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Haliaeetus
11-03-2010, 04:09 PM
This is a new ETF composed of exploration companies. It is supposed to start trading November 4.

http://www.gwmgroupinc.com/intranet/BackOfficeResourceFile/1097_GLDX_fact_sheet.pdf

http://www.gwmgroupinc.com/intranet/BackOfficeResourceFile/1091_GLDX_prospectus.pdf

http://www.gwmgroupinc.com/intranet/BackOfficeResourceFile/1095_SOLGLDX_index_fact_sheet.pdf

Bring the Gold
11-03-2010, 04:38 PM
This is a new ETF composed of exploration companies. It is supposed to start trading November 4.

http://www.gwmgroupinc.com/intranet/BackOfficeResourceFile/1097_GLDX_fact_sheet.pdf

http://www.gwmgroupinc.com/intranet/BackOfficeResourceFile/1091_GLDX_prospectus.pdf

http://www.gwmgroupinc.com/intranet/BackOfficeResourceFile/1095_SOLGLDX_index_fact_sheet.pdf
Some big hitters in there Colossus, Exeter, Rubicon.

I wish I had bought this index in 2009 :D

ptrschssl
11-03-2010, 05:02 PM
That looks like an impressive ETF and their wisest choice was UXG.
You guys ought to look up the company and the CEO, Robt McEwen,because everything he touches turns to gold! Pun intended.

CyclesGuy
10-10-2012, 07:35 AM
Bumping this old thread cause I think the posters were on to something.

I'm trying to figure out the optimal time to invest in explorer shares. Anyone on this board holding GLDX at the present time? The other fund I'm eyeing is the TSXV, which may offer a little less risk (with less upside) but still capture any gains in the gold explorers.

Studying the technicals, explorers still seem to be quite undervalued relative to gold, the mining seniors, and to the mid-cap producers.

GLDX peaked in early 2011 relative to gold, with a gold:GLDX ratio of about 71. We stand today at 200. The 400-day moving average of the ratio is 145. We're looking at GLDX gains of 35% just to return to the 400-day, and a gain of 176% to match the previous 2011 high. I'm thinking this might be a good time to go long and attempt to leverage gold's seasonal rally?

Thoughts?

Gwyde
10-10-2012, 05:08 PM
... but as Brent Cook repeatedly mentions: 95% of explorers won't make it. You'll need to cover your losses holding as much as possible of the 5%. GLDX may have a decent number of good picks in their basket. But even then, it plunged largely more than did GDX, the major miner ETF. I found this comparison:
Explorers have a long way to go (http://gwyde.blogspot.be/2012/09/gold-explorers-have-long-way-to-go.html)

I don't fancy a TSXV basket fund. With lots of early stage start-ups, there's going to be an awful lot of the 95% on board.

Haliaeetus
10-13-2012, 02:31 PM
ETF's routinely lend stock shares to short sellers for extra cash. Additionally, the ETF shares themselves can be shorted. So this adds extra counter party risk to consider for those who think it is possible that the music might suddenly stop one day.

http://online.wsj.com/article/SB10001424052702303823104576391573704929238.html

Quote:
Like mutual funds, many ETFs put their holdings to work, lending them out to other investors with the aim of earning a little extra income. The borrowers are typically institutional investors betting that, say, shares of Company A are going to fall in price. These "short sellers" sell the borrowed shares, hoping to buy them back later at a lower price to return to the ETF.

The practice of securities lending affects ETFs in another, more complex way that doesn't occur with conventional mutual funds: Some investors routinely lend the ETF shares themselves to others, typically for short selling. Some ETFs are "net short," meaning there are more shares sold short than shares in existence.

Still, at a recent securities-lending conference hosted by data company Data Explorers, 46% of industry insiders responding to a survey said they believed that net-short ETFs could pose a systemic risk for securities markets. The independent Ewing Marion Kauffman Foundation released a paper in November with similar concerns, stating that shorting of ETFs has "created enormous reliance on the continued solvency of countless market intermediaries."

Gwyde
10-15-2012, 03:46 AM
(...)
The practice of securities lending affects ETFs in another, more complex way that doesn't occur with conventional mutual funds: Some investors routinely lend the ETF shares themselves to others, typically for short selling. Some ETFs are "net short," meaning there are more shares sold short than shares in existence.

Still, at a recent securities-lending conference hosted by data company Data Explorers, 46% of industry insiders responding to a survey said they believed that net-short ETFs could pose a systemic risk for securities markets. (...)


During the so-called flash crash, some ETF"s have been among the main victims, causing their stock price to drop far below the equity value in the basket (thus temporarily trading at a huge discount). For those waiting for another such anomaly, it may make sense shorting an ETF. (Being long the main equity components can render it more or less risk neutral.)

GLDX is a small ETF (owining only very limited positions in its investment niche). In such case a "net short" ETF does raise the second concern you quote:



(...)
The independent Ewing Marion Kauffman Foundation released a paper in November with similar concerns, stating that shorting of ETFs has "created enormous reliance on the continued solvency of countless market intermediaries."

Contrary to stocks, ETF shares can be created according to need. Whenever an ETF trades at a premium, the management issues new ETF shares, offset by purchasing more equity. GLDX is able to issue many new shares without completely distorting the market in which it operates. In such case, I would not qualify a "net short" a systemic risk.

Haliaeetus
10-15-2012, 08:52 AM
Contrary to stocks, ETF shares can be created according to need. Whenever an ETF trades at a premium, the management issues new ETF shares, offset by purchasing more equity. GLDX is able to issue many new shares without completely distorting the market in which it operates. In such case, I would not qualify a "net short" a systemic risk.

If I short GLDX there are no new shares of GLDX created by the sponsor, and no purchase of the underlying stocks. The problem referenced in the article is that the ETF shares themselves can be shorted, so that can create many more shares of the ETF than were issued by the sponsor. Therefore there is systemic risk if the one short the ETF becomes insolvent and can not return the shorted ETF shares or pay the cash to make their margin payments. Somebody will be left holding the empty bag.

I read recently that Citi Bank is one of the main players in paying funds to borrow shares for shorting. Consider what happens if Citi declares bankruptcy and can't return the shares or pay any margin requirements.

CyclesGuy
10-15-2012, 10:55 AM
Haliaeetus and Gwyde, thanks for the points , the ETF risk is a topic I haven't thought much about. Other than Silver Wheaton I've never bought individual shares before of anything, but I have large portions in large cap/junior mining ETFs. I typically diversify across at least 3 Funds or ETFs and hold them until a technical peak (then convert to something undervalued)l, so I'm less worried in the short term.

My thinking is to create my own basket of 3-5 stocks that correlate highly with the GLDX index and that way I can avoid management fees as well.

In particular I'm considering:
Guyana Goldfields
Newstrike Capital
Seabridge Gold

In comparison to GLDX, year-to-date, 1 month, and 3 month analysis has this basket average correlation 0.93. Backtesting this group would have had volatile swings that leverage GLDX by about 2x, but I figure there is less downside now than in previous months/years, and I'm willing to average down further if they keep dropping.

With the bloodbath taking place on the commodity markets this morning, today seems like a good day to get started :cool: Thoughts?

Haliaeetus
10-15-2012, 12:29 PM
Haliaeetus and Gwyde, thanks for the points , the ETF risk is a topic I haven't thought much about. Other than Silver Wheaton I've never bought individual shares before of anything, but I have large portions in large cap/junior mining ETFs. I typically diversify across at least 3 Funds or ETFs and hold them until a technical peak (then convert to something undervalued)l, so I'm less worried in the short term.

My thinking is to create my own basket of 3-5 stocks that correlate highly with the GLDX index and that way I can avoid management fees as well.

In particular I'm considering:
Guyana Goldfields
Newstrike Capital
Seabridge Gold

In comparison to GLDX, year-to-date, 1 month, and 3 month analysis has this basket average correlation 0.93. Backtesting this group would have had volatile swings that leverage GLDX by about 2x, but I figure there is less downside now than in previous months/years, and I'm willing to average down further if they keep dropping.

With the bloodbath taking place on the commodity markets this morning, today seems like a good day to get started :cool: Thoughts?

I am also big on SLW. The royalty companies have the most sound business model, IMO. Others are RGLD, FNV, and SAND.

I would consider going with more than 3 exploration stocks if you want to mimic an ETF, perhaps 7-10 or more. Individual exploration stocks have a way of suddenly crashing for one reason or another.

A rule I try to follow is not to put more than one or two percent of my money in any one exploration stock (companies with no mines), and no more than 5 percent in any one stock, except perhaps the royalty companies if the price is right. If a company has a property that will be producing soon, then they are in between the 1 to 5 percent. I focus most of my attention on royalty companies and those with working mines and little or no long term debt. Exploration company investing is only with money you can afford to lose without getting night sweats, IMO. They have no source of income except selling more shares, getting a loan, or selling royalties; it takes a lot of cash to get a property into production.

It is difficult to know when this correction will be over with. There are factors holding metals down at the moment. One is the election. Two is a vast number of gold call options at 1800 that expire toward the end of November. Three is that the price went up pretty fast for a while and needs a rest to give a base for another rise. The politicians and the shorts have reason to hold a boot on the price for the next few weeks. That doesn't mean it won't go up anyway, but there are good reasons for a pause.