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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: Taikun who wrote (57169)12/12/2004 10:47:36 PM
From: LLCF  Read Replies (1) of 74559
 
<OK, fine. I wonder why Turk and the GATA bunch have so many issues with GLD then?>

I gave you my opinion [based on my experience] on what you posted on a couple of vary specific issues. I don't claim:

1.) To be in the know on those specific issues except for what I've seen in my experience, and have not looked into the background or context of the quotes except for your post.
2.) To know the particulars on redemption or floatation of new shares of GLD vs CEF.

<<Why are they [futures] included? I think it raises questions about the extent to which they could be use.>>

Now, again just my perspective.... but CEF has been in business for more than a decade, is Canadian. That tells me that they simply didn't think of using futures at the time of formation. I also am not sure on CEF's redemption rules... if you can't redeem, but only sell in mkt, and if they can't simply issue new shares... then they don't have a hedge issue. Also, every dolt on WStreet knows about baskets and arbitrage now, to me it's a no brainer to keep your options as broad as possible in hedging your account.

Example:

The company has to liquidate X oz of gold due to redemptions [I'm assuming one can redeem]... spot gold is bid $4 below fair value to the futures. Why give the $4 to some investment bank's arb desk??? They sell the futures and when the spread comes back in line later in the afternoon trade the futures in for the real thing.

Now if you're part of the black helicopter crowd you're damn worried about the comex going out of business that day... EVEN SO the company doesn't HAVE to use the futures if things are getting hairy in the market!

<I read what you write, and then I look at CEF's prospectus, and I just see a tighter product.>

You're right. But if my understanding of the way things work is what's going on in the wording you're presenting, I'm NOT worried about hanky panky at all unless all hell breaks lose and they have lose canons punting away on the trading desk.... which is NOT what you are saying Turk and Gata are implying... they are worried [if I read you right] about manipulation, and GLD is some dark I-bank clone of some death star. If the precious metals market get's to the point where the worry I would have is an issue [lose cannon on trading desk ala Nick Lesson losing tens or hundreds of millions in a few days]... I've already got 100mill in the bin. {of course it's not worth much! LOL}

DAK
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