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Krystof Huang

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  • 10 Good Gold ETFs And Perspectives [View article]
    Thank you Blackberryman for the heads-up on OUNZ. This new London-held ETF today has a share price of $12.44 and a spread of only 1¢. Probably a viable alternative for people who do not trust GLD.

    Please note that I would not suggest more than 10% of account in gold for the average investor. My autotrading strategy SN-SOS--a long-short strategy designed to equal the average stock market gain while adding security measures--is currently lagging below the S&P 500 due primarily to holding 10% in gold which has fallen in value lately. (A live performance chart can be seen at SOS.collective2.com)

    I am confident that SN-SOS will catch up to the S&P. I also have a high-gain strategy holding 20% gold which is doing well. However, an experimental strategy SN-Gold holding 40% in gold has been causing a net loss during a time when investments should be doing well. SN-Gold attempted to achieve a long-short gold strategy by short-selling gold, gold mining and silver during downward trends. However, SN-Gold has turned out to be more of a headache than it is worth and will be discontinued.

    As I said in my article above, the best hedge for gold is simply to be invested in the stock market. If you want to make money in the stock market--and not merely to hedge your gold--then in my experience the gold should not be more than 10% to 20% per strategy. Also, if you want to hold more gold, it really makes the best sense to do so via gold coins + cash in safety deposit boxes as discussed above.

    Therefore, for US residents, the ETF lineup mentioned in my article works out nicely for holding up to 25% of account in bullion while not risking more than 5% per ETF. This provides 6 custodial diversifications: SGOL, PHYS, IAU, GTU, GLD, PPLT+PALL/SPPP. Only use 5 of these at one time. Every 2 months, close one and open another, so that no ETF is held for more than 10 months. Thus probably always qualifying for "ordinary" US tax rates on gold--the same rate that we pay on dividends, bonds and CD's.

    GLD and OUNZ are both London-held. I personally would not want two London locations. Also as just explained, there is no need for one more location. So I would suggest either not using OUNZ--or replacing GLD with OUNZ--or dividing one allocation between GLD+OUNZ.
    Jun 4 05:27 PM | Likes Like |Link to Comment
  • 10 Good Gold ETFs And Perspectives [View article]
    In addition to the low-interest brokers with funky names--Interactive Brokers, Options House and for very large accounts Trade Monster--$5 per-trade fees might also be negotiated for large accounts at the highly secure TD Ameritrade. But I would definitely avoid Portfolio Margin at TD Ameritrade--its margin interest rates are only slightly below average. For non-corporate accounts, Merrill Edge offers "30 free trades monthly." It must be noted that Merrill Edge is owned by Bank of America which was a bankruptcy candidate in 2008. I have strong faith in Interactive Brokers and TD Ameritrade because they are evidently conservatively managed as well as being clear leaders in online trading. However, whether Merrill Edge might be more or less of a credit risk in the future than Options House or Trade Monster, I have not yet done sufficient research to have any opinion.
    May 24 09:54 AM | Likes Like |Link to Comment
  • 10 Good Gold ETFs And Perspectives [View article]
    Clarification: one way to avoid sales taxes is obviously to hold all gold coins in a state with no sales taxes. Another way is to hold the coins is several different states with no "use tax" or if you and the person with whom you are buying-and-selling live in separate states which both have no "use tax." (Use taxes are explained here: http://bit.ly/S3bO4v ) That was what I meant by qualifying as "interstate commerce." Then as stated above, your gold gains and losses can qualify for "ordinary" US federal income tax rates if you buy-and-sell all coins within one year with a friend. There is no need to mail or move around the coins, if you just carefully document who-owns-what on CD-ROM's. But don't take my word for it--check this out every year with your tax preparer.
    May 24 09:28 AM | Likes Like |Link to Comment
  • 10 Good Gold ETFs And Perspectives [View article]
    P.S. After doing some additional research, I can report with some confidence that--contrary to one assumption by "David" above--if a bank goes bankrupt, it is extremely unlikely that you will need to submit any paperwork to remove your safety deposit box contents. Also--in spite of occasional blustering to the contrary--banks purposely avoid knowing what is in safety deposit boxes, in order to avoid huge liability lawsuits. Kitco might be a good place to hold some of your gold. However, if you are concerned about US government scrutiny, the US government certainly has ways to lean on Kitco if they want to target a place where US citizens are likely to hold gold. This is much more likely in my opinion than peeping into tens of millions of safety deposit boxes. Incidentally--in spite of popular misconceptions--it is probably not illegal to hold cash in safety deposit boxes.

    (My primary reference for these statements is a 2003 article posted at Bankrate.com: http://bit.ly/S34TIP )

    As of May 2014, I now suggest that the safest way to hold emergency money is to hold 1/2 in close-to-spot gold coins and 1/2 in US dollars, divided among 3-6 safety deposit boxes, in locations that are not at-risk for natural disasters or political instability. The 1/2 gold probably cuts in half the effects of the devaluation of dollars and the 1/2 dollars probably cut in half the effects of ups-and-downs of gold prices. For US residents, the bank locations should be in multiple states with no "use tax" or one or more states with no "sales tax"--so that you can arrange to buy-and-sell without paying sales taxes. Then you can sell a different 1/6 of the gold to a relative every 2 months, thus claiming "ordinary" federal tax gains and losses according to current values. Which 1/6 is currently owned by whom can be documented with images on 6 CD-ROM discs. Thus the gold coins never need to be physically moved around.
    May 24 09:02 AM | Likes Like |Link to Comment
  • 10 Good Gold ETFs And Perspectives [View article]
    PS--it is also possible that your home state might allow your gold transactions to qualify at "interstate commerce" if the other person lives in a different state. If you think this might be feasible, then to be quite sure, I would suggest contacting your state tax department. Explain exactly what you intend to do--such as selling things to an out-of-state person but to which you retain custody, if that is your intention. Depending on the laws of your state, this might or might not qualify as "interstate commerce." Also as we all know, the laws regarding "interstate commerce" are evolving so as increasingly to tax internet-based sales. These changes might also affect other transactions. As stated in my article, whatever your tax protocol is, it should be verified and re-verified annually with a tax professional.
    May 3 02:40 PM | Likes Like |Link to Comment
  • 10 Good Gold ETFs And Perspectives [View article]
    Correction: it might be necessary for US residents to hold all gold coins in states with no sales taxes.

    If using my suggestion to modify the federal long-term "collectibles" tax into your "ordinary" tax rate--by selling temporarily a different 1/6 of gold coins to a friend or relative every 2 months--then it seems probably necessary to hold the coins in states with no sales taxes. Your state of residency might allow you to avoid sales taxes by performing the transaction in a different state. However, your state might also specify that you are liable to pay sales taxes even if sold out-of-state. If so, you might want to hold all gold permanently in states with no sales taxes.

    Otherwise, selling all of your gold by the end of every year makes you liable for sales taxes on all of your gold, repeated every year. This is an unfeasible expense. Also, I would suggest avoiding sales tax liability, even if you think it would not be detected. It is somewhat self-contradictory to hold gold for the sake of extreme high-security, meanwhile exposing that same gold to a possibility of high tax penalties.

    (Also please note that if the gold is held in a state with no sales tax, there need not be any risk of transportation or of your friend or relative reneging on the deal--because you can "sell" the gold while yourself remaining the custodian of the gold. So--with no gold actually being moved around or changing hands--you and your friend can instead exchange CD's holding images of each gold coin transacted and clarifying who owns what exactly--with no fear of losing custody. You can either be custodian of all the gold--or you can hold the gold that is technically "not yours" in escrow--so if the other person loses their holding that is "yours" then you merely replace that loss by claiming ownership over "their" gold that you already hold. You can also agree to share liability if anything should happen to one of multiple locations--in effect, everyone then has the security as if having the total number of locations of everyone involved. Of course, every person involved then claims short-term federal tax payments or deductions on any gains or losses every 2 months on whatever gold they legally "owned" and have transacted.)
    May 3 11:56 AM | Likes Like |Link to Comment
  • 10 Good Gold ETFs And Perspectives [View article]
    Correction. If someone wants the security of holding 2/10 of savings in gold coins but with less price risk--there may be better solutions than my suggestion above of short-selling half the gold. Instead, perhaps hold 1/10 of savings in gold coins and 1/10 in cash, both in safety deposit boxes. That may amount to the same thing except much simpler. I might also look into other possibilities later.
    Apr 12 11:29 PM | Likes Like |Link to Comment
  • 10 Good Gold ETFs And Perspectives [View article]
    NEW SUGGESTIONS TO ENABLE HOLDING 2/10 OF SAVINGS IN GOLD COINS.

    While writing this article, I was aware of a certain dilemma. There is substantial price risk in holding more than 1/10 of savings in gold. While on the other hand, 1/10 of savings is not much of a safety net. Also, gold ETFs never have the absolute security of gold coins. Also, as mentioned in the article, holding gold coins has several problems.

    After thinking for some time, I suspect that I may have resolved these dilemmas, as follows.

    1) 1/10 of any investment account be allocated to gold, divided among several ETFs.
    2) 2/10 of total savings be allocated to close-to-spot gold coins, divided among several bank locations.

    The price risk of the ETFs can be considered to be automatically hedged due to its small size in relation to the stock market investments. The price risk of the coins can be cut in half by short-selling GLD for half the value of your gold coins under low margin interest at Interactive Brokers. Also, "ordinary" US tax rates can be maintained by selling 1/6 of your gold coins to a friend--and every 2 months buying it back and selling a different 1/6 to the same friend.

    However, if your friend is not a gold investor, then under this protocol, perhaps you should consider that 1/12 of your gold is no longer yours. Because perhaps you should give your friend the right to sell the 1/6 of your gold while agreeing to share half the profit. For the following reasons.

    a. If a massive financial collapse should occur--the only reason for which you should hold gold--you would not want your friend to be left with nothing after helping you out.
    b. Also, if your friend has no right to sell the 1/6 of your gold, then it might become legally questionable that you have ever "sold" the gold.
    c. Also, if there is a massive financial collapse, it will probably be a good thing for you to keep a good friend with whom you have shared something equally. (Albeit only 1/6 of what you have.)

    (Note. I am not a legal expert and laws can change. Any such protocol should be verified by a tax professional each year.)
    Apr 11 03:00 AM | Likes Like |Link to Comment
  • 10 Good Gold ETFs And Perspectives [View article]
    SOME CLARIFICATIONS ABOUT THE SECURITY PROS AND CONS OF ON-MARGIN TRADING.

    If your investment strategy makes use of margin, see:
    * Margin rate comparison: http://bit.ly/1kvUqyb
    * Brokers offering portfolio margin: http://bit.ly/PBz80P

    As of 2014, only 3 brokers seem to have margin interest rates low enough to make it feasible to use margin extensively: Interactive Brokers, Options House and Trade Monster. Options House does not yet offer Portfolio Margin. Trade Monster requires an account value of over $300,000 both for Portfolio Margin and for reasonable interest rates.

    As implied in my article above, it is usually best to avoid margin and especially "portfolio margin," which multiplies the trading that you can do and therefore the risk. However, Options and short-selling often must be done "on-margin" even if you are not risking more than your account value. Sometimes these are only hedge positions, not adding risk but subtracting risk, and yet the margin allowance is used up. If so, for an amateur investor who needs to increase margin capability, it is probably better to avoid applying for the high-credit "portfolio margin," and instead to consolidate trading with savings, i.e. deposit 50% more into the trading account and do not substantially trade with it. This increases your margin allowance without necessarily increasing your risk--for example if you use that extra margin and extra deposit primarily to hold TIPS.

    However, having a substantial amount of "unused money" in the account might not be feasible for the following people.

    a) A highly-skilled amateur investor who is trying to live off of investing and does not yet have a large amount of extra capital.
    b) A professional account manager who wants to show a strong performance record while also enabling strong safety measures.

    If you are in category A or B, I would still caution against the use of margin to add leverage risk. However, it might be sensible to use margin if that margin is primarily used to hold gold and TIPS. (If ETFs are used, with a maximum 1/10 of account value per ETF). Otherwise, no matter how well your hedge protocol might work--whether it consists of short-selling or of trail-sell orders--during a major flash-crash you could still ultimately be relying on FDIC or SIPC insured cash. FDIC or SIPC insurance is sort of like a wooden fire escape: it is quite reliable except during the most important time to be reliable. During a 2008-level crash, when major pillars of finance are at risk, neither FDIC nor SIPC insurance can be considered fully secure. See: http://bit.ly/1bcAy3f

    And even though a major crash "probably" will happen gradually, it also might be precipitated by a flash-crash. If so, nothing will be totally safe--but you can have a substantial chance if your trail-sell orders are triggered in time and if your TIPS are already in-position.

    In conclusion, in my small opinion, everyone should avoid using margin, thereby avoid increased risk and also avoid outrageous margin interest rates. However, for some highly-skilled investors, it might make sense to hold gold and TIPS on-margin as safety positions. And yet again, if so, currently the only brokers worth considering for substantial on-margin trading seem to be Interactive Brokers and Options House--and for very large accounts Trade Monster.

    (And of course if at all feasible, it is also a good idea to diversify between several brokers.)
    Apr 3 05:15 PM | Likes Like |Link to Comment
  • 90% Of Green Energy Stocks Will Go Bankrupt... So Buy The Sector? [View article]
    Thank you for the kind words Joe. Glad to know that maybe there are two sane people on this planet. We seem to have a similar experience and sure you can quote me.

    By the way I sneaked in a few of my words about black gold in my latest SA article about yellow gold which I hope you might like: "10 Good Gold ETFs and Perspectives": http://bit.ly/1fCLC5f
    Mar 19 10:09 PM | Likes Like |Link to Comment
  • The Dead Cat Dollar Outperforms Gold, Silver And The HUI [View article]
    Thank you Bob for your inspiring article and your friendly words to me back in December. I was encouraged to write a full article. This ended up taking several months but in March 2014 finally has been accepted by SeekingAlpha as "10 Good Gold ETFs and Perspectives." That article also references your article. http://bit.ly/1fCLC5f

    The necessary re-examination convinced me to invest in gold but not invest in silver. Also to use diversifified multi-ETF gold as a portfolio hedge. In practice, now is proving a great time to use gold as a portfolio hedge. Any downward speed for gold can only be half as much as the last few years. And so for the time being, my ETF gold very reliably goes up whenever stocks go down, as well as somewhat vice-versa.

    I also created a long-short ETF autotrading system SN-SOS which includes 1/10 gold. At first I planned to do 2/10 gold because it is such an effective portfolio hedge. However, even though gold only goes down significantly when stocks go up, some people might be disappointed with the drag on gains. Also, people serious about gold can hold gold coins. Therefore SN-SOS holds 1/10 gold and 1/10 short-term US Treasury TIPS ETFs. My website has full instructions how to do-it-yourself with little or no trading costs. (I will post an SA article about SN-SOS in a month or two after its performance pattern has been established.)
    Mar 17 10:01 AM | Likes Like |Link to Comment
  • 10 Good Gold ETFs And Perspectives [View article]
    Kitco and Everbank (mentioned below) sound worth looking into for gold storage. But if it pans out, do not put all your gold in one basket. Perhaps 1/4 in a home safe, 1/4 in Kitco, 1/4 in Everbank, 1/4 in ETFs. But also consider that a Kitco vault is not necessarily unconnected to banks. Nor is Kitco necessarily more accessible than the safety deposit box of a local bank that went bankrupt. Nor is there any shortage of accessible banks, credit unions and S&L's that do not gamble in derivatives if you do the research.

    Nor is custodial honesty the only problem. If the economy collapses there will be right-wing and left-wing radicals who would love to burn down banks, there will be desperate or corrupt bank employees and police officers, there will be angry farmers armed with bulldozers and dynamite. There may be biker gangs or warlords who line up everyone suspected of holding gold and shooting those that do not put out. Maybe also shooting those who do put out.

    This might all seem unlikely now. But think it through. Why buy gold? Because someday things might get really bad, at least for a short time.

    And gold is not the only thing that holds up in a crisis. Wood lots. Solar panels. Homesteading. Dried food. Or just installing a large 2-door camper on your property for storage and emergency living space. Investing locally in these things might be more secure than gold, and have similar expectations. Plus tax deductions. Plus working together with neighbors and farmers instead of pitting you against neighbors and farmers.

    Also keep in mind that if something happens to an ETF, you will have thousands of angry investors and their lawyers on your side. But if something happens to a home safe or a local deposit box, you might be quite alone in claiming reparation.

    In summary, gold in general has its limitations. Direct-hoarding also has special problems and limitations. After the pros and cons are thoroughly considered, direct-hoarding comes out perhaps 50-50 with ETFs, especially GTU which has multiple Canadian vaults and the Swiss-held SGOL.

    Also for example, holding coins nearby may have added risks, but also added advantages. In a "state of emergency," if a family member needs antibiotics or other medical help, or there are riots or a natural disaster and you need to get out of the area--rapid access to gold coins could literally save a life.

    In the final analysis, you might for example decide to hold 1/3 of your gold allocation in ETFs and 1/6 in rapid-access coins and 1/6 in whatever you decide to be the most secure alternative and 1/3 in solar panels or a chicken farm or etc.

    The value of any of these alternatives of course depends on who you are, how much you need to safeguard and where you live. Also of course if you live in Florida or a Tornado Alley, etc., maybe the best place to hold things is not where you live. In any case, what all of these things have in common is that they require research and customization.

    In the meantime, while you are doing the research, buy some gold ETFs.
    Mar 15 09:47 AM | Likes Like |Link to Comment
  • 10 Good Gold ETFs And Perspectives [View article]
    Thank you all for your comments and shared interest in the importance of gold investing. Especially ThePatron for representing a very well-respected opinion among gold bugs. In fact, I must credit the many anti-GLD arguments for leading me to my conclusion that one should never place more than 6% of savings in any gold ETF.

    Everyone should surf for the many articles pro and con GLD and make up your own mind. However I would suggest the following basic understandings.

    1. My article is long even after being much-abbreviated. I am not a recognized expert nor even a gold bug and there are certainly many details that could be challenged.

    2. If you have a strong opinion, please post a link to an article that space-effectively and well-roundedly represents that opinion. Or write an instablog yourself and link to that.

    3. No anti-GLD argument can be complete unless the several reputable pro-GLDs who have debunked that opinion are referenced and discussed point-by-point.

    4. Please note that if GLD has "fractional" holdings as alleged by ThePatron then some other ETF must also be "fractional." And as I imply in paragraph E-9 above, only by holding gold yourself can you be absolutely sure that you hold gold when it really matters.

    5. When Lehman Brothers collapsed, one of their US Treasury funds was found to hold only about 90% of its supposed US Treasuries. Nonetheless the investors did get 90% of their money right away and probably at least 5% more after litigation. Similarly, I almost did not suggest VTIP in this article for short-term TIPS, because it holds substantially more cash and less TIPS than other TIPS funds. However, Vanguard has a supremely strong low-fee business model, and any imperfection of VTIP is insignificant compared to what could happen if you rely on a lesser diversity of short-term TIPS funds, or especially if you rely on an SIPC or FDIC cash position during a banking collapse such as almost happened in 2008.
    http://bit.ly/1bcAy3f

    6. I.e. all gold ETFs are flawed. GLD is the oldest gold ETF and therefore built up entrenched detractors before the others even existed. Many of their points are valid but their messages are naming GLD over and over and so many simply assume that newer gold ETFs are somehow better. Maybe but I doubt it. And it does not really matter. I am less concerned about custodial policy than about nuclear war, riots, direct acts of theft or terrorism, draconian laws, etc.

    Therefore in my small opinion, it is naive to expect that any ETF will deliver more than 90% of what you expect when it comes to a clinch. It is far more important simply to diversify between ETFs. Of which there are half as many as I would like for gold but still enough of a variety to be thankful for. GLD is also the second most popular ETF on the planet. It is far more likely that a smaller gold ETF will get away with managerial nonsense. Did Bob Pisani even bother visiting the others?

    However let us assume for argument that GLD is outrageously found to be 40% derivative-based. There is no problem unless derivatives collapse. And if derivatives collapse, you will still be much better off with GLD than with the -90% losses that will happen to stocks, derivatives and perhaps FDIC accounts and perhaps anything tied to any paper currency.

    If you want to be totally safe, buy coins. But you may lose money every year on taxes, storage and trading costs. And do not put all the coins in one place.

    And if you have stock market investments, a diversity of gold ETFs and short-term TIPS ETFs simply provide by far the safest buttons that you can push in your online trading accounts.

    (A ladder of individually-bought TIPS is more absolute than the short-term TIPS ETFs but involves a bit more rigamarole and might tie-up some of your money for 15 years if trader confidence plummets during a stock market downturn. In all history, trading values increase for US Treasuries during stock market downturns--more consistently than for gold. However the reverse is theoretically possible, especially if the US government reschedules its debt, and which the US congress has repeatedly demonstrated it is willing to risk, and for which there might even be good reasons.)
    Mar 13 01:48 PM | Likes Like |Link to Comment
  • Yes, The Nasdaq Bubble Is Definitely Here [View article]
    Thank you NYC Trader for this necessary discussion. However I would prefer greater focus on dissecting the Nasdaq-100 ^NDX QQQ.
    *The ^NDX bubble was more than twice as outrageous as the general Nasdaq.
    * People who bought-in at the peak of the 1999 ^NDX bubble are still after 15 years a long, long way from getting their money back.
    * Nonetheless, a primary assertion in this article--that the general Nasdaq is normally no better than the S&P--is not true for the ^NDX which has consistently outperformed.
    * ^NDX would have done well for anyone buying-in with 1/10 of portfolio, rebalanced annually, during all but the worst part of the 90's bubble.
    * Nonetheless I am very concerned about the bubble-forming tendency of any high-flying tech-biased index ETFs including the FDN Internet Index ETF. I would not have more than one of these types in my portfolio and I think QQQ/^NDX is lately a bit less-dangerous than FDN or any purely high-technology ETF.
    * An S&P-600 Growth ETF such as VBK has similar potential as QQQ with minimal specialization. Similarly non-specialized high-performers are GURU and PKW. Other consistent high-performers which are somewhat specialized but not over-dependent on one hook--that consistently do extra-good whenever times are good but do not form outrageous bubbles--are a Retail Index ETF such as XRT and a "consumer discretionary" ETF (travel and entertainment) such as VCR. QQQ used to be a favorite of mine, but now is ranked in my eyes at best among the latter 4-6 of these.
    Feb 22 12:15 AM | Likes Like |Link to Comment
  • Binary Options “ZERO RISK” Strategy [View instapost]
    Rajat, thank you for sharing this insight. The basic idea is rather "11 year old" as you say--and I am very skeptical of binary options. However sometimes that is what it takes to see something clearly--and the concept can be applied to other instruments.

    I stumbled on this article while surfing out of curiosity for what the heck are these "binary options." I have yet to find a clear explanation either from protractors or detractors. A critical article at Forbes just rambles on with anecdotes and does not seem to understand the difference between a zero-sum game and a negative-sum game. http://onforb.es/QeoLo2

    If you play poker at a Connecticut casino, you pay $5 every half hour just to sit at a $5 table. This is obviously what it takes to pay for all the chandeliers, carpeting, air conditioning and croupiers. Nobody can consistently overcome that rake. And yet there is no shortage of suckers.

    To be specific, nobody has explained what is the vig? I see some saying there is a built-in disadvantage of 55/45 which is worse than playing against loaded dice. Then there are "comments" that claim there is actually an advantage. http://bit.ly/1fvlf1p

    The first question to ask is, how do the Binary brokers make their money? Are they operating out of the kindness of their hearts? I am not claiming to know at this point. I have run out of time trying to find out.

    Rajat, if by chance you are not a millionaire by next June, feel free to send a private message to see how I am doing with my non-binary adaptations.
    Feb 18 08:23 AM | Likes Like |Link to Comment
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