th consecutive year) seek to make up for losses in their portfolios by chasing high (and even higher with leverage) beta. Which is why as the next chart below shows, in a furious scramble to catch up by year end, the institutional Russell net futures (i.e. levered) positioning just hit a record high: the biggest investors are now all-in the smallest names. So is the massively overbought small cap sector due for a correction? With these manipulated, centrally-planned markets, nobody has any idea. However, for those who have once again bet all in, which just happens to be most plain vanilla dumb money, it may be time to reevaluate.
The "commodity king" author of the "world renowned" Gartman momentum chasing and perpetual contrarian fade newsletter, if not so much of an ETF under the same name anymore, does it again. From this morning.
Now with the S&P forging a massive reversal to the downside, we not only must abandon being bullish we must become bearish... and very so.... Our bearish friends, having been wrong for so long, are now right; it is time to be bearish of stocks, while the time for having been bullish is now past... We trust we are clear. The game’s changed and when the game changes, we change.... We had heretofore consistently erred bullishly of simple things… of coal; of steel; of railroads; of ships and shipping… but we are not now.
And... wrong again. Or said otherwise, short of subscribers in breaking even terms.
Turkey has been aggressively adding to its gold reserves in recent years and now has the world's 11th-largest gold reserves.
Westerners aren't used to the kind of inflation levels, government confiscation, and currency volatility so common in places like India; and so the need to own gold as protection isn't fully appreciated in the West. Westerners pay lip service to gold's being "an inflation hedge" or "a currency" or "a safe asset", but these terms are used in an extremely abstract way by the vast majority of the investing public, who see gold as mostly just another trading vehicle. India's love affair with gold is well-understood in Asia but completely misunderstood in the West — a phenomenon we have always found fascinating — but recently it has become abundantly clear that this disconnect is widening almost daily as the Western fixation with 'The Gold Price' and the Eastern obsession with 'The Price of Gold' take ever more divergent paths... In short, Asians like their gold to be heavy, shiny, and made of ... well, gold.
“This could turn into a very violent wake-up call for [screen-traded gold]. People talk about ‘fiat currencies’, but we also have ‘fiat gold.’ Volatility is too cheap right now.”