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I Disagree with David on the ETFBruce E Batchelor David, I disagree with you on almost every point in your defence of GLD. I have been in financial markets for 40 years and the prospectus work on GLD should never have been passed. The bar inventory has been compiled by amateurs, and you have no reason to defend this listing. Please go back to the prospectus and find the place where it says that there is sufficient gold in the trust to cover all fund inflows plus market variations, less the management fee. It is not there. Little-known to many, the trustee made its own news release at the time of the commencement of trading of GLD, and announced that it is an ADR-like vehicle using a "proprietary trading approach." This is the same outfit which consented to a finding of money-laundering. That is to say, by their own publicity, not an asset-backed trust, but one which, I assume, trails or anticipates market movements, and which from the "proprietary" aspect, uses derivatives or risk-management software. One day, many of these programs will be on the wrong side a major move. Or we will find that the insiders are front-running the units in the open market, knowing the data output of the model. We can expect some extreme volatility in the bullion scene as a result of the GLD trading model, and not the stability you would like to see. Then the serial number issue alone would have caused the trading suspension of any less-visible entity. The "addresses" you mention of the custodians are the names of entities with multiple locations, rather than addresses; no actual physical locations (as with the Perth Mint securities) are listed. Central Fund gives an actual bank address in Toronto, for a more solid example. If I attended a bankruptcy hearing and the respondent said they had money in "The Royal Bank" that would be no use to me. Nor should it be for an investor. The serial number sequence rings my bell. I doubt that there has been a physical asset assembly for this security. I am saying this just to be on the record. I hope we have a good intermediate selloff here, as the weekly adjustment in GLD inventory will prove very interesting. The minute that the listing does not appear on time (Fridays) we know we have big trouble... Sincerely, Bruce E. Batchelor |
