So there are these things called Exchange Traded Funds (ETFs), which allow investors to gain exposure to non-stocks (like oil, gold, bonds, Asian market, etc.) with the ease of stocks. What happens is that you buy a share of the ETF, and then the ETF invests its money such that its own share price (in theory) mimics the thing you are ultimately trying to invest in.
Now oil ETFs, for example, don't actually buy and hold oil. (At least, not the ones I've researched.) Presumably this would be too costly. Instead, they buy futures contracts on oil, and then roll them over when the delivery date approaches.
But when it comes to gold, both the GLD and IAU ETFs claim that they invest in physical gold. GLD (not sure about IAU) also says that its investors can redeem shares of GLD for the equivalent amount of physical gold at any time.
Well I was talking with a guy who works for "an investment counselor in Switzerland" (the term he asked that I use), and he said that his firm wanted to test this redemption clause. The people running GLD came back and said something like, "We prefer that you continue to hold the shares. The amount you want to redeem is too small."
So at this point, I thought, "Oh OK, they wanted to get $2,800 worth of gold, and the ETF didn't want the hassle of redeeming that. No big deal."
But no, that's not it at all. The Swiss firm was trying to redeem about $30 million worth of GLD shares!!!
So they sold their shares, used the proceeds to buy actual gold bars, and are storing them in a Swiss bank.
This guy seemed intelligent, truthful, and non-delusional. (He thus passes Carlin's test.) Can anyone in the finance world comment on whether this story sounds plausible?
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