ETF fund buying reported to be high
CaptHenway
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Numismatist. 50 year member ANA. Winner of four ANA Heath Literary Awards; three Wayte and Olga Raymond Literary Awards; Numismatist of the Year Award 2009, and Lifetime Achievement Award 2020. Winner numerous NLG Literary Awards.
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roadrunner
Why would the Trustee, Bank of NY, be involved in fraud of this nature, given the minimal importance of this business to their overall business?
<< <i>Does anyone credible really believe that the reputable gold etfs really don't own the gold they say they do? SPDR Gold Shares, for example, lists each bar held in London on their web site, and assert that audits are conducted as part of annual reporting.
Why would the Trustee, Bank of NY, be involved in fraud of this nature, given the minimal importance of this business to their overall business? >>
Define 'ownership'.
If you mean physical possession, and showing ownership on corresponding paper, I greatly question whether they have that gold on hand. Why? Because when you read the fine print in the Prospectus, and Statement of Additional Information, they can lend, lease, borrow, short sell, naked short sell, etc gold. When they 'lease' it out to someone else, they can still show it as an owned asset on their books.... and the entity it is leased to can ALSO list it on their books as an asset. Who owns it? Who has physical possession? Where is it?
Their are many games that can be played by the ETF's.
Fraud? Again, what is the definition of fraud? The ETF may be doing what they stated that they might do in the prospectus, etc. Except most investors do not realize this is going on.
The physical bars (if they are really there) are kept with other institutions... which supply the trustee with the numbers, etc. These storage institutions are reponsible for their own auditing and record keeping... the trustee accepts their numbers without much questioning. Again, many games can be played.
As to why the trustee would knowingly get involved in a setup like this? Very simple.... much money to be made. And regulators are turning a blind eye to much of what is going on. There may even be complicity with the regulators.
If you trust the ETF's of gold and silver.... by all means jump right in. A person can make some good money by playing the trends. But keep your eyes open.... because when it is all said and done, you are dealing in paper and if you believe there is the proper amount of gold or silver for each one of the shares, ........ well, we each make our own decisions.
The trustees are not allowed to audit or view the gold in the storage conditions maintained by the custodians. That's in the prospectus. See no evil, hear no evil. All the trustees ever see are numbers on a sheet of paper. And that's just the way they want it so that they have no liability in the case "irregularities" pop up. I guess if you have reason to fully trust banks and financial institutions after what has occurred over the past 2 years, then GLD and SLV should pose no problem. The Central Fund of Canada is probably one of those I might trust to have all the gold they say as they do frequent audits with actual counts.
Frankly, I would be shocked if all the gold the ETF's say they own is actually there. Who was the last major broker to be holding gold for their clients but turned out they didn't actually have it...Merrill?
roadrunner
<< <i>The physical bars (if they are really there) are kept with other institutions... which supply the trustee with the numbers, etc. These storage institutions are reponsible for their own auditing and record keeping... the trustee accepts their numbers without much questioning. Again, many games can be played
The trustees are not allowed to audit or view the gold in the storage conditions maintained by the custodians. That's in the prospectus. See no evil, hear no evil. All the trustees ever see are numbers on a sheet of paper. And that's just the way they want it so that they have no liability in the case "irregularities" pop up. I guess if you have reason to fully trust banks and financial institutions after what has occurred over the past 2 years, then GLD and SLV should pose no problem. The Central Fund of Canada is probably one of those I might trust to have all the gold they say as they do frequent audits with actual counts.
Frankly, I would be shocked if all the gold the ETF's say they own is actually there. Who was the last major broker to be holding gold for their clients but turned out they didn't actually have it...Merrill?
roadrunner >>
Yes, I think it was Merrill.... and if I recall correctly, in the court case they stated that it was a 'standard industry practice' what they did.
<< <i>Does anyone credible really believe that the reputable gold etfs really don't own the gold they say they do? SPDR Gold Shares, for example, lists each bar held in London on their web site, and assert that audits are conducted as part of annual reporting.
Why would the Trustee, Bank of NY, be involved in fraud of this nature, given the minimal importance of this business to their overall business? >>
Your bank doesnt have all the "cash on hand" to pay every depositor if they were to all withdraw at once. Why do you think the ETF's are any different?
What is the upside to the bank of NY to committing fraud? Do you think this is a Madoff type Ponzi scheme?
<< <i>
Your bank doesnt have all the "cash on hand" to pay every depositor if they were to all withdraw at once. Why do you think the ETF's are any different? >>
Last I remember, banks only need 10% in cash. But that has been years ago, I'm not sure if that has changed.
<< <i>The trustee (Bank of NY) has the right to audit the gold in the vault twice per year. (This is explicitly stated in the 10-K recently filed)
What is the upside to the bank of NY to committing fraud? Do you think this is a Madoff type Ponzi scheme? >>
Its not so much commiting "fraud" in a criminal sense. But you had better believe that they are OVERSELLING those contracts in much the same way as a bank multiplies the "paper/electronic" money supply. Its just the nature of the greedy beast. You have 100 ounces of physical gold, and the government says you may use that 100 ounces to sell 1,000 ounces of paper gold to your buddies. You gonna just sell those physical 100 ounces and miss out on the other 900 ounces of "phantom gold" commisions? Hell no! Your gonna sell the full 1,000 ounces and ASSUME that all your investors dont demand physical delivery at the exact same time. Trust me, this IS the next bubble that will burst!
<< <i>The trustee (Bank of NY) has the right to audit the gold in the vault twice per year. (This is explicitly stated in the 10-K recently filed)
What is the upside to the bank of NY to committing fraud? Do you think this is a Madoff type Ponzi scheme? >>
Not sure what you..... want to hear.
If you are looking for assurance that it is a totally 'safe' investment, it will be up to someone else to give you that assurance. I certainly cannot.
The upside for the bank is that it is making lots of money on the ETF. That is why they would partake in those types of manipulations.
"The right to audit" opens some questions. If they have the right, are they exercising that right? And what does the audit entail? The gold in Fort Knox is 'audited' every year.... but yet no-one is allowed entry into the actual physical vault to verify actual physical presence. It is a 'paper' audit. To make sure the paper trail adds up. That right to audit the gold in the vault in the 10-K may be the same. Read the Statement of Additional Information. There is usually a lot of interesting things hidden in that.
The same benefit that all the other major banks have been getting by playing along with GS, JPM, FED and the Treasury. You get to make obscene amounts of money, get protection from above, and then stiff the bond and shareholders with the losses when your Ponzi-scheme finally falls apart. Makes sense to me. Madoff was a trick or treater compared to the bankers. And besides, any fraud in the gold or silver ETF's would be looked upon with favor by the financial community because those barbarous relics are unwanted competition to fiat currencies.
The accountants that actually sign off on the final ETF paperwork don't do the actual inventory. And I would find it incredibly hard to believe if employees of BONY do a complete physical inventory of the various sub-custodians. Who in their right mind is going to put their signature on such a document claiming that they sighted every ounce of gold?
Last few articles I read in 2006-2007 concerning bank on hand deposits was that the requirements were lowered well below the decades-old standard of 10% and in some cases to as little as 1%. A little leverage can go a long ways.
roadrunner