Thursday, November 6, 2014

Everything you always wanted to know about ETF $GLD *but where afraid to ask

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way - in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.


                                           Charles DickensA Tale of Two Cities

EXCHANGE-TRADED FUND $GLD DECONSTRUCTED

Fundamentally I take no issue with the rise of the ETF. I find myself trading ETF vehicles more and more; and in turn I have seen a boon in my investment returns.  There is no question that the ETF to a degree, has changed the way the Wall Street Game is played. Darwinism for Traders teaches us that it is the "ability to adapt to change" which is key to survival.

Are all ETF's created equal? The short/long answer NO

Trading activity over the last couple weeks has raised some questions about Exchange-Traded Funds.  What we witnessed was a severe correction in Biotech Stocks. The ETF has created the (cringe) "risk on, risk off" approach to investing. These sell-offs have quite a different "feel", then anything I experienced in the 1990's. Leveraged ETF's are powerful trading vehicles that can have powerful effects on the Markets at large. ETF's for the public investor can get quite tricky.

Today we will take a look at one of the UGLY ETF's and remain vigilant in assessing RISK; We do live in a strange time in which the SEC and FDA chooses to ignore any notion of "systemic risk." We must make sure to profit from the "build it and they will come" environment we live in today.  Be it ETF's , IPO's, or Pharmaceutical Drugs; the Free Markets, for better or worse, have certainly never been more "Free". 

ETF $GLD is not GOOD, it is not BAD, it is UGLY.  The danger of this ETF is in giving the public investor unprecedented access to a market he/she knows little or nothing about. Certainly your shoe shine boy never would have speculated in Gold Futures; though it is likely he is happily holding ETF $GLD today; anecdotally I am sure of it.  I would say that any ETF tracking a commodity falls under the bad/ugly category. I have profited greatly in the commodity ETF trade of late, mostly I would assume at the public's expense.  The SEC 20-30 years ago use to pride itself on protecting the "individual investor." Today's SEC seems to pride itself more on protecting Wall Street; assuming they take any pride in anything; outside of collecting a pay check and pseudo-selling the American Dream.

The fundamentals, general market conditions surrounding gold are quite complex. WITH a tweet, a twit and a blog I will do my best. I am a heuristic when it comes to approach-to trade the commodity itself is the best of educations; which I have done for quite some time.

The commodity space has experienced a decade long raging Bull Market. This was fueled in large part by China hyper-growth; a Nation, in essence, going through an Industrial Revolution at lightening speed.  The LONG Gold Trade early in this cycle was beautiful; you bet I was long, before the term "gold bug" was in vogue. I was more heavily weighted LONG Crude; as this to me was/is more an indicator for Global Growth ( note: today I am SHORT GOLD and LONG CRUDE ). IN the second phase of the commodity bull, gold traded more in sympathy with industrial metals: commodity traders are aware China is not building factories out of gold. In this second phase I was completely out of $GLD , as I was heavily concentrated in Crude and select Industrial Metals. 

Enter the Financial Crisis. Gold's third and final bull stage: Gold $GLD dubbed a "safe haven." This is where your shoe shine boy, your dry cleaner and your taxi driver bought ETF $GLD ; and I assure you are still holding it today.  The third phase, courtesy of the ETF is where gold became a Religion. Even today, with gold in a clear secular Bear Market, the flock/crowd follows false $Profits aka Peter Schiff/Marc Faber.  



The Media has been focused on Biotech, "Momentum Stocks" and Flash Boys of late (which is appropriate). The larger story; the bifurcation in the commodity space. This tectonic shift which began Summer 2011 is now accelerating. The commodities markets are now returning to normalization. The US has re-established it's economic leadership; China is still a story but no longer THE story. Globalization is healthy, and back on track. Crude Oil and SELECT Industrial Metals are re-establishing leadership. Fund managers/smart money long ago abandoned $GLD . ETF $GLD is mainly being held by the general public/individual investor.History tells us, this scenario will not end well for $GLD.





Wall Street has been selling complex financial instruments since the first share of stock was traded downtown in New York City. Are ETF's really that different? When it comes to $GLD maybe not. However, "ETF systemic risk to Markets" is still a question worth asking. The current Bull Market in equities likely has 3-5 years left to go-so I suppose we will not get our first ETF "stress-test" till around 2017.  Until then, make sure to understand the ETF you are trading: understand it even more if you are INVESTING! 


ALWAYS read the ETF prospectus, I assure you that IS worth it's weight in $GLD

"ETFs that track gold are also exposed to a host of company risks that have nothing to do with the actual fluctuation in gold's value. In the SPDR Gold Trust prospectus, for example, the trust can liquidate when the dollars in the trust fall below a certain level, if the net asset value (NAV) drops below a certain level, or by agreement of shareholders owning at least 66.6% of all outstanding shares. These actions can be taken, regardless of whether the gold prices are strong or weak."

http://www.investopedia.com/articles/exchangetradedfunds/08/gold-etf-gold-futures-showdown.asp

Monday, April 21, 2014

MONDAY NIGHT highLIGHTS (click on selected image)

 $GLD TECHNICAL ANALYSIS
my 3 cents *adjusted for inflation








Last Week's $GLD $USO $SPY BULL THESIS




 $WFM Whole Food Markets TA

Saturday, April 19, 2014

Everything you always wanted to know about ETF $GLD *but where afraid to ask

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way - in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.

                                           Charles Dickens, A Tale of Two Cities

EXCHANGE-TRADED FUND $GLD DECONSTRUCTED


Fundamentally I take no issue with the rise of the ETF. I find myself trading ETF vehicles more and more; and in turn I have seen a boon in my investment returns.  There is no question that the ETF to a degree, has changed the way the Wall Street Game is played. Darwinism for Traders teaches us that it is the "ability to adapt to change" which is key to survival.









Are all ETF's created equal? The short/long answer NO

Trading activity over the last couple weeks has raised some questions about Exchange-Traded Funds.  What we witnessed was a severe correction in Biotech Stocks. The ETF has created the (cringe) "risk on, risk off" approach to investing. These sell-offs have quite a different "feel", then anything I experienced in the 1990's. Leveraged ETF's are powerful trading vehicles that can have powerful effects on the Markets at large. ETF's for the public investor can get quite tricky.

Today we will take a look at one of the UGLY ETF's and remain vigilant in assessing RISK; We do live in a strange time in which the SEC and FDA chooses to ignore any notion of "systemic risk." We must make sure to profit from the "build it and they will come" environment we live in today.  Be it ETF's , IPO's, or Pharmaceutical Drugs; the Free Markets, for better or worse, have certainly never been more "Free". 

ETF $GLD is not GOOD, it is not BAD, it is UGLY.  The danger of this ETF is in giving the public investor unprecedented access to a market he/she knows little or nothing about. Certainly your shoe shine boy never would have speculated in Gold Futures; though it is likely he is happily holding ETF $GLD today; anecdotally I am sure of it.  I would say that any ETF tracking a commodity falls under the bad/ugly category. I have profited greatly in the commodity ETF trade of late, mostly I would assume at the public's expense.  The SEC 20-30 years ago use to pride itself on protecting the "individual investor." Today's SEC seems to pride itself more on protecting Wall Street; assuming they take any pride in anything; outside of collecting a pay check and pseudo-selling the American Dream.

The fundamentals, general market conditions surrounding gold are quite complex. WITH a tweet, a twit and a blog I will do my best. I am a heuristic when it comes to approach-to trade the commodity itself is the best of educations; which I have done for quite some time.

The commodity space has experienced a decade long raging Bull Market. This was fueled in large part by China hyper-growth; a Nation, in essence, going through an Industrial Revolution at lightening speed.  The LONG Gold Trade early in this cycle was beautiful; you bet I was long, before the term "gold bug" was in vogue. I was more heavily weighted LONG Crude; as this to me was/is more an indicator for Global Growth ( note: today I am SHORT GOLD and LONG CRUDE ). IN the second phase of the commodity bull, gold traded more in sympathy with industrial metals: commodity traders are aware China is not building factories out of gold. In this second phase I was completely out of $GLD , as I was heavily concentrated in Crude and select Industrial Metals. 

Enter the Financial Crisis. Gold's third and final bull stage: Gold $GLD dubbed a "safe haven." This is where your shoe shine boy, your dry cleaner and your taxi driver bought ETF $GLD ; and I assure you are still holding it today.  The third phase, courtesy of the ETF is where gold became a Religion. Even today, with gold in a clear secular Bear Market, the flock/crowd follows false $Profits aka Peter Schiff/Marc Faber.  





The Media has been focused on Biotech, "Momentum Stocks" and Flash Boys of late (which is appropriate). The larger story; the bifurcation in the commodity space. This tectonic shift which began Summer 2011 is now accelerating. The commodities markets are now returning to normalization. The US has re-established it's economic leadership; China is still a story but no longer THE story. Globalization is healthy, and back on track. Crude Oil and SELECT Industrial Metals are re-establishing leadership. Fund managers/smart money long ago abandoned $GLD . ETF $GLD is mainly being held by the general public/individual investor. History tells us, this scenario will not end well for $GLD.













Wall Street has been selling complex financial instruments since the first share of stock was traded downtown in New York City. Are ETF's really that different? When it comes to $GLD maybe not. However, "ETF systemic risk to Markets" is still a question worth asking. The current Bull Market in equities likely has 3-5 years left to go-so I suppose we will not get our first ETF "stress-test" till around 2017.  Until then, make sure to understand the ETF you are trading: understand it even more if you are INVESTING! 


ALWAYS read the ETF prospectus, I assure you that IS worth it's weight in $GLD

"ETFs that track gold are also exposed to a host of company risks that have nothing to do with the actual fluctuation in gold's value. In the SPDR Gold Trust prospectus, for example, the trust can liquidate when the dollars in the trust fall below a certain level, if the net asset value (NAV) drops below a certain level, or by agreement of shareholders owning at least 66.6% of all outstanding shares. These actions can be taken, regardless of whether the gold prices are strong or weak."

http://www.investopedia.com/articles/exchangetradedfunds/08/gold-etf-gold-futures-showdown.asp




































Saturday, April 12, 2014

Everything You Always Wanted to Know About the Financial Crisis *but where Afraid to Ask

"Everything should be made as simple as possible, but not simpler." - Albert Einstein

IN order to understand today's Market Environment I feel it important to re-visit the "Global Financial Crisis". U.S. Market Indexes this Week ended on avg down 2.5%. We saw volatility in real terms (kinda). Investor/trader "psychological volatility" reached a crescendo late Friday.


IT seems many investors, speculators, economists, politicians, saints and scoundrels have forgotten (or misunderstand) how it is we got HERE. In so doing, they remain disillusioned as to where we are heading. The Global Financial Crisis was NOT caused by an inflated housing bubble alone. Certainly Predatory Lending, Sub-Prime nonsense, and liar loans created a Housing Nightmare. A boom/bubble and bust cycle was in the cards, not a Global Crisis.


The Financial Crisis a failure in Government : Wall Street invented the credit default SWAP placing HUGE bets Worldwide on the Housing Market. Said SWAP's are sophisticated instruments-indeed "insurance, without being insurance" (no reserve requirements). We could blame Wall Street for GREED, and most do. The SEC's lack of oversight is the true joker in our current predicament.  IN the 1970's we find a responsible SEC, thoroughly researching and testing the new Futures/Options Market before a contract was ever to be traded. Today we live in a World where any new financial invention can be thrown onto public Markets, with no measured due diligence. The "build it and they will come" model remains completely unregulated. Wall Street on average works appropriately, and yes "greed, for lack of a better term, is good" (see Gordon Gekko and Adam Smith). However we must not forget that Wall Street is indeed a GAME, which demands we have responsible Referees on the playing field. 


The Financial Crisis Recovery and Government: The Monetary and Fiscal Policy executed at the time, when a Global Depression was a very real probability, was an absolute necessity.  I suspect most of Main Street remains completely unaware of how close we came to the ultimate Financial Event Horizon.  The FED, under Ben Bernanke appears to have brought the U.S. through the Crisis, quite safely.  The measures taken were as extreme as they were obligatory. The Federal Government provided a "bridge loan" of sorts to keep the Banking Industry solvent. The Financial Sector in a Capital based Economy, big or small, can NOT be allowed to fail. 


 The " bridge" has been crossed. Which begs the question: Do we now have a Janet Yellen problem?  An overly cautious, indecisive FED is not good for the Markets or the Economy.


We must not fall prey to the paranoia of "black swan" events. Black Swans indeed do exist, all around, though by definition it is unlikely any talking heads/economists can see them.  In truth everything that is being discussed be it by Marc Faber, Peter Schiff , Thomas Friedman or Janet Yellen are all known known's aka "White Swans". 


The Stock Market is a game of incomplete information, where the  EDGE is in the public's misunderstanding of the COMPLETE information. It remains unclear to me, if Janet Yellen has the sophistication to properly manage FED policy. The map is static, the territory is dynamic. 


The Demise of the U.S. Economy, has been greatly exaggerated. Janet Yellen best focus on the road ahead, with only an occasional glance to the rear view mirror.


Yellen on Yellen:  "  http://www.frbsf.org/our-district/press/presidents-speeches/yellen-speeches/2009/june/yellen-economic-crisis-federal-reserve-response/ "