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Bitcoin ETF: Navigating SEC Spider Web: Spider Woman

Call it a Rat’s Nest, a Rabbit Hole, or a Rubik’s Cube, but no certified marketsmuse can dispute the fact the ETF industry has become a Spider’s Web of complexity when it comes to the assortment of products being promoted. And, who more qualified to advocate on behalf of a Bitcoin ETF than Kathleen Moriarty, who is often referred to as the Spider Woman of the ETF marketplace for her long history of traversing the SEC in the course of championing innovative products.

(Reuters) –When one of the first exchange-traded funds launched in 1993, securities lawyer Kathleen Moriarty received a gift from her legal assistant: a Spider-Man comic-book cover altered to depict the superhero facing off against a hulking Securities and Exchange Commission.

kathleen-moriarity-bitcoin-etf-lawyer
Kathleen Moriarty, Esq. (photo courtesy of Reuters)

Twenty-three years later, Ms. Moriarty’s ability to navigate the arcane rules that govern financial markets and products has built her a reputation as a top lawyer in the ETF business and earned her the nickname “Spider Woman.” Her latest challenge is convincing regulators that a bitcoin ETF is appropriate for the market. That isn’t necessarily an easy sell, given the explosion of ETFs across the market and their fraught role in a market meltdown last August.​

“I tend to concentrate on more exotic products,” Ms. Moriarty said. “Zero of my plans include retirement.”

ETFs have grown to become one of Wall Street’s most popular product categories by offering investors low-fee access to wide swaths of the market.​Investors had close to $3 trillion in assets across nearly 4,500 ETFs globally as of March, according to London-based research firm ETFGI.

“I don’t think anyone would have thought it was going to be this big,” said Ms. Moriarty, a partner at Kaye Scholer LLP, in an interview this year at her Midtown Manhattan office, which was adorned with decorative arachnids and the framed comic.

Ms. Moriarty, who turned 63 Tuesday, helped launch what is still the largest U.S.-listed exchange-traded fund—the SPDR S&P 500 ETF, or SPY—paving the way in 1993 for a booming industry.

“If you’re going to try to do something unique and novel in that space, you’re going to call Kathleen,” said Jim Ross, who heads State Street Global Advisors’ line of SPDR ETFs.

ast year, the agency proposed new rules that could limit ETFs’ growth and even slim down the current lineup, such as curbing the use of derivatives by mutual funds and ETFs and limiting their holdings of assets that are illiquid, or tough to buy and sell.

An SEC spokeswoman declined to comment for this article.

Ms. Moriarty said regulators’ concerns about the products’ proliferation is “extreme.”

“How many more mutual funds do we need? Nobody ever asks that question,” said Ms. Moriarty. (There are more than 8,100 mutual funds and about 1,600 ETFs in the U.S. as of February, according to the Investment Company Institute, a fund industry group.)

Ms. Moriarty cited bitcoin’s volatility as a risk in the filing she co-wrote. She said her proposed ETF’s structure is similar to that of the $32 billion exchange-traded gold product, the SPDR Gold Trust, that she helped launch in 2004 because it aims to give investors access to the commodity without having to hold it. The fund, GLD, has risen sharply along with gold prices this year.

“I’m optimistic,” Ms. Moriarty said about the bitcoin application.

blackrock-botch-gold-etf-iau

BlackRock Botches Gold ETF; IOU for IAU

Administrative oversight left BlackRock unable to meet demand for its Gold ETF, IAU; Suspends New Issuance.

(WSJ) –BlackRock Inc. said it suspended the issuance of new shares in IAU, its roughly $7.7 billion gold exchange-traded product due to an administrative oversight, in the latest bruise for the exchange-traded-fund industry and its largest provider.

Analysts said the move on Friday threatens to drive business to competitors and intensify scrutiny of the $2 trillion ETF business in the U.S. It also underscores concerns that these products—baskets of assets that trade intraday like stocks—are vulnerable to breakdowns.

Friday’s suspension came after a 20% run-up this year in the price of gold. The rally had spurred increased demand for the iShares Gold Trust, which is traded on the New York Stock Exchange under ticker symbol IAU. Some analysts said the surge in gold-futures prices likely drove up demand for the product for use both in bets that gold would rise and bets that it would fall. Those wagers came amid uncertainty over the health of the global economy and concerns about resilience of the financial system in the face of negative interest rates in Europe and Japan.

BlackRock wasn’t able to issue new shares to meet the demand because it failed to file the appropriate Securities and Exchange Commission paperwork, the firm said.

The breakdown could prevent the fund from accurately reflecting the value of gold, interrupting a key process that lets investors arbitrage any difference between the quoted price of the ETF and the value of the underlying assets.

The suspension could mean the price of the fund would rise faster than the price of gold until share creation resumes. Investors are “going to be paying more of a markup,” said Mohit Bajaj, director of ETF trading at WallachBeth Capital LLC, which trades iShares Gold Trust. “I think people are going to be trading GLD instead of IAU now,” he said, referring to the ticker symbol for SPDR Gold Trust, which is run by a unit of the World Gold Council and marketed by State Street Corp.

In the week ended Thursday, investors put more than $1.1 billion into the iShares product’s key rival, the about $32 billion SPDR Gold Trust, more than any other exchange-traded product, according to FactSet data.

For the full story from WSJ, please click here

 

Its All Greek..A RareView View…

As the events in Greece escalate to a frenzy, global macro strategists are lining up to opine on what might happen as the EU and the world calculate the impact of a Grexit. MarketsMuse tapped into one of the industry’s most thoughtful strategists and one who is notorious for having both ‘sight beyond sight’ and inevitably, a view that is rare when compared to those who position themselves as “opinionators.”  Without further ado, below is the extracted version of the 29 June edition of “Sight Beyond Sight

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro
  • Key Talking Points…What People Are Watching…Major Asset Prices
  • US Fixed Income – Choke Yourself If  You Believe in 2 Rate Hikes in 2015
  • China – Correction Accelerates Government Learning Curve & Possibly IPO Reform

 

We started working early yesterday morning, spending time on the phone with as many risk takers as possible around the world and listening in on numerous bank conference calls on the unfolding events. Additionally, we felt compelled to watch our screens all night. At the time of writing, we have not actioned one item in our model portfolio and are nowhere near able to aggregate the thoughts of the risk takers we respect or the market commentary we received from anyone who writes research for a living. The fact is there is no coherent sentence to write. The dust has yet to settle, and until it does, no one can claim to know what will happen.

Despite all of this market plumbing being very visible, and even after the Greece referendum news on Friday, the probability of a disorderly financial reaction due to its consequences has only risen to ~40% from 20% or less based on what we can gather. Leaving last week many held the view there was a 50-50 probability for a resolution with a bias for a positive outcome.

Now let’s go through the asset classes and products, and ask how they will perform. For ETF players, our lens is on GREK, FXI, HEDJ and necessarily, SPY. For those looking for an immediate take-away trade with regard to the overwhelming Greek-infused chitter chatter and jibber jabber, think $GLD. In this case, our view, which we have espoused for more than 15 minutes, might or might not be  ‘rare’, but its one we can hang our hat on…

Prudent risk management says that the overriding exercise now is to take risk down regardless of your bias on the outcome. Resolution strategies are a distant second place and with US employment Thursday followed by a three day weekend that includes this Greek referendum, that makes this scenario that much more likely.

In terms of Greece, many are watching/waiting for the ECB reaction function to the Emergency Liquidity Assistance (ELA), which is scheduled to be revisited on Wednesday. As a reminder, the events in 2012, in which there was a large spike in the ELA program assistance as a result of Greece, was the catalyst for the now famous “do whatever it takes” speech by ECB President Mario Draghi. Ironically, the three-year anniversary of that speech is coming up shortly and there is no question professionals want to see Draghi re-ignite the European recovery trade. Our point is that faith in him being a steward of the market remains unwavering and he is still the only person perceived as the class act in this goat rodeo.

If we had to pick one asset that we all were led to believe mattered in the context of a “Grexit” over the last five years, and that was supposed to react to that event, it would be Gold. It should be up $50 at a minimum and yet it can barely hold a bid. If you feel bad for the citizens of Greece, then please save a little sympathy for the Gold terrorists at the failure of the yellow metal to respond today. Next week, if things get worse, and gold still fails to respond, that could be the final nail in their coffin. At least there will be one good outcome to the whole sorry saga. Continue reading

ETF Land: Its All About the US Dollar

MarketsMuse ETF update profiles the most talked about topic: the US Dollar courtesy of extract below from March 25th coverage from Todd Shriber of ETFtrends.com. Here’s the snippet:

For over a year, exchange traded funds tracking the U.S. dollar have been the stars of the currency ETF group, but recent weakness in the greenback could prompt some investors to assess other currency opportunities.

Todd Shriber, ETFtrends.com
Todd Shriber, ETFtrends.com

Since topping on March 13, the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP), the U.S. Dollar Index tracking ETF, and the actively managed WisdomTree Bloomberg U.S. Dollar Bullish Fund (NYSEArca: USDU) are off 3.6% and 3%, respectively.

The much maligned CurrencyShares Euro Currency Trust (NYSEArca: FXE) is up nearly 4.7% over that period and recent dollar weakness has gold ETFs, such as the SPDR Gold Shares (NYSEArca: GLD), on six-day winning streaks. None of that means the dollar’s run is over. In fact, some market observers believe the recent pullback in the U.S. currency presents a buying opportunity. Continue reading

German ETFs Offer Good Opportunities in Rebounding European Market

MarketMuse update is courtesy of ETF Trends’ Todd Shriber.

Earlier this week and over the past few months, MarketMuse has been covering the rocky European market, thanks to Greece, and its recent rebound, with ETF $GVAL. Now investors have even more to be excited about with the recent success of German ETFs. 

The U.S. is not the only developed market where stocks are eying record highs. Germany’s benchmark DAX accomplished that feat Friday, climbing above 11,000 for the first time.

Exchange traded fund investors are responding, pumping massive of amounts of capital into Germany ETFs. The Recon Capital DAX Germany ETF (NasdaqGM:DAX), the only U.S.-listed DAX-tracking ETF, is up nearly 8% in the past month.

With its heavy tilt toward large, multi-national companies, the DAX index is benefiting from a depreciating euro currency. A weaker euro would help support export growth and potentially generate greater revenue from overseas operations for the multi-nationals.

A weak euro and sturdy data out of the Eurozone’s largest economy is prompting investors to put new capital to work with Germany ETFs. Through Thursday, only three ETFs have seen greater inflows than the $494.1 million added to the iShares MSCI Germany ETF (NYSEArca: EWG), the largest Germany ETF.

One of those three is the WisdomTree Europe Hedged Equity Fund (NYSEArca:HEDJ), which allocates 26% of its weight to German stocks. No ETF has seen larger 2015 inflows than HEDJ’s $4.1 billion in new assets and the gap between HEDJ and the second-place inflows ETF, the SPDR Gold Shares (NYSEArca: GLD), is sizable at over $1.6 billion.

Thanks to the faltering euro, investors are also flocking to currency hedged Germany ETFs. After taking in $450 million on Thursday, the iShares Currency Hedged MSCI Germany ETF (NYSEArca: HEWG) has added over $491 million this week. The ETF, which uses EWG with a EUR/USD hedge, had $287.4 million in assets heading into Thursday.

On a percentage basis, the Deutsche X-trackers MSCI Germany Hedged Equity Fund (NYSEArca: DBGR) and the WisdomTree Germany Hedged Equity Fund (NasdaqGM: DXGE) have also seen significant asset growth. DXGE has more than doubled in size this year while DBGR has tripled in size since the start of 2014.

Underscoring the advantage of the euro hedge with German equities, DBGR and DXGE have both produced double-digit returns over the past month while EWG is up “just” 7.5%. Importantly, economic data supports the case for more upside for Germany ETFs,

“German gross domestic product expanded 0.7 percent in the fourth quarter, soaring past an estimate for 0.3 percent. Private consumption rose markedly in the fourth quarter, and investment developed positively, driven by a significant increase in construction output,” reports Inyoung Hwang for Bloomberg.

 

Macro Trading View: Short Gold v. Long Silver; Long Euro Stoxx 50 (SX5E) versus Short S&P 500 (SPX)

Below excerpt from a.m. edition of Sight Beyond Sight, is courtesy of global macro think tank, Rareview Macro LLC

Neil Azous, Rareview Macro LLC
Neil Azous, Rareview Macro LLC

New Strategy – Short Gold vs. Long Silver

This morning we sold 3000 GLD 12/20/14 P112 at .63 to close.

We rotated our short Gold bias using put options into a short Gold versus long Silver spread using futures.

The updates were sent in real-time via Twitter.

Below are two illustrations: A “monthly” chart of long Gold versus Silver and a matrix containing our trade construction details.

Note that this is not a short-term “tactical” trade but rather an intermediate term “strategic” trade. As such, it will be managed with greater latitude in terms of risk.

Similar to the 200-day Moving Average (200-DMAVG), we find long-term Linear Regression Channels can be a strong technical indicator.

For those not familiar with Linear Regression Lines, it is a line that best fits all the data points of interest and consists of three parts: more

Professional Traders Lining Up to Sell SPX For the Wrong Reasons: Be Wary of the Good Idea Fairy: A Rareview View

Below commentary is courtesy of extract from a.m. edition of today’s Rareview Macro’s “Sight Beyond Sight”

A Simple View:  US Dollar, Gold, SPX, UST’s

Neil Azous, Rareview Macro LLC
Neil Azous, Rareview Macro LLC

The objectives we have laid out continue to materialize across the themes we are focused on.

The Q&A session with President Mario Draghi following today’s European Central Bank (ECB) meeting has concluded. We will leave it to the people with PHDs to debate the intricacies of what he had to say. But if price is the voting machine that always tells you the truth, then the weakness in the Euro exchange rate highlights that the press conference was simply dovish. Expect these same PHD’s to keep chasing as they lower their price targets again.

As evidenced in our most recent editions of Sight Beyond Sight, there was little doubt that Draghi would not strike a dovish tone. With his emphasis on a unanimous vote for further action if necessary and formally adding in the notion that the ECB’s balance sheet will return to 2012 levels (i.e. ~1 trillion higher), Draghi did a good job of walking back the negative tone that the media have tried to portray over the last 48-hours, especially the speculation about an internal battle/dissent/revolt building up against Draghi.

For us, it was never about whether the professionals sold the Euro after the event. They were going to do that anyway as the trading dynamics continue to point towards the Euro buckling under its own weight regardless of what Draghi says. Instead, we were more focused on a short covering event not materializing ahead of tomorrow’s US employment data and that has been largely removed for today.

So those bearish have to contend with the following factors: Continue reading

Macro-Strategy Insight to Latest Events in Hong Kong and..”What about $GLD?”

MarketsMuse Editorial Note: Below is extract from Oct 1 edition of macro-strategy commentary courtesy of Rareview Macro LLC’s daily publication “Sight Beyond Sight”..We often profile this content from macro strategy expert and author Neil Azous, simply because since we first started following SBS commentary, it has become one of those most highly-regarded independent research pieces subscribed to by more than a few of the “sharpest knives in the drawer.”

Neil Azous, Rareview Macro LLC
Neil Azous, Rareview Macro LLC

“….One simple way to measure the market impact of the growing pro-democracy protests in Hong Kong is to look at future assumptions for corporate dividend streams.

Specifically, we are watching the HSCEI Dividend Point Index Futures (symbol: DHCZ5) that trade on the Hong Kong Futures Exchange.

Because most of the “terminal outcome” is already in the price of the futures contract, based on the modeling of expected dividend payouts, the front-month futures contract should generally show the most acute reaction to a fast-developing live event. Put another way, the “gap risk” is much higher at the front versus the back of the futures curve.

Now, to be fair, this product is generally used by regional investors with $50-300 million in AUM as the futures are not liquid enough for the larger players. However, the fact that smaller is at times synonymous for “weaker hands” highlights that the local and small player is not yet really concerned by the protests. And what that tells us is that the possible contagion from these protests is actually lower than most people think, at least for today. Continue reading

A Rareview Macro View: “There’s NO Gold in Them Thar Hills”

It was in early 1849 that the director of the Mint at Dahlonega, Dr. M. F. Stephenson spoke from the steps of the mint building in a futile attempt to convince the miners to remain in Georgia to mine rather than to flock to California to chase what might be an impossible dream. “There’s gold in them thar hills, boys,” he shouted as he pointed at the hills surrounding Dahlonega.   

Below commentary is courtesy of today’s a.m. edition of Rareview Macro’s “Sight Beyond Sight”

 

Neil Azous, Rareview Macro LLC
Neil Azous, Rareview Macro LLC

Gold is showing the largest negative risk-adjusted return across regions and assets.

The pre-market price in SPDR Gold Shares (symbol: GLD) is ~126.40. The volume-weighted-average-price (VWAP) from June 19th until last Friday’s close is 127.0392.

We use June 19th as the starting point because that is when the IRAQ-ISIS conflict registered its loudest decibel level and Brent Crude Oil made its high and Gold broke above the April-May period.

The technical support levels are illustrated below but the first one was breached so far on an intra-day basis. A move closer to 1300 would suggest longs just became trapped. Continue reading

Black Gold v. Yellow Metal: Macro-Strategy Perspective

As if it were a segment in “Orange is the New Black,” the price correlation between Crude Oil (aka Black Gold) and the Yellow Metal continues to swing like a chandelier in a windy mansion. Below extract courtesy of Neil Azous, from today’s a.m. edition of Rareview Macro’s Sight Beyond Sight summarizes the current correlation in a crisp way…

Neil Azous, Rareview Macro LLC
Neil Azous, Rareview Macro LLC

There are two assets being watched closely right now – Brent Crude Oil and the Euro Exchange Rate.

Firstly, Brent Crude Oil is showing the largest negative risk-adjusted return in Commodities. This morning, the “barrel” has broken through yesterday’s low and overall has now retraced over 50% of the Iraq/ISIS move higher seen in June. Below is a regression analysis between Brent Crude Oil and Gold for three time periods related to Iraq/ISIS: Before, Height, and Current.

Gold was trading at its lower point on June 2nd and the correlation (i.e. red asterisk on chart) to Brent Crude Oil was negative. On June 19th, the correlation was the most positive when Brent Crude Oil was at its highest level. Today, the correlation is on the cusp of swinging back to negative territory. We highlight this because the same pattern has been seen before, with the height on March 14th and after the Ukraine-Russia crisis. And what happened next? Gold dropped by -10% over the next 45 days.

By the way, it was reported that assets in the SPDR Gold Trust (symbol: GLD) rose +1.4% to 796.39 metric tons in the two sessions through yesterday. To put that in context, that is the largest two-day gain since November 2011 and it is just one example of the new found retail length in Gold. The other was in CFTC futures positioning which professionals use to gain exposure. Continue reading

The Anger Indicator: A Rareview

Below extract courtesy of this a.m.’s edition of Rareview Macro’s Sight Beyond Sight..(Re-published with permission from Neil Azous)

Neil Azous, Rareview Macro LLC
Neil Azous, Rareview Macro LLC

Here is an aggregation of the various statistics either sent to us from subscribers or we came across during our readings this weekend.

1.  Japan Government Pension Fund (GPIG):  Apple (AAPL), Exxon and Microsoft have the heaviest weighting in the MSCI Kokusai Index; ~87% of GPIF’s foreign stock holdings follow this benchmark. (Source:  Eurofaultlines)

2.  As far as we can tell the degree of these inflows have not yet been widely observed by other paid forecasters on the Street. EM Portfolio Inflows Reach New High In May: Our EM portfolio flows tracker indicates that portfolio inflows to emerging economies continued their upward trend of the last several months, reaching the highest level since September 2012, when the Fed launched QE3 (Chart 1). In May, EMs are estimated to have received $45 billion in portfolio inflows from global investors, up from $28 billion in April and $27 billion in March. The May figure reflects $28 billion going into EM bond markets (portfolio debt flows,Chart 2) and $17 billion into EM stock markets (portfolio equity flows, Chart 3). (Source: Institute of International Finance) Report

3.  This week the S&P 500 will surpass the 1995-96 record for number of consecutive days in which the index has traded above its 200-day moving average.

4.  SPY closed above its upper Bollinger 5 days in a row through Friday. SPY has only closed above its upper Bollinger 4 days in a row 4 times since 2009. (Source: Fat Pitch)

5.  Relative Strength Indicators (RSI)

a.  The S&P 500 (SPY) 9-day RSI is over 70 = Overbought

b.  The NASDAQ (NDX) 9-day RSI is 74 and AAPL’s is 80 = Overbought

c.  The Transports (IYT) 9-day RSI is over 77 = Overbought

d.  The Semiconductors SOX) 9-day RSI is over 70 = Overbought

6.  Since 1950, the DJIA has lost -1.9% and SPX -2.1% in June. The last 20 years have been even weaker. Moreover, the SPX has been down in 11 of the last 16 mid-term elections Junes (Source: Stock Traders Almanac).

7.  The VIX has closed below 12 for five straight days, the longest streak at that level since 2007 (Source:  Volatility Trader) Continue reading

Smart Money Says: No Gold Needed As Capex Spending Kicks In to Global Economy

For readers focused on expert views re: the precious metals, and in particular Gold, below a.m. note courtesy of macro-themed analyst Paul Krake to his “View From The Peak” audience of institutional investment managers provides a “bid-on” to market observations made last week by Neil Azous, principal of “bespoke macro strategy boutique” Rareview Macro LLC, and the publisher of “Sight Beyond Sight” :

Neil Azous, Rareview Macro LLC
Neil Azous, Rareview Macro LLC

“..Short gold has been one constant theme for VFTP for the past 18 months and I do not see any reason to adjust this structural stance. The reasons to be short gold are long and varied but they all go back to my basic theme that as the world becomes less risky, the need for safe haven assets declines. If real interest rates are on the rise then gold will decline. A more sophisticated thesis is being proposed by my good friend Neil Azous from Rareview Macro, an extremely thoughtful and thorough daily overview of the investment landscape (www.rareviewmacro.com). Neil’s argument revolves around a revitalized global capex cycle that will be driven by a spurt in bank lending and the global economy playing catch up after five years of underinvestment across the developed world. We have this expressed via our long energy (XLE) / short consumer discretionary (XLY) basket but short gold is also an excellent expression of what will be the end result of this recalibration of the capex cycle: higher global growth and higher real interest rates…”

Courtesy of View From The Peak
Courtesy of View From The Peak

 

Paul Krake’s observations are available via http://www.viewfromthepeak.com.hk/.

The “Sight Beyond Sight” newsletter authored by Neil Azous is distributed to leading investment managers, Tier 1 hedge funds and top gun traders across the universe of sell-side, cash trading desks. Additional info at www.sightbeyondsight.com

 

James Grant: Short $LQD Before Bonds Fall

indexuniverseCourtesy of Olly Ludwig

Sooner or later the bond market is going to start falling, and a perfect exchange-traded vehicle to play the unraveling of the more than three-decade rally in fixed-income markets is “LQD,” a corporate bond fund that happens to be one of the largest fixed-income ETF in the world, James Grant told attendees at IndexUniverse’s Inside ETFs conference this week.

But Grant, the editor and publisher of Grant’s Interest Rate Observer, said that while he is short the iShares iBoxx $ Investment Grade Corporate Bond Fund (NYSEArca: LQD), it’s terribly difficult to time such trades, as markets are “unreliably efficient” and “reliably inefficient” and, moreover, the Federal Reserve’s loose-money policies since 2008 essentially mean that interest rates are not in a free market.

Grant’s comment about LQD came in response to a question from IndexUniverse Chief Executive Officer and founder Jim Wiandt, who introduced Grant and asked what investors—faced with the prospect of the end of a secular bull market in bonds since the early 1980s—should now do.

“Short,” said Grant. “I’m short something called LQD.”  The ETF, the iShares iBoxx $ Investment Grade Corporate Bond Fund (NYSEArca: LQD) is quite liquid and has $24 billion in assets under management.

Grant, a longtime critic of the Fed and a proponent of a return to the gold standard, was the grand finale at the 6th Annual Inside ETFs conference, which took place in Hollywood, Fla. from Feb. 10-12. The event, which has become the see-and-be seen event in the world of ETFs, was attended by nearly 1,300 people, most of them financial advisors and fund sponsors. Continue reading

Credit Suisse Lists Covered-Call Gold ETN; $GLDI w Exposure to $GLD

indexuniverseCourtesy of Cinthia Murphy and Olly Ludwig

Credit Suisse on Tuesday launched its Credit Suisse Gold Shares Covered Call ETN (NasdaqGM: GLDI), a strategy that provides long exposure to physical gold coupled with an overlay of call options.

The ETN, comes with an annual expense ratio of 0.65 percent, will have notional exposure to the bullion ETF SPDR Gold Shares (NYSEArca: GLD) while notionally selling monthly “out of the money” call options, the fund’s prospectus said.

The strategy is designed to enhance current cash flow through premiums on the sale of the call options. Those premiums will be received monthly in exchange for giving up any gains beyond 3 percent a month. In other words, the premiums would soften the blow if GLD were to face a sell-off, but that’s the extent of the fund’s downside protection.

There’s still growing uncertainty in the market on whether the 12-year-long gold rally has run its course, which makes Credit Suisse’s launch of GLDI timely, as the ETN represents a somewhat neutral view on gold.

ETNs are senior unsecured obligations; in this case, of Credit Suisse’s Nassau branch. Unlike ETFs, they have no tracking error, but, also unlike ETFs, they represent a credit risk. For example, if Credit Suisse ever faced bankruptcy, holders of GLDI would likely lose their entire investment.

This ETF Could be The Real Monetary Easing Play: Benzinga

benzinga-logoWhile the market seemed generally unimpressed by the Federal Reserve’s pledge to hold interest rates down until the U.S. unemployment rate drops below 6.5 percent, the usual suspects among ETFs performed as expected Wednesday.

Following the conclusion of the central bank’s last monetary policy meeting of 2012, the PowerShares DB US Dollar Index Bullish (NYSE: UUP ), the ETF equivalent of the U.S. Dollar Index, fell almost 0.2 percent on above average turnover. The SPDR Gold Shares (NYSE: GLD ) and the iShares Gold Trust (NYSE: IAU ) closed slightly higher. The iShares Silver Trust (NYSE: SLV ) impressed with a gain of 1.4 percent on strong volume.

There is another near-term option for traders looking to take advantage of monetary easing and it arguably has nothing to do with the Fed. Emphasis on “near-term,” but it is worth noting the ProShares UltraShort Yen (NYSE: YCS ) surged 1.5 percent on volume that was better than triple the daily average on Wednesday.

In the process, the ProShares UltraShort Yen broke through resistance in the $46 area to close at $46.72. That is the highest closing print for YCS since April.

The utility of YCS, which in the words of its issuer “seeks daily investment results, before fees and expenses, that correspond to two times the inverse (-2x) of the daily performance of the U.S. Dollar price of the yen,” is clear.

Japan, the world’s third-largest economy, is scheduled to hold elections on Sunday December 16. Given recent price action in YCS, it would appear forex traders are pricing in victory for Shinzo Abe in his quest to become prime minister again and for Abe’s Liberal Democratic Party.

Should Abe emerge victorious, the yen will likely plummet because Abe has been vocal in his desire to weaken his country’s currency. In fact, Abe is a dream come true for quantitative easing addicts because he has called on the Bank of Japan to engage in unlimited easing .

Recent polls suggest Abe will win and that Japan’s ruling Democratic party will suffer significant losses. That is good news for YCS.

Proper trading of YCS revolves around remembering two key points. First, YCS is a leveraged ETF just like the more widely known Direxion Daily Financial 3X Bear Shares (NYSE: FAZ ) or the ProShares UltraShort S&P500 (NYSE: SDS ). That means YCS is best used as a short-term instrument not a long-term investment.

Second, the yen has a penchant for short-term declines when the Bank of Japan intervenes in the currency market or when rhetoric, such as Abe’s, is favorable. However, the Japanese currency has been strong in recent years. YCS has a plain vanilla counterpart, the CurrencyShares Japanese Yen Trust (NYSE: FXY ). FXY’s daily chart is a train wreck, but over the life of that ETF, it has surged 40.5 percent.

For the complete article courtesy of Benzinga.com & NASDAQ, please click here

June ETF Short Report: ‘Q’s’ Shorts Drop 42%

Courtesy of Olly Ludwig

Short-sellers last month significantly cut their bets against an array of the broadest U.S. stock indexes, which looks quite sensible in the rearview mirror considering both the S&P 500 and the Dow Jones industrials average rallied by nearly 4 percent in June.

While financial markets are again on tenterhooks over the dismal fiscal situation in Europe—and Spain’s in particular—last month marked something of a respite from the three-year-old eurozone debt crisis, as short interest on non-U.S. stocks fell as well.

Most conspicuously, the number of shares short on the PowerShares QQQ Trust (NasdaqGM: QQQ), the Nasdaq 100 ETF, dropped 42.6 percent in June, compared with a nearly 9 percent rise in the prior month. The decline left short interest on the “Q’s” at 10 percent of the ETF’s outstanding long float, compared with more than 18 percent at the end of May, according to data compiled by IndexUniverse.

Shorts on the SPDR S&P 500 ETF (NYSEArca: SPY) meanwhile fell by almost 23 percent in June, compared to a 13 percent jump in May. Also, short interest on the iShares Russell 2000 Index Fund (NYSEArca: IWM) fell by more than 7 percent last month, after holding about steady in the prior month.

Dark Clouds Ahead? Continue reading

Popular ETFs You Should Never Use..

  Courtesy of CNBC..By: Lee Brodie

Exchange traded funds are among the more popular ways to trade. Called ETFs on the Street they allow investors to diversify risk through a basket of stocks.

A pro like trader Steve Grasso of Stuart Frankel who works on the floor of the NYSE, can barely move a foot or two without hearing “Buy the XLF or get me out of the GLD, now!’

But these and other popular ETFs may not always be your best bet.

According to Matt Hougan, IndexUniverse president of ETF analytics, there are alternative ETFs that aren’t as widely known, but may actually better serve your needs. He profiled five of them on CNBC’s Fast Money. They follow:

Sector      Widely Traded
Gold                  GLD

Hougan’s Alternative: IAU

Looking at the GLD, Hougan says the IAU  holds exactly the same thing. “It’s plenty liquid and owning it is about half the cost of the GLD.”

Sector         Widely Traded
Financials                XLF 

Hougan’s Alternative: IYF

Hougan says this is something of a popularity content. “People know the XLF .” However, the XLF only tracks large caps. (Click here to see top holdings on Yahoo! Finance.) If you want exposure to the entire banking sector Hougan recommends the IYF  for “the full spectrum.” Continue reading

ETFs Are Duking It Out Over Fees

By LIAM PLEVEN

Exchange-traded funds have lured many investors away from mutual funds by offering lower fees. But increasingly, some ETFs are also using fees to compete with other ETFs.

In a handful of high-profile cases, particularly in commodities and stocks, investors can choose between two ETFs that are virtually identical except for their fees. Gold bugs, for instance, can buy into a bar of bullion by holding shares in either SPDR Gold Shares GLD +3.88% or iShares Gold Trust IAU +3.94% . But the SPDR fund charges 0.4% of assets a year in fees, compared with the iShares fund’s 0.25%.

Disparities like that point to the rising importance of price as a distinguishing factor in what has become a crowded and confusing ETF marketplace for many individual investors. It isn’t clear yet how effective the tactic will be in the long run—there may be good reasons in some cases for investors to stick with or buy a higher-priced fund. But it seems to hold promise as a marketing tool.