HomePublicPM sector ETF’s – batteries not included

Agree totally with Plunger’s recent post on these things. The Spock Miners Matrix will NEVER hold any PM sector ETFs, except for a short term hedge situation, which is now more and more unlikely as the bull market develops. They are a narrow specialized sector derivative instrument, not an investment, developed by Wall Street, to enhance their bonuses. Even for hedging, they are a big risk, if liquidity dries up. As for the X3 (NUGT, DUST, JNUG and JDST) that hang off the underlying, they are indeed matches for arsonists, the arsonists being the market makers and owners of these terrible decaying derivatives. Designed purely for intra-day speculation in a casino. Avoid, avoid, avoid.

As for underlying stocks in GDX, GDXJ, GLDX and SIL, most do not meet Spock metrics. These are passive funds and stock selection therein is mainly done based on market weighting criteria, not the fundamental metrics of the individual companies. For that reason, virtually all of the Spock Miners in the portfolio, are not included in GDX, GDXJ etc. Even for GLDX which holds about 15 companies, only 7 meet Spock metrics. So what is the point in owning these ETFs, where many of their holdings are zombies, the ETFs charge monthly fees, and there are liquidity issues when systemic market risk occurs.

Counter party risk is also a concern with the ETFs. In a market meltdown, the ETF investor is exposed to the risk of the ETF owners and nominee companies that hold the underlying securities. Why take that risk. Better to have clear ownership title to a basket of individual gold and silver miners, with no counter parties in the ownership chain.

About Spock

Passive aggressive market trader and mining analyst, with 30 plus years experience in the global markets, across all sectors, with a focus on mining and precious metals resource stocks.


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PM sector ETF’s – batteries not included — 3 Comments

  1. Appreciate all the hard work. Some of us are most likely starting with less capital and therefore our position sizes are much smaller. If we are in and out at smaller lot sizes (therefore smaller gains) trading fees will begin to affect our overall gains. I understand the goal of Spock is to optimize trading profits by being nimble and in and out of trades as needed even in strong companies. Would it be possible at this juncture to put a list together of lets say 10-15 companies that you consider long term buy and hold (cookie jar stocks)understanding that if one of those fall out of favor we drop it.

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