Monday, February 06, 2006



The Author frequently writes about Exchange-Traded Funds (ETFs), industry, country, or market-specific funds that are traded on major exchanges. ETFs are efficient ways to gain exposure to stock markets from particular countries (Korea-EWY), international markets (Emerging Markets-EEM, Latin America-ILF), or a particular index.

They also have the advantage of being traded on an open exchange, so there is liquidity for the ETF. Two recent ETFs offer an interest in gold bullion. [S]treetTRACKS Gold Trust (GLD) is one such ETF. Another is IAU, a fund that the Author holds. Each share of IAU is backed by .1 ounce of gold. IT has done well, sitting with a 22.65% return in the Author’s portfolio in four months.

Barclays, the international finance giant, has filed with the Securities and Exchange Commission for an ETF for a silver fund. Shares in the fund will be backed by 10 ounces of silver[i]. Silver recently hit a new high of $10 per ounce and investment analysts think that the fund will attract interest among investors. It is a way for investors to get exposure to this metal without incurring the risks of silver-mining stocks, nor the cost and risk of storing the physical metal.

Most analysts believe that the silver fund will be approved by the SEC and launched. The comment period ends February 13th , but there is no date set for trading to begin. Some analysts believe that this new Silver ETF is being heavily front-run so it may see an early run-up in price and face a sell-off as the fund attracts attention from average investors.

While an Initial Public Offering is in the “Comment” period, after the offering prospectus is released but before it may be sold, the ETFs or stock’s underwriters are permitted to take “Indications of Interest” from investors. If there is a lot of interest, shares will be strictly allocated to the best and wealthiest clients of the underwriters and managers. This is just one way that the investment industry favors the well heeled and the well connected.

So if you wish to buy some silver ETFs, you might wait a few days or weeks until the price stabilizes. But remember, buying shares of the silver ETF will not be like buying shares of an IPO like There will be actual silver bullion backing these ETF shares, not shares of Internet pet food sales that will never materialize.

IMPORANT DISCLAIMER: This newsletter is offered for informational purposes only. Sources of information provided are believed to be reliable, but are not guaranteed to be complete or without error. Opinions and suggestions are provided with the understanding that readers acting on information contained herein assume all risks involved. The Author may or may not buy or sell securities discussed in this newsletter.

* “Silver and Gold” is a song from the well-loved and very profitable Rankin & Bass Christmas special, “Rudolph the Red-Nosed reindeer”. Burl Ives, as a well-dressed snowman, sings the song “Sliver and Gold” I don’t know how this is relevant, but it will excite a few more electrons.