Baltic Dry Index Up 36% This Month, Still a Blip on Long-Term Chart

By Brendan Conway

The  Baltic Dry Index is back in this news, this time apparently ready to hearten market bulls.

From the Wall Street Journals Costas Paris and Francesca Freeman :

A late-summer push by China to stock up on iron ore has helped push global freight rates to their highest in more than a year, sending a popular gauge of the global economy rising faster than it has at any time since the global financial crisis.

The Baltic Dry Index, which tracks global freight rates for ships carrying dry-bulk commodities such as coal, iron ore and grain, finished Wednesday up 4.6%, its highest closing since January 2012. It is up 36% this month alone.

The index often serves as a proxy for global demand for raw materials, and analysts credited a new surge of shipments to China for much of the rally—the latest indication of renewed growth in the worlds second-largest economy.

This shipping-industry gauge drew notoriety by slumping from north of 11,000 to triple digits during the financial crisis. So its a bit of good news to see it rising.

Also, check out the 10-year chart. Even a triple-digit move would look like a blip.

Sep 11, 2013

Vanguard S&P 500 Fund to Reverse Split; Lower Transaction Costs Eyed

By Brendan Conway

Splits of exchange-traded fund shares are usually the province of fast-moving leveraged funds. But a reverse split is coming to Vanguard S&P 500 ETF (VOO ), too.

The 1-for-2 reverse split, effective as of Oct. 24, will double the price of your ETF shares and cut the number of shares in half, Vanguard Group said this morning in a press release.

Why the move now? Vanguards release described it as an effort to lower overall transaction costs to buy and sell shares. The savings would come as a result of effectively shrinking the size of the ETFs bid-ask spread relative to its market price. From a Vanguard spokesman:

[A]ssuming two ETFs, one priced at $50 and one priced at $100, both trade at spreads of 1 penny, investors pay a 2 bp spread for the $50 ETF and a 1 bp spread for the $100 ETF.  This is why increasing the share price will help to lower transaction costs for investors.

Be aware reverse splits can create unexpected tax headaches. That happens when the move results in fractional shares, for instance, splitting 5 shares into 2.5. You cant actually own buy or sell a fractional share in your account. So those bits of stock or ETFs get automatically redeemed for cash. Youll record a small gain or loss.

This morning, the Vanguard S&P 500 ETF trades for $77.30. So, barring a sharp move in the S&P the next six weeks, the post-split price will be somewhere in the mid-$100s. Itll be closer to where competitors SPDR S&P 500 ETF (SPY ) and iShares Core S&P 500 ETF (IVV ) are priced (around $169 this morning).

Update 1:40 p.m.: Paragraph three of this blog post was updated with comment from a Vanguard spokesman.

Sep 11, 2013

10:50 AM ET

Gold Company Backed By Paulson and Baupost Soars 20%

After a tough year, score one for a battered gold-mining stock of high interest to U.S. hedge funds.

Little-known Gabriel Resources (GBRRF. GBU.T ), whose shareholders included Paulson & Co. and Seth Klarmans Baupost Group   at the most recent disclosure, is up 20% this morning following the companys ultimatum to the Romanian government over a key project.

Agence France-Presse/Getty Images

The company slumped 54 percent in Toronto trading on Sept. 9 after Prime Minister Victor Ponta said that parliament should “quickly” vote on whether to abandon the Rosia Montana project because of levels of opposition. Crin Antonescu, head of the junior ruling coalition National Liberal Party, and opposition leader Vasile Blaga called for the development to be terminated.

Gabriel Resources said Sept. 9 that it would “assess all possible actions open to it” including litigation should draft legislation making way for the development be rejected. Ponta yesterday responded by saying that the country “wouldn’t want to pay anything” and was ready to defend itself in court.

Paulson & Co. owned a 16% stake as of the most recent disclosure and Baupost held more than 12%, according to FactSet Research Systems .

Even with Wednesdays surge the stock is down 67% on the year, outpacing the roughly 43% drop in Market Vectors Gold Miners ETF  (GDX ) and Market Vectors Junior Gold Miners ETF  (GDXJ ) this year, and 48% in Global X Gold Explorers ETF (GLDX ).

Sep 11, 2013

9:39 AM ET

Morning Read: Vanguard Tops August ETF-Money Horse Race

By Brendan Conway

Market check. U.S. stocks opened flat to modestly lower on Wednesday morning. The price of gold futures is also flat at $1,363. Treasury bonds are in higher demand, sending the yield on the 10-year Treasury bond down to 2.94%.

Fund watch: In a month when investors pulled a record amount of money from exchange-traded funds. Vanguard Group kept pulling it in, unlike its top two competitors. The firms $3.75 billion in August net inflows compares to $4.33 billion in outflows from BlackRocks (BLK ) iShares and $19.5 billion from State Street (STT ), writes Cinthia Murphy of IndexUniverse . Low-cost, no-frills funds a big draw? Sure, but also realize Vanguards money is stickier thanks to a relatively loyal clientele and the trend of outflows at competitors probably wont stick around. For instance, the bulk of State Streets (STT ) monthly investor exits targeted SPDR S&P 500 ETF (SPY ). That ETF is a kind of revolving door for investors stock-market exposure, and it can see the money return just as quickly as it exited. Over at BlackRock, investors distaste for bonds lately has been a headwind, with ETFs like iShares iBoxx $ InvesTop Investment Grade Corp. Bond Fund  (LQD ) and  iShares Trust Barclays 20+ Year Treasury Bond Fund  (TLT ) near the top of the third quarters outflow tallies. That trend may have legs in the second half of 2013, but it wont stick around forever.

In case you missed it: DoubleLines Jeff Gundlach says he thinks gold looks kind of cheap and also has good things to say about Market Vectors Gold Miners ETF (GDX ).

Sep 10, 2013

6:03 PM ET

Gundlach: I Kind of Like Gold; Its Sort Of Cheap

By Michael Aneiro

Speaking during a presentation this afternoon, DoubleLine Capital  bond guru and all-purpose investing opportunist Jeff Gundlach    — who has not historically been a big fan of gold has apparently softened his stance enough to offer a tepid endorsement.

He offers similarly hedged praise for the Market Vectors Gold Miners ETF  (GDX ). I sort of like the GDX, he said.