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Wednesday, October 3, 2012

Should You Be Afraid of Bogus Gold ?

If you're planning to invest in physical gold -- in bullion or bars directly, or even through some of the Gold ETF's -- the answer, apparently, is yes. Even reputable precious metals dealers have been taken in by counterfeiters. 

As Fox News NY reported, "What makes it so devious is a real gold bar is purchased with the serial numbers and papers, then it is hollowed out, the gold is sold, the tungsten is put in, then the bar is closed up. "


What to do ? SEEKING ALPHA contributor 'The Financial Lexicon' offers the following advice in a recent post :
First, stay small. There is less economic incentive to fake a gold coin as opposed to a gold bar. It doesn't mean there aren't fake gold coins floating around (there are). But if you stick with a reputable dealer, and you know what a real coin looks like, you are less likely to get scammed than you might be when purchasing a gold bar. Moreover, if you are nervous about buying a fake gold coin, you can always choose to purchase coins that dealers have purchased directly from the U.S. or Canadian Mints.
 Additionally, if you are worried about fake silver coins, you could consider purchasing some of the older 90%, 40%, or 35% silver coins that used to be in circulation. These include silver dollars, half-dollars, quarters, dimes, and nickels. There would far less economic incentive to fake these coins. Although, again, it does not mean that fakes don't exist.
 Furthermore, regarding silver bars: if you want to purchase physical bars and think you can avoid fakes by turning to silver, be aware that silver bars stuffed with lead are known to exist.
 Finally, if the possibility of purchasing fake precious metals is a worry with which you do not want to concern yourself, you could always purchase the miners as a means of gaining exposure to precious metals. One of the more popular ways of diversifying exposure to the miners is through the Market Vectors Gold Miners ETF (GDX).

Spell-checker Follies at THE ECONOMIST

This, from the front-page of THE ECONOMIST online,
BANKS IN TROUBLE
Another legal bomb
New York’s attorney general files a bazaar complaint against JP Morgan Chase
 
It is plain, from an examination of the related article, that 'bizarre' rather than 'bazaar' was intended.


Looking for Stock Market Safety in Consumer Staples ?

Then check out David Trainer's SEEKING ALPHA piece, "The Good, the Bad and the Ugly in Consumer Staples ETFs". 

After reviewing six funds - Select Sector SPDR-Consumer Staples (XLP), 
Vanguard Consumer Staples Index Fund (VDC), PowerShares Dynamic Food and Beverage (PBJ),
PowerShares Dynamic Consumer Staples Sector (PSL), Rydex S&P Equal Weight Consumer Staples (RHS), and First Trust Consumer Staples AlphaDEX Fund (FXG) - Trainer concludes that XLP is "the only consumer staples sector ETF to rank better than the overall sector. Therefore, the only ETF we would recommend is XLP."
 
Essentially, Robert Goldsborough of Morningstar agrees with Trainer, in his SEEKING ALPHA post,"A Defensive Consumer Staples ETF For An Uncertain Economic Environment":
Consumer Staples Select Sector SPDR (XLP) is the lowest-priced and most liquid exchange-traded fund for broad exposure to a basket of defensive, mega-cap consumer discretionary names. As investors become increasingly concerned about potentially chilly economic winds ahead that could affect more discretionary consumer spending, they might want to consider this ETF, which holds the 41 consumer staples firms that are contained in the S&P 500 Index...
 Investors seeking nondiscretionary exposure to the consumer have plenty of choices in the ETF world. In our view, the most similar alternative to XLP is the smaller and less liquid Vanguard Consumer Staples (VDC) (0.19% expense ratio). Even though XLP owns only 41 stocks versus the 108 companies that VDC holds, the two funds show performance that has been almost perfectly positively correlated over the past five years (99%).