tag:blogger.com,1999:blog-14963913.post9165095717431808914..comments2023-10-27T20:27:57.900-04:00Comments on Kid Dynamite's World: Why Is GLD So Hard For People To Understand? An ETF Lesson: Part IIIKid Dynamitehttp://www.blogger.com/profile/17475987512856310577noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-14963913.post-9286340418817826032010-11-29T18:34:09.254-05:002010-11-29T18:34:09.254-05:00WCW - cool. But still, what was your point about t...WCW - cool. But still, what was your point about the rights that shareholders get? is MDY structured like that? QQQQ? DIA? what rights are shareholders accorded thusly under the '40 act?<br /><br />they still can't vote, right? they can't redeem their ETFS for the underlying basket (unless they are an AP), right? (the Merrill Lynch HOLDERS are an exception: SMH, HHH, BBH, etc)Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-896378440132001662010-11-29T18:18:13.453-05:002010-11-29T18:18:13.453-05:00Apologies -- I forgot these things (GLD, AU, and f...Apologies -- I forgot these things (GLD, AU, and friends) generally aren't structured as '40-Act funds. Most successful ETFs, with the notable exception of SPY, are. Mea culpa. I war wrong.wcwhttps://www.blogger.com/profile/16307608293310560164noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-3412348954882262472010-11-29T12:46:48.395-05:002010-11-29T12:46:48.395-05:00WCW - I have no interest in arguing what the WSJ d...WCW - I have no interest in arguing what the WSJ did or did not understand. It's quite evident that, like almost all journalists writing about the topic, they positively do not understand the redemption mechanism, which I went through lengths to explain in the post already, so I will not do it again here.<br /><br />Saying things like "ETFs are mutual funds" doesn't help at all, and only guarantees that people will continue to misunderstand, because ETF cash flows and redemptions ARE NOT AT ALL LIKE mutual fund cash flows and redemptions.<br /><br />As for the similar rights to open ended mutual funds - would you care to elaborate? what rights? I'm not an expert on the rights of mutual fund holders, although I'm pretty sure they don't have things like voting rights in the underlying (the fund votes for them). So what rights to GLD holders have? <br /><br />from the prospectus:<br /><br />"Upon the termination of the Trust, the Trustee will, within a reasonable time after the termination of the Trust, sell the Trust’s gold bars and, after paying or making provision for the Trust’s liabilities, distribute the proceeds to the Shareholders,"<br /><br />as I stated in the article.<br /><br />also, "Shareholders have no voting rights except in limited circumstances. Shareholders holding at least 66-2/3% of the Shares outstanding may vote to remove the Trustee. The Trustee, in turn, may terminate the Trust with the agreement of Shareholders owning at least 66-2/3% of the outstanding Shares. In addition, certain amendments to the Trust Indenture require 51% or unanimous consent of the Shareholders."<br /><br />then there's also this, referencing the same '40 act which you referenced:<br /><br />"Shareholders do not have the protections associated with ownership of shares in an investment company registered under the Investment Company Act of 1940 or the protections afforded by the CEA. The Trust is not registered as an investment company under the Investment Company Act of 1940 and is not<br />required to register under such act. Consequently, Shareholders do not have the regulatory protections<br />provided to investors in investment companies."Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-75590078118813690232010-11-29T11:35:11.822-05:002010-11-29T11:35:11.822-05:00ETFs are '40-Act mutual funds. Sponsors have ...ETFs <em>are</em> '40-Act mutual funds. Sponsors have to apply to the SEC for exemptive relief in order to launch them. Let us just repeat the important words: <strong>ETFs are mutual funds</strong>. So shareholders of ETFs indeed have rights that exactly parallel those of the shareholders of open-end mutual funds, because legally they are the same vehicle.<br /><br />I don't think the WSJ fails to understand creation and redemption, I think it failed to dumb-down the concept accurately for a short article.wcwhttps://www.blogger.com/profile/16307608293310560164noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-2221414572452466712010-11-29T11:08:03.149-05:002010-11-29T11:08:03.149-05:00VegasKev - as many people have pointed out, by all...VegasKev - as many people have pointed out, by allowing a broader range of investors to access your product (which is what ETFs like GLD do), it can certainly result in higher prices. For things like commodities, a lot of people don't like this idea.<br /><br />I think it's better to have the products open to everyone - if I want to buy palladium, I should be able to buy palladium, as a retail investor - it shouldn't be just professional futures traders who should be able to access the product (which is basically how it used to be)Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-91208795945800948212010-11-29T11:02:36.773-05:002010-11-29T11:02:36.773-05:00My firm recently helped underwrite this gold ETF: ...My firm recently helped underwrite this gold ETF: Sprott Physical Silver Trust but I don't pretend to understand it that much.<br /><br />What do you think will be the long-term effect these types of ETF's on the market (for whatever the ETF's hold)? Do these ETF's merely further influence mania's? I don't think we have ever had an ETF that tracks a phyisical product implode so I wonder what the effect would be if the parabolic increases stop.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-63692203267154345052010-11-28T13:02:08.247-05:002010-11-28T13:02:08.247-05:00I read that article, and I thought it sounded inco...I read that article, and I thought it sounded incorrect based on your earlier posts. <br /><br />Thanks for explaining this once again :-)Manshuhttp://onemint.comnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-58339734325543195032010-11-27T07:52:26.149-05:002010-11-27T07:52:26.149-05:00thanks beth - it was a c&p typothanks beth - it was a c&p typoKid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-53920602615201176572010-11-27T02:51:32.638-05:002010-11-27T02:51:32.638-05:00Is there a cut-and-paste typo in there? Did you r...Is there a cut-and-paste typo in there? Did you really mean SPY near the end?<br />--BethBeth Leonardhttps://www.blogger.com/profile/17861448464354807633noreply@blogger.com