Exchange Traded Fund
What You Need To Know About Buying Silver At A Time When Even The Canadian Mint Says "It Has Sold Everything It Has"Submitted by Tyler Durden on 02/24/2011 19:27 -0400
Even as silver performed some unprecedented fireworks today, plunging on what was a margin hike in... crude, the metal continues to trade just below its post-Hunt Brother highs. So for those who still have not decided whether or not to take the plunge and buy into the precious metal (which, granted, was selling at $8.80 three years ago, and has since nearly quadrupled in price), we present the following discussion between Jeff Clark of Casey Research and The Daily Crux, which answers "what you need to know about buying silver today." This comes a week after we first highlighted that the Canadian Mint has sold it last stock in silver and has demand for much more.
FmxConnect uses several proprietary indicators to predict volatility trends. One indicator, the TrendVol actually gives directional signals as well. Simply stated, if this week closes above 1416, there is a high likelihood of a 75 to 175 move higher in gold over the next 2 months. Although if the indicator hits, we'd expect the move to happen in a more compressed time. The signal does not usually waste time letting you know if it is right or wrong. The indicator combines Bollinger bands, implied volatility, skewness, and historical volatility to determine speed and direction of a potential move. The actual calculations involve using these indicators to create and proprietary oscillators.
It has been a long wait for “peak oilers”. Egypt was a snore, but Libya is a different kettle of fish. Global production peaks in 2015, and after that the sushi hits the fan. Next stop, $300 a barrel?
Good morning. The investment thesis for this comment advocates a barbell. Long quality flight "insurance" Treasury bonds (despite 3 leg 2yr, 5yr, and 7yr auctions in shortened Holiday week), short complacency, and long energy/geopolitical plays. The upshot is that markets will be dominated by geopolitical risk which I don’t feel is valued properly at the moment. This is a departure from an extended period of catalysts to investment performance dominated by a chronology of sovereign and Club Med imbalances, QE light and QE2 ruminations, midterm election/budget austerity leanings, and earnings recovery/growth prospects contributions to valuations. Until ever so late the marketplace hasn’t had the liberty of focusing on simple mundane economic fundamentals, and I suggest that fundamentals may be put aside again in light of tidal wave of hearts and minds of peoples versus regimes. Petty domestic partisan budgetary and ideological spats will play second fiddle to a global stage littered with toxins that possess the potential to re-arrange global allocation of physical and human resources. The stakes are high and any investment theses must aspire to handicap risk premium of potentially explosive re-arranging of deck chairs of all things political GLOBALLY.
WTI’s premium disappeared about a year ago and in recent days it has been trading at more than a $10/bbl discount to Brent mainly due to rising inventory levels at Cushing OK. Some believe WTI may be undervalued by at least $12.
The numbers for silver demand are starting to make some market-watchers nervous. The U.S. Mint sold over 6.4 million silver Eagles in January, more than any other month since the coin’s introduction in 1986. China’s net imports of silver quadrupled in 2010, to 122.6 million ounces, roughly 13.7% of global production. Meanwhile, mine production can’t meet worldwide demand; the only way demand gets fulfilled is from scrap supply. That is some very hungry demand. Which raises the question, how long can this pace continue?
This one caught us by surprise. Today, Deutsche Bank announced it was suspending new issuance in the PowerShares Agriculture Double Long ETF, the DAG. What is odd, is that unlike last week's announcement by Barclays that it would start unwinding its triple inverse S&P ETF (BXDD), which has logically been plunging as the market levitates ever higher on ever lower volume, the DAG has done exactly the opposite. In fact, as the chart below shows, the DAG is trading close to its 52 week high, having tripled from the 52 week low in July (yet still $12 away from its all time high reached in 2008). Therefore, this is not a performance issue, which needs a reverse stock split to be resolved, and likely indicates some deeper issues with creation of shares in what is rapidly becoming the hottest asset space.
Now that the $25 million AUM Egypt ETF is expected to be indicative of the entire Egyptian stock market, and which will likely be claimed to be correct even if its underlying securities never manage to trade up to parity, when and if it reopens, there is little that can surprise us anymore. With that in mind, we would like to present the MUB ETF, whose recent surge has left it trading at a premium to NAV that has not been seen since just before the March 2009 666 lows. As the chart below shows, the last time the MUB was trading at 100.79, it did so at a record discount to NAV. Now - about three months later, it is the inverse, as the municipal tracker has now inverted and is trading at a multi-year premium. This begs the question: does underlying value chase the synthetic price? And if so, does it mean that it is time for a compression trade in which the MCDX is sold coupled with selling of the MUB in anticipation of a return to parity spread. That would be the case in a normal world. In this one, in which the WTI-Brent spread just hit another fresh all time wide, who knows...
Markets are mixed this morning. Muni ETF rallied on Friday on news of the extension of the BABs program. The BABs program that expired in 2010, which originally permitted a 35% subsidy on state and local government-issued taxable munis, would now allow a 32% subsidy this year and 31% in 2012 under this new proposal. WSJ reported that due to Republican Party resistance, a more moderate 28% subsidy would create a political compromise. The Treasury department reported that interest expense is expected to rise to 3.1% of GDP in 2016, a threefold increase that is likely to raise borrowing costs.
The gradual drain of COMEX silver inventories seen in recent months continues and COMEX silver inventories are at 4 year lows. Total dealer inventory is now 42.16 million ounces and total customer inventory is now at 60.68 million ounces, giving a combined total of 102.847 million ounces. The small size of the physical silver market is seen in the fact that at $30 per ounce, the COMEX silver inventories are only worth some $3 billion....Talk of a default on the COMEX is premature but the scale of current investment demand and industrial demand, especially from China, is such that it is important to monitor COMEX warehouse stocks. The possibility of an attempted cornering of the silver market through buying and taking delivery of physical bullion remains real and would likely lead to a massive short squeeze which could see silver surge as it did in the 1970s.
Egypt Stock Market To Be Closed Through Wednesday (At Least), Even As EGPT Predicts 15% Upside ArbitrageSubmitted by Tyler Durden on 02/13/2011 14:01 -0400
All those who were hoping that Egypt would open its stock market today, as had been indicated previously by the Egyptian Central Bank, will be disappointed. Not only will the CASE not open today, but it will remain shut on Monday and Tuesday as well. The reason: the Thermidor reaction at local banks is starting. Per Reuters: "Egypt's central bank declared Monday a bank holiday after a series of worker protests and strikes on Sunday at state-owned banks." Oddly enough, in the power vacuum immediately following a revolution, when the country has just transferred power to a supposedly beneficial, but not really, military regime, Egypt's number one priority is not to keep the general casino open. What a disgrace. More from Reuters: "Banks were also due to be closed on Tuesday, which is an official holiday marking the Prophet Mohamed's birthday. "Employees are demanding higher salaries," Deputy Central Bank Governor Hisham Ramez said by telephone, adding that strikes were mainly at state and not private banks." But do not despair, according to the perfectly efficient ($25MM AUM) EGPT ETF, the Egypt stock market is currently 15% undervalued. All that is needed to make sure that someone can pocket a guaranteed 14.6% arbitrage is for the Egyptian financial industry to have enough people left employed to open the stock market.
Insider Traders Investigated For ETF Stripping, Or How The SEC Is Now Only 10 Years Behind The CurveSubmitted by Tyler Durden on 02/09/2011 22:49 -0400
The brilliant minds as the SEC have finally realized that when it comes to insider trading, they are and will forever continue to be, about 10 years behind the curve. To wit: today, for the first time we learn that the transvestite midget porn fanatics have realized that one can use ETFs, and, gasp, swaps to mask insider trades. So while the SEC brainiacs diligently scour for those who buy massive blocks of stock (or calls) 2 minutes ahead of an acquisition announcement, virtually everyone else has been sneaking by unscathed simply because they have, rightfully, assumed that the SEC are a bunch of retards. Such investigative brilliance deserves to be rewarded with at least one taxpayer funded screening of Long Dong Silver (oh wait, they may realize there could be manipulation in the silver market, and by none other than JP Morgan, if they were to watch that.)
The days of the inverse triple (then double, then single) leveraged ETFs are coming to an end. And in a market where the only direction is only up, with zero volatility, zero distributions, and now, zero volume, we wish them a quick and painless death. Barclays Bank has just announced it is suspending creations of its inverse leveraged ETN to the S&P500, in an act that is supposedly "a reflection of what rising stock prices can do to the price of a security designed to produce profits in a falling market" but is really a capitulation by one of the last leveraged ways to play the failure of central markets. Of course, Iosif Vissarionovich Bernanke will fail eventually, as central planning always does, but by then there will be no readily accessible ways to play the downside.
As the United States of Zimbabwe barrels forward on Ben Bernanke's hyper-inflationary crazy train - we will go along for the ride...
Morning Gold Fixing: JP Morgan Accepts Gold Bullion As Collateral – Silver Backwardation To Lead To Short Squeeze?Submitted by Tyler Durden on 02/07/2011 08:34 -0400
JP Morgan announced today that from now on they will accept physical gold bullion as collateral. This is a sign of gold’s further remonetisation in the global financial and monetary system. It may signal that JP Morgan is having difficulty in securing gold bullion in volume. JP Morgan is the custodian for many of the gold and silver exchange traded funds. They will not accept ETF trust gold as collateral. In October, the clearing house of global exchange CME Group – CME Clearing – announced it will now accept gold as collateral for trades on the exchange. Gold bullion can be used for margins for CME trades, ranging from crude oil, gold, grains, equity indexes and Treasury bonds. Given the current monetary, macroeconomic and geopolitical risk gold is an attractive alternative to debt, equities or other paper assets as collateral. JP Morgans’s move shows how gold bullion’s fungiblity and tangibility as an asset makes it attractive and shows gold’s increasing importance in the financial system. Interestingly, the CME is storing their collateral gold at JP Morgan Chase Bank in London. The exchange said it hoped to add additional depositories in the future but there has been no announcement of developments in this regard.