Fed can't keep the rates low

[johnpane]

On 6/9/2021 at 4:04 PM, wabuffo said:

I'd wait until the Treasury general acct at the Fed gets down to $100b-$200b (or end of July) - whichever comes first and look to short something like TLT (so maybe TLT puts - medium duration of some sort).  Others have suggested shorting high-yield ETFs (not my expertise) since they would see a double-whammy of both rising Treasury rates and rising HY credit spreads.

 

 

On 6/13/2021 at 10:17 PM, Spekulatius said:

It is an interesting thesis, but now one has to estimate the infliction Point which is when the Fed account balance reaches about $100B. Currently, we are at $633B which is probably worth about 1-2 month from now- I am guessing end of July when interest rate should start to move up again, if this hypothesis is correct.

 

It seems that TLT puts with an out of money strike and a year end expiration date would be a good way to play this. Either it works, or it doesn’t but it is an alternative hypothesis that I like because I think it is underpriced.

 

 

What do you guys think of this new interest rate hedge ETF as a way to position for interest rate rises (and increased interest rate volatility) with limited downside and timing risk? The fund uses swaptions on 20-year treasuries dated 7 years out. The chart shows theoretical performance of the swaptions, with a positive convex response to interest rates, and carry cost of about 10% per year if rates and volatility are unchanged. I think an increase in interest rate volatility would push the entire curve upward. These swaptions represent about half of the ETF holding with the rest in 5-year treasuries.

 

This post has more details on the ETF's strategy, and is the source of the curve shown here.

 

Edited June 15, 2021 by johnpane
clarify wording

[K2SO]

On 6/14/2021 at 10:10 AM, wabuffo said:

I think Rosenberg is one of the many macroeconomists getting faked out by the bond market right now. 

Yup. I think most of these economists are isolated from the impacts of inflation because they aren't out there every day seeing what's happening with prices. I include myself in that group. I was shocked last month to find that a dozen donuts from a local gourmet shop are up about 50% over the past 2 years. My wife laughed at me like yeah, where have you been? Everything is up!

 

Rosenberg thinks he's a contrarian with this call but he's just following the bond market's lead. If I ignore the bond market and instead go by what I see and what I hear in earnings calls, we are on the brink of some pretty major inflation. 

 

[Spekulatius]

On 6/14/2021 at 10:10 AM, wabuffo said:

David Rosenberg has a very different take on inflation & interest rates. He thinks rates will continue to go down & the current inflation is temporary. 

 

https://www.zerohedge.com/markets/economist-david-rosenberg-says-bond-market-has-inflation-right

 

I think Rosenberg is one of the many macroeconomists getting faked out by the bond market right now.  His will be one of the exploding macroeconomists' heads come the fall.  

 

Of course, I have no idea whether inflation is transitory or not (I'm not sure) - but I believe his rate prediction will be proven wrong (at least after August 1st-ish).

 

wabuffo

yes I think that could well be correct. The narrative "the bond market is smart and is bullish" could well be wrong, because as @wabuffo neatly pointed out, the bond market is just supply and demand and right now, there is little supply, so prices wen up (and bond yields down) due to a transient factor.

[TwoCitiesCapital]

16 hours ago, Cigarbutt said:

@LearningMachine

i don't really want to enter this debate among great minds but the cash-on-the-sideline thing is a tricky concept. Let's say i use my cash on the sideline to buy your VZ shares, then you have cash on the sideline. Even if i use margin cash, then i use cash on the sideline from someone else. The noise about all this growth in cash deposits is simply a reflection of expanding balance sheets (commercial banks, the Fed etc). For example, during 2020-1, corporates have built cash (for which they now face negative rates when they try to deposit at JPM or BAC) but the increase in cash was matched by revolver draws and debt issuance. Without entering the irrelevant question about the possible presence of systemic excess cash or excess debt, it's interesting to note that, during 2020-1, money market funds AUM increased by about 1T, of which all was channeled into short term government debt yielding essentially 0%. And since mid-March 2021, when MMFs call JPM and BAC, they are offered negative rates so they have turned to the reverse repo market and bought more than 500B of short-term repo collateral (short term government debt) in exchange for cash and a 0% (or slightly negative yield). i guess the opportunity cost is about 0% for cash on the sideline. Anyways, whatever your perspective on this wave of liquidity waiting to stir animal spirits, you have to reconcile with the following recent asset allocation profile prepared by Ned Davis (excellent data). Some conclusions from the graphs appear counter-intuitive but it's not fake news and it all makes sense if you actually go through the numbers.

 

Not to mention the very act of banks hoarding cash, as opposed to lending, is contractionary and disinflationary. This entire economy is floated on credit growth - you cut the growth rate of credit and the impacts on economic growth are dramatic. 

 

I can't speak for the big banks, but I know bankers here in the Midwest for local credit unions and the like. They're sitting on tons of cash too, but not because they think prices are rising. It's because they don't have enough money good projects to invest it in and things are arguably shakier today than they were 2-years ago when rates were higher. 

 

4 hours ago, K2SO said:

Yup. I think most of these economists are isolated from the impacts of inflation because they aren't out there every day seeing what's happening with prices. I include myself in that group. I was shocked last month to find that a dozen donuts from a local gourmet shop are up about 50% over the past 2 years. My wife laughed at me like yeah, where have you been? Everything is up!

 

Rosenberg thinks he's a contrarian with this call but he's just following the bond market's lead. If I ignore the bond market and instead go by what I see and what I hear in earnings calls, we are on the brink of some pretty major inflation. 

 

 

Or that inflation is already captured in the elevated inflation figures were CURRENTLY seeing and we're on the brink of massive disinflation unless donut prices go up by ANOTHER 50% over the next 2-years. 

 

To get consistently elevated inflation, you need consistently rising prices. And those prices need to rise at the same, or an accelerating rate. If a house changes in value from 100k to 200k in a year, your housing inflation rate is 100%. If it goes up by another 100k in year 2, housing inflation is only 50%. If it goes up by another 100k in year 3, inflation drops to 33%. The drop from 100%, to 50%, to 33% is disinflation - a slowing rate of inflation. 

 

Any bonds priced for 100% inflation at the beginning of this trend will PRINT MONEY in the environment of 50% and 33% inflation. The bond market knows this and will NOT move to reflect current inflation unless if it becomes convinced that inflation is sustainable and accelerating. 

 

So who cares that donuts were up 50% over the past 2-years? That impact is already captured in today's inflation figures and bond yields. All that matters going forward is if they go up another 50% or more over the next 2. B/c if they don't, the impact is disinflationary.

 

What is going to drive a 50% increase in donut prices over the next 2-years? Ongoing stimulus? Ongoing supply chain disruptions? Ongoing wage hikes? Ongoing inelasticity of consumer demand? Most of these seem one-off and dare I say...transitory? 

Edited June 15, 2021 by TwoCitiesCapital

[Libs]

Upthread there was a discussion of reserve currency. Dalio put together an impressive study of the rise and fall of empires ( Dutch to British to U.S over 500 years) that ties into this. The are several key factors to consider, including military strength, education, innovation, and so forth. I found it very helpful:

 

https://www.linkedin.com/pulse/big-cycles-over-last-500-years-ray-dalio

[Munger_Disciple]

Another perspective FWIW:

 

 

Edited June 15, 2021 by Munger_Disciple

[LearningMachine]

6 hours ago, Munger_Disciple said:

Another perspective FWIW:

 

 

 

Interesting how Paul Tudor Jones mentions at around 4:55 that now is not the time to be invested in financ[ial assets], but better to be in commodities. 

 

This brings another distinction that someone mentioned earlier

• #1. Inflation in financial assets vs.
• #2. Inflation in day-to-day products/services. 

 

I wonder if another way to think about this is that with the monetary supply going up and interest rates being low for so long, we have been having inflation for a long time.  So far, the monetary supply was going in the hands of the rich who don't spend that much and end up saving or buying financial assets, which has been increasing the price of financial assets. 

 

Now, when we see stimulus and minimum wages go up, putting monetary supply in the hands of lower-income spenders, and we have bottlenecks happen, all of a sudden we see them compete with each other on limited products/services and we see inflation start to happen in day-to-day products/services.

 

The danger here though is that as inflation starts to shift from financial assets to day-to-day products/services, it will result in higher interest rates/discount rates, bringing the value of financial assets lower. 

 

Another way to say it is that the value of financial assets is basically a multiple on price of day-to-day products/services.  With inflation in day-to-day products/services, that multiple goes down.  

 

 

 

Edited June 16, 2021 by LearningMachine

[no_free_lunch]

I have no idea how this goes down but I have worried about inflation since the commodity boom in 2006.  So far I have been wrong and so I am suspicious that this is THE time it finally happens.  I did a little DD and it seems that post world war 1 & 2 in the US there was strong inflation for a few years and then it simmered.  During that inflation bout post WW2 they just kept interest rates low right through the inflation.  Not sure what the rationale was, I think they were concerned about the great depression returning.  All I know is the fed played it cool and I would argue was right in that one case.   

 

Today we have inflation and are emerging, hopefully, from total war like spending, so it does seem similar.  Meanwhile the deflationary force of production efficiency and globalization is still at play.  Debt levels are high but japan has higher and has shown how tough it is to call inflation.  I see it as a very mixed bag. 

 

We will see but I am trying to setup on stocks that will do ok in either scenario.

Edited June 16, 2021 by no_free_lunch

[SharperDingaan]

The great thing with Inflation are the pair trades.

Gold miners print money. Fixed costs remain largely unchanged, whereas contribution margin rockets upwards as the gold price increases. The more 'fear of inflation', the higher the margin goes, and the higher the share price. Whereas the value of financial assets drop like a brick, as the rising yield lowers PV (price of the asset). Long commodities, short long term bonds. Ideally on the SAME company, to net out the credit risk 

 

Main street reacts to TODAY's inflation, CB's react to TOMORROW's inflation. Hence, the pair trade is really a play on the horizon differences, and the difference in 'views'. The specific vehicle chosen is largely secondary (it just needs to be a commodity company). Re Joe/Jane investor? sell the bond fund/ETF, buy the commodity fund/EFT.

 

Everyone selling their bond fund/ETF, forces the portfolio to sell, flooding the market with incremental supply. All else equal, price drops and yields rise - pushing the 'inflation' line, pushing the price of the gold miner still higher. Bond losses avoided, commodities gains made, and no day-to-day investment 'upkeep' required!

 

SD

 

 

[K2SO]

16 hours ago, TwoCitiesCapital said:

So who cares that donuts were up 50% over the past 2-years? That impact is already captured in today's inflation figures and bond yields.

Agree that in theory this SHOULD be the case, but if you think that the inflation figures we have seen over the past 2 years and the yields on bonds have compensated you for this loss of purchasing power, then I can't agree.

 

Having said that, the markets tell the story, and if bond, lumber and copper's recent moves are correct, then we could be seeing the end of this very temporary period of "transitory" inflation.

 

I'm not religious on the matter and open to changing my mind. However I'm operating under the assumption that high inflation is coming eventually. Because if governments and central banks can escape the money printing and fiscal stimulus of the past year without runaway inflation, prepare to see this as the new playbook for every future recession. 

 

[TwoCitiesCapital]

1 hour ago, K2SO said:

Agree that in theory this SHOULD be the case, but if you think that the inflation figures we have seen over the past 2 years and the yields on bonds have compensated you for this loss of purchasing power, then I can't agree.

 

Having said that, the markets tell the story, and if bond, lumber and copper's recent moves are correct, then we could be seeing the end of this very temporary period of "transitory" inflation.

 

I'm not religious on the matter and open to changing my mind. However I'm operating under the assumption that high inflation is coming eventually. Because if governments and central banks can escape the money printing and fiscal stimulus of the past year without runaway inflation, prepare to see this as the new playbook for every future recession. 

 

 

I agree. I just think 'eventually' is likely later this decade or the next one IF it happens. 

 

My working theory is that demographics, globalization, technological advancement, and private sector debt explosion have all be disinflationary/deflationary over the last 1-2 decades. These factors offset the money printing and is why inflation hawks were wrong each time about massive inflation. 

 

After 2-3 decades of limited consumer price inflation, politicians will get comfortable with the idea that money really is free. And that will be precisely the point where the disinflationary drags from these offsetting factors is waning. I could see how we MIGHT get inflation in that environment. 

 

But even with demographics, productivity advancement from internet/personal computing/mobile phones, partial reversal of global supply chains, and less reliance on US dollar in global trade (from lower oil consumption) all moving away from being disinflationary, we would still have other deflationary/disinflationary trends to contend with. 

 

Technological advancement and productivity gains from A.I. may be massively deflationary. Consumer debt balances will likely grow and any rise in interest rates throttles discretionary spending and thus inflation/economic growth. The trillions printed may largely remain trapped as excess reserves and not circulated throughout the broader economy. Etc. etc. etc. 

 

It's a high bar to get lasting inflation in the U.S. and I can't see how it occurs any time soon without something major (like the loss of reserve status) occurring first. 

[Castanza]

4 hours ago, SharperDingaan said:

The great thing with Inflation are the pair trades.

Gold miners print money. Fixed costs remain largely unchanged, whereas contribution margin rockets upwards as the gold price increases. The more 'fear of inflation', the higher the margin goes, and the higher the share price. Whereas the value of financial assets drop like a brick, as the rising yield lowers PV (price of the asset). Long commodities, short long term bonds. Ideally on the SAME company, to net out the credit risk 

 

Main street reacts to TODAY's inflation, CB's react to TOMORROW's inflation. Hence, the pair trade is really a play on the horizon differences, and the difference in 'views'. The specific vehicle chosen is largely secondary (it just needs to be a commodity company). Re Joe/Jane investor? sell the bond fund/ETF, buy the commodity fund/EFT.

 

Everyone selling their bond fund/ETF, forces the portfolio to sell, flooding the market with incremental supply. All else equal, price drops and yields rise - pushing the 'inflation' line, pushing the price of the gold miner still higher. Bond losses avoided, commodities gains made, and no day-to-day investment 'upkeep' required!

 

SD

 

 

What gold miners do you like? 

[Gregmal]

On 6/15/2021 at 6:42 AM, johnpane said:

 

 

What do you guys think of this new interest rate hedge ETF as a way to position for interest rate rises (and increased interest rate volatility) with limited downside and timing risk? The fund uses swaptions on 20-year treasuries dated 7 years out. The chart shows theoretical performance of the swaptions, with a positive convex response to interest rates, and carry cost of about 10% per year if rates and volatility are unchanged. I think an increase in interest rate volatility would push the entire curve upward. These swaptions represent about half of the ETF holding with the rest in 5-year treasuries.

 

This post has more details on the ETF's strategy, and is the source of the curve shown here.

 

Wow this of the surface seems pretty cool. I'll have to look into it but is there any real info on the beta? IE how kind of allocation would be suitable per lets say $100k? An ETF I'd imagine is fairly low, but it the fund holds options it could be pretty gnarly. Thanks in advance if anyone has answers or just wants to throw shit against a wall and guess. 

[TwoCitiesCapital]

6 minutes ago, Gregmal said:

Wow this of the surface seems pretty cool. I'll have to look into it but is there any real info on the beta? IE how kind of allocation would be suitable per lets say $100k? An ETF I'd imagine is fairly low, but it the fund holds options it could be pretty gnarly. Thanks in advance if anyone has answers or just wants to throw shit against a wall and guess. 

 

Harley Bassman (the fixed income guru behind this ETF product) talks in depth about this on the Macro Voices podcast. I don't recall what the actual "delta" was, but he goes into detail about thinking about sizing in that conversation and provides examples of how much you'd expect this thing to move. 

[SharperDingaan]

Re gold miners. Prettty much any one of these   

https://www.fool.com/investing/the-10-biggest-gold-mining-stocks.aspx

 

Freeport has the advantage of also being a dominant copper producer, and strength on the unsavoury side of the third-world mining business. Our commodity preference is o/g, simply because it is well within our circle of competence. 

 

NA deflation very likely is the case - long term, and for many of the reasons posted. But 'transitory' inflation will be high, and for at least 1-3 years. Global (China) trade artifically lowered prices in NA, and environmental costs were never part of the end price paid. Security of supply is now back on the table, and it is going to cost more for just about everything. As we are currently seeing.

 

Todays $100 grocery bill is $200 in 9 months, $250 in 18 months. Sure, the inflation rate is mathamatically declining over time (deflation), but to main street - groceries cost 2.5x more than they used to (inflation). To continue eating, you must charge more for your labor - cost push inflation, and opportunities.

 

SD

 

 

Edited June 16, 2021 by SharperDingaan

[TwoCitiesCapital]

Fed "surprised" the market by projecting two rate hikes (0.50%) over the next 18 month period and the long-bond rallies like crazy in response. 

 

Bond market is even LESS convinced of inflation after the Fed meeting acknowledging it and suggesting they'll accelerate rate hikes from prior projections. 

 

 

 

 

[wabuffo]

Bond market is even LESS convinced of inflation after the Fed meeting acknowledging it and suggesting they'll accelerate rate hikes from prior projections. 

 

You are ascribing motivation when all that's happening is due to the plumbing.   The Fed turned on a valve ever so slightly (5bp) and of course the fluid dynamics took over.   Reverse repo jumped over $230b a few minutes ago (to a record $755.8b).

 

All while the US Treasury is reducing its net issuance of securities temporarily.   The Fed should've stood pat on IOER.

 

wabuffo

 

[TwoCitiesCapital]

1 hour ago, wabuffo said:

Bond market is even LESS convinced of inflation after the Fed meeting acknowledging it and suggesting they'll accelerate rate hikes from prior projections. 

 

You are ascribing motivation when all that's happening is due to the plumbing.   The Fed turned on a valve ever so slightly (5bp) and of course the fluid dynamics took over.   Reverse repo jumped over $230b a few minutes ago (to a record $755.8b).

 

All while the US Treasury is reducing its net issuance of securities temporarily.   The Fed should've stood pat on IOER.

 

wabuffo

 

 

I dunno. Other "inflation hedges" like precious metals also got crucified. Silver is down 6% today. Gold? 4%. Long bonds are up. S&P is down while Nasdaq is up suggesting it's not just rates but ALL longer duration proxies outperforming. 

 

None of that seems right in response to a 0.05% hike in the IOER or inflation concerns being justified. The bond market has been saying there would be no sustainable inflation all along. I wonder if its time for commodities to catch down to that.

 

I say that as someone who is heavily in commodity companies - not b/c of inflation fears but because they were dirt cheap from 2015 - 2020. 

[LearningMachine]

On 6/9/2021 at 1:04 PM, wabuffo said:

Hypothetically?

 

 

I went long GLD Leap Calls @$150 in mid-April.

 

I'd wait until the Treasury general acct at the Fed gets down to $100b-$200b (or end of July) - whichever comes first and look to short something like TLT (so maybe TLT puts - medium duration of some sort).  Others have suggested shorting high-yield ETFs (not my expertise) since they would see a double-whammy of both rising Treasury rates and rising HY credit spreads.

 

If I'm feeling adventuresome - I'd short the junkiest of tech ETFs since their share prices should fall with rising discount rates (since any cash earnings, if there are any, would be way out in the future) when the TLT puts go on.  Maybe even short the Russell via puts.

 

But none of this is anything I might actually do since I'm a big chicken when it comes to both options and shorting.  I am comfortable with GLD and GLD calls since I think I understand that one well enough.

 

DO NOT DO ANYTHING THAT I AM DESCRIBING HERE - YOU WOULD BE A DEGENERATE GAMBLER IF YOU DID and BEN GRAHAM WOULD REVOKE ANY VALUE INVESTOR CREDENTIALS YOU MIGHT HAVE ... (I PROBABLY MAY NOT DO ANYTHING I'M DESCRIBING HERE - x GLD)

 

wabuffo

 

@wabuffo, curious what makes you more comfortable about gold etfs over other ideas for inflation protection?   Speaking of gold ETFs, have you considered GLDM? 

[LearningMachine]

14 hours ago, wabuffo said:

Bond market is even LESS convinced of inflation after the Fed meeting acknowledging it and suggesting they'll accelerate rate hikes from prior projections. 

 

You are ascribing motivation when all that's happening is due to the plumbing.   The Fed turned on a valve ever so slightly (5bp) and of course the fluid dynamics took over.   Reverse repo jumped over $230b a few minutes ago (to a record $755.8b).

 

All while the US Treasury is reducing its net issuance of securities temporarily.   The Fed should've stood pat on IOER.

 

wabuffo

 

 

If 5bps valve turn could have such a big impact, could Fed turn these valves in the future also, making it hard to predict TLT/GLD/GLDM prices AND their timing? 

Edited June 18, 2021 by LearningMachine

[wabuffo]

curious what makes you more comfortable about gold etfs over other ideas for inflation protection?   Speaking of gold ETFs, have you considered GLDM? 

 

GLD maintains a peg - it acts like a central bank that issues/redeems Trust units and buys/sells gold to maintain its peg of 10-to-1 to the price of gold (ex the Trust's expenses).  Miners never interested me because I would be getting much further away from the actual peg that I'm trying to achieve.   I was buying more GLD LEAP calls yesterday.

 

If 5bps valve turn could have such a big impact, could Fed turn these valves in the future also, making it hard to predict TLT/GLD/GLDM prices AND their timing? 

 

The move from zero is the biggest move.  I was surprised the Fed did it.  They must've been getting a lot of calls from the money market funds (MMFs).   MMFs that have O/N RRP accounts at the Fed are the main users of reverse repo and were probably threatening to impose fees on their holders (by convention, they can't "break the buck" and the last time they did they nearly brought down financial system.)

 

This is getting very interesting now.  The IRS tax deadline (June 15th) plus some very large issuance by the Treasury has unexpectedly increased the TGA balance this week.  That means there will be a pretty large compression in a shorter period of time over the next 3-6 weeks.  

 

Even JPow made reference to the TGA in his press conference:

wabuffo

 

Edited June 18, 2021 by wabuffo

[wabuffo]

The move from zero is the biggest move.  I was surprised the Fed did it. 

 

Actually - I will go further.  I think this was a big mistake by the Fed.  It didn't need to raise the IOER.  This will create a big mess that the Fed will have to come back in and clean-up.

 

It may not seem like much but it creates a huge swirl-whirl and will suck deposits out of the banking system unless the Fed corrects their mistake.

 

The cycle will go like this:

 

1) MMFs will dump short-term T-bills which yield a few bps to get 5bp in a swap with the safest counterparty in the world (Fed).

2) The T-bills will be bought by corporate treasurers whose alternative was uninsured deposits at a big bank earning zero or MMFs earning zero.  Now they can get a few bips from holding s-t T-Bills.

3)  the losers - banks who will lose a trillion or more in deposits.

 

It already started yesterday with the huge jump in O/N RRP.   This will turn into a crisis created by the Fed who will have to come back in and lower their IOER to zero or maybe 1 bip.

 

Yet another unforced error by the dum-dums at the Fed who can't just sit quietly in their offices and do as little as possible.

 

wabuffo

[LearningMachine]

4 hours ago, wabuffo said:

curious what makes you more comfortable about gold etfs over other ideas for inflation protection?   Speaking of gold ETFs, have you considered GLDM? 

 

GLD maintains a peg - it acts like a central bank that issues/redeems Trust units and buys/sells gold to maintain its peg of 10-to-1 to the price of gold (ex the Trust's expenses).  Miners never interested me because I would be getting much further away from the actual peg that I'm trying to achieve.   I was buying more GLD LEAP calls yesterday.

 

Thanks @wabuffo, are you saying GLDM doesn't maintain a peg?  Does that make a huge difference?  For long term gold exposure, GLDM seems to have lower expenses at 0.18% vs. GLD's 0.40%.  Any issues you see with GLDM?

 

Looks like with miners you get amplification of changes in gold price, i.e. (price of gold - $1000 all-in production cost/oz) * Multiple. 

 

Have you looked into marginal production cost curve of gold?  I think the ideal entry point would have been when gold price was close to marginal cost of production needed to supply jewelry/industrial/tech needs.  Now, it is way higher than that, and somewhat speculative, no?   Yes, marginal production cost curve should move as labor prices move up, but looks like marginal cost needed to supply those needs will still be much much lower than today's prices. 

Edited June 18, 2021 by LearningMachine

[Gregmal]

What would be the preference for gold vs crude? I think the commentary we've seen recently, highlighted by Tepper the other day is spot on. The environment is hostile to these companies. Demand will increase almost certainly if the factors driving inflation take place, probably even if it doesnt. Meanwhile supply is hamstrung. 

 

"He added the day Exxon Mobil Corp. added activist investors to its board was the time to buy oil stocks -- because it signaled drilling will eventually decrease over time, and with it supply."

 

This occurred a couple weeks ago and prices arent too far off. If we want store of value, IMO it helps having a use for the store of value. You can do plenty with crude....gold on the other hand pivots back towards the "its worth what someone will pay for it" and BTC is better/equal or well you can make jewelry with it arguments which Ive always felt have merit. 

[wabuffo]

GLDM seems to have lower expenses at 0.18% vs. GLD's 0.40%.

 

Yes -but what about the underlying SG&A expenses of the companies in the miners index.  You are basically buying a bunch of mining companies who waste capex and pay themselves well.  Its a business (and a bad one) vs near-pure exposure to the yellow metal (which is what I'm looking for).   I'm sure there are great management teams among the gold miners - but again, if I want to invest in a business, I can do that myself across all kinds of industries.

 

wabuffo