Thanks -- I guess after the offering the premium will return to
"normal" levels. I'm pretty sure that PHYS will be doing a
secondary as well, but they haven't announced it yet -- that one I
do own. But it is frustrating when you own a gold and silver
bullion trust that is down on a day like today.
The premium for PHYS is unsustainable. You should sell it and
buy GTU (assuming you undertand the PFIC tax consequences), else
you risk taking a 15% haircut.
The premium on PHYS has been running at about 20% -- it spiked
to 30% -- but today's articles this in
ZeroHedge have quickly brought it back to
20% -- you can check it intraday
here
What I have seen is that CEF traditionally trades at about a 10%
premium, and that GTU trades at about at 12% premium (these are
obviously rough averages). But I think there's a good reason why
PHYS trades at double the premium. PHYS is the only one that was
organized under US law that allows it to have long term capital
gains treatment. The others are taxed as collectibles, so for
instance while the tax rates are currently 15% on LT cap gains,
they are 29% on collectibles (I think that's the right number, if
not it's about that). So a taxable account can easily justify the
additional premium, which I expect it will hold for a while until
enough competitors organize under US law to drive the premiums
down.
I agree that the comparison of GTU to PHYS is fair because both
are gold only, whereas CEF is about half gold and half silver, so
depending on how they are trading that also effects the
equation. Larger investors are also willing to pay a premium
on PHYS vs. GTU because with PHYS you have the option of taking
physical possession of your bars, another advantage that clearly
has some additional value to some investors.
So when you add it all up, I think there are legitimate
reasons for the premium, although it clearly got knocked down this
morning.
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CEF.A - TO
Posted by frank on 11th of May 2010 at 10:10 am
They are doing an offering at $14.85 US. Closing is expected around May 18, 2010
Thanks -- I guess after
Posted by puma on 11th of May 2010 at 10:18 am
Thanks -- I guess after the offering the premium will return to "normal" levels. I'm pretty sure that PHYS will be doing a secondary as well, but they haven't announced it yet -- that one I do own. But it is frustrating when you own a gold and silver bullion trust that is down on a day like today.
The premium for PHYS is
Posted by sethbru on 11th of May 2010 at 10:55 am
The premium for PHYS is unsustainable. You should sell it and buy GTU (assuming you undertand the PFIC tax consequences), else you risk taking a 15% haircut.
The premium on PHYS has
Posted by puma on 11th of May 2010 at 11:06 am
The premium on PHYS has been running at about 20% -- it spiked to 30% -- but today's articles this in ZeroHedge have quickly brought it back to 20% -- you can check it intraday here
What I have seen is that CEF traditionally trades at about a 10% premium, and that GTU trades at about at 12% premium (these are obviously rough averages). But I think there's a good reason why PHYS trades at double the premium. PHYS is the only one that was organized under US law that allows it to have long term capital gains treatment. The others are taxed as collectibles, so for instance while the tax rates are currently 15% on LT cap gains, they are 29% on collectibles (I think that's the right number, if not it's about that). So a taxable account can easily justify the additional premium, which I expect it will hold for a while until enough competitors organize under US law to drive the premiums down.
I agree that the comparison of GTU to PHYS is fair because both are gold only, whereas CEF is about half gold and half silver, so depending on how they are trading that also effects the equation. Larger investors are also willing to pay a premium on PHYS vs. GTU because with PHYS you have the option of taking physical possession of your bars, another advantage that clearly has some additional value to some investors.