Tuesday, July 14, 2009

Bloomberg: Einhorn Switches From Gold ETF to Bullion

Just saw this out from Bloomberg. I'm not heavy into gold, but keep an eye on it now that David Einhorn and John Paulson have been buying it. I owned the silver ETF for a short time, and may buy it again as it has come down a bit in recent weeks. Although ETF's are great, when you're buying in these volumes, they can defeat their purpose.

-Greenlight Capital Inc., the $5 billion hedge-fund firm run by David Einhorn, told investors it switched all of its holdings in a gold exchange-traded fund into bullion during the second quarter.

-The New York-based fund said the cost of keeping gold in a storage facility is less than it paid in fees for the SPDR Gold Trust, according to a letter sent to investors yesterday.

-Greenlight, started by Einhorn, 40, in 1996, told clients in January it was buying gold for the first time amid the threat of inflation from higher government spending. The firm held 4.2 million shares of SPDR Gold Trust in the first quarter, making the gold-backed ETF its biggest holding.

This will only add to the ETF debate. ETF's are wildly popular and are very useful, especially for smaller investors. But when you look at instances like this, and also with what has been happening with the oil and natural gas ETF's, its clear that these funds aren't perfect.

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