Investor Demand Driving Gold Price Spiral?

Teresa, February 29, 2008 @ 11:30AM ET | Link | RSS | Read via Email | Start a Discussion

Speculators in commodity futures basically open a bet if another trader can be found to take the other side. In the majority of cases, the bet is closed out before expiration, settled in cash without the actual “stuff” changing hands. That got me thinking.

GLD and other gold ETFs are doing something very different than what futures trading used to do: they are taking tonnes and tonnes of the stuff off the market. In effect, investor demand via exchange traded funds has become a new phenomenon in the supply/demand equation, fuelling the price spiral like never before.

We took a look at some numbers from the SmartMoney ETF screener:

In December 2007, GLD was the seventh largest ETF by total net assets at $15.1 billion, placing it just below QQQQ which had $21.6 billiion total net assets.
In January 2008, GLD was the seventh largest ETF by total net assets at $18.7 billion, placing it below IVV, QQQQ, EEM, EFA and SPY.
On February 26, 2008, GLD was the fifth largest ETF by total net assets at $18.7 billion. It had eclipsed QQQQ. Only EEM ($23.1 billion), EFA ($47.4 billion), and SPY ($84.8 billion) were larger.

As of the close on February 28, 2008, StreetTRACKS Gold Shares held 639.44 tonnes of gold valued at $19,725,219,813 while the Comex Gold Trust held 59.93 tonnes valued at $1,857,851,989 for a combined total of $21,583,071,802 in net assets, eclipsing $17 billion assets under management in QQQQ.

Take a look at the picture to the right. It is of gold bars belonging to the streetTRACKS Gold Shares ETF. That’s right. They have 639 TONNES of it. They have so much of “the stuff” that the vault resembles an IKEA WAREHOUSE. It’s simply amazing.

I for one am very interested to see how price action unfolds as performance-chasing State-Run Funds and institutions allocate away from traditional asset classes, pouring billions of dollars directly into crude oil, copper and other commodities. Bubbull, anyone?

Sigma Design (SIGM): The Post Mortem

Pete, February 29, 2008 @ 11:04AM ET | Link | RSS | Read via Email | Start a Discussion

Fellow financial blogger Charles Kirk of The Kirk Report wrote to let us know that SIGM (NASD:SIGM) would make a good candidate for sentiment cycle analysis.

As usual, we applied our analytics to the daily chart along with the widely-watched 50-day and 200-day moving averages. The pink/cyan dots provide potential entry/exit signals while the price bars are colored red/yellow/green to identify relative performance.

After a period of outperfomance, SIGM began underperforming on December 27, 2007. The phases of the sentiment cycle are distinct, easily identified in real time by the tone of financial reporting. It is interesting to note that Wall Street firms still maintain a rating of 1.85 on SIGM which Reuters equates to an “Outperform”.

The following news stories were filed during the Enthusiasm phase:

The Rise of IPTV 12-12-07
AT&T isn’t the only company enjoying the slow death of cable and the rise of internet television. Further up the assembly line, Sigma Designs should fetch a hefty chunk of the $5 billion AT&T plans to spend on its new TV service U-verse, Cramer said.
Samsung’s New Home Theater-in-a-Box (HTiB) Powered by Sigma Designs 12-14-07
Sigma Designs (Nasdaq:SIGM - News), a leading provider of highly integrated system-on-a-chip (SoC) solutions, today announced that its highly integrated SMP8634 media processor was selected by Samsung Electronics Co., Ltd. to power its new HT-BD2 home theater-in-a-box (HTiB), the first home theater product to combine a Blu-ray player and sound system into one product offering.
Sigma Media Processor to Power Sharp’s AQUOS Line of Blu-ray Disc Players & Recorders 12-19-07
Sigma Designs (Nasdaq:SIGM - News), a leading provider of highly integrated systems-on-a-chip (SoC) solutions, today announced that its highly integrated SMP8634 media processor was selected by Sharp Corporation to power its new line of AQUOS® Blu-ray disc players and recorders. Sharp’s new products include the BD-AV1 and AV10 Series for the Japanese market and the recently introduced slim-profile AQUOS BD player, model BD-HP20U, the company’s first offering in the U.S. market.

The following news stories were filed during the Disbelief phase:

Semiconductor Stocks Fall, but Sigma Design Shares Advance After Recent Stock Price Slide 12-28-07
Sigma Design stock had fallen because investors had been concerned about new product announcements by Broadcom Corp. and ST Microelectronics NV, according to Deutsche Bank analyst Sukhi Nagesh. Nagesh said in a note to investors Wednesday that the low price offered a good opportunity as Sigma Design is a fast-growing company.
Sigma Demonstrates Latest Consumer Technology Solutions at CES 1-7-08
Sigma Designs (Nasdaq:SIGM - News), a leading provider of highly integrated systems-on-a-chip (SoC) solutions, today demonstrated a wide range of consumer technology solutions at CES 2008.
Video Games and TV Shows Are Serious Business 1-8-08
“They make the media-processing chips for two very high-growth markets right now: IPTV set-top boxes — they’re the only chips certified by Microsoft right now — and also high-definition DVD recorders and players,” he said. “Consumers have spent billions of dollars investing in high-definition TVs, and they want to make sure they have the content to take full advantage of that.”
The CES column 1-11-08
“In this generalized video space, a name that keeps cropping up is Sigma Design with its specialized video chips. I cannot tell you how many times its name came up in casual conversation. The stock is now undergoing a correction and is worth watching as are any companies in the once moribund TV space.”
Lightning Round 1-14-08
Sigma Designs: It’s one of the big winners of Blu-Ray’s win over HD DVD. Sigma is hated by the short sellers, Cramer said. “I’m with the long buyers.”

The following news stories were filed during the Panic phase:

Analyst Downgrades Sigma Designs on Sales Concerns, but Says Conditions Will Likely Improve 2-19-08
An analyst downgraded shares of Sigma Designs Inc. Tuesday, citing the potential for a dip in revenue at the company, which makes chips for video and audio devices, in the first half of the year.
Sigma Designs CEO Exercises Options 2-19-08
The president and chief executive of Sigma Designs Inc., which makes chips for video and audio devices, exercised options for 157,240 shares of common stock, according to a Securities and Exchange Commission filing Friday.
Recent Stock Sales by Sigma Officers Are Shares From Expiring Options 2-25-08
Sigma Designs (Nasdaq:SIGM - News), a leader in digital media processor SoC’s for consumer electronics, today announced that certain options to purchase common stock held by its executive officers have a limited period of exercisability. Most of the recent sales of common stock made by Sigma executive officers were of shares received upon exercise of a portion of a stock option that would have expired on March 15, 2008 if not exercised before that date. Most of these options vested in calendar year 2007, and the relatively short window between vesting and expiration is required for Sigma’s executive officers to retain the benefit of these grants and is resulting in an elevated level of insider selling.
Lightning Round 2-26-08
Sigma Designs: “I have egg on my face for this one. I want to be careful here.”

Time and again the pattern is the same: the news stories maintained a bullish tone, providing investors “reasons” to continue buying well into the disbelief phase. Special thanks goes to KirkReport.com for finding this terrific example.

Investor Demand Driving Gold Price Spiral?

Sigma Design (SIGM): The Post Mortem

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Investor Demand Driving Gold Price Spiral?

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