ETFs similar to VGPMX (Metals & Mining)

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ajacobs6
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ETFs similar to VGPMX (Metals & Mining)

Post by ajacobs6 » Tue Jan 12, 2016 11:51 am

I have a small stake in VGPMX because I want exposure to precious metals and mining stocks. However, I don't like the active management...and I do not like the high turnover the fund has.

Are there any better broad-based solutions? The only ETF I could find that might be reasonable is PICK - iShares MSCI Global Metals & Mining Producers

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cfs
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Re: ETFs similar to VGPMX (Metals & Mining)

Post by cfs » Tue Jan 12, 2016 11:58 am

ajacobs6 wrote: . . . . The only ETF I could find . . . .
Ahoy, shipmate!

Check this link for options: http://etfdb.com/etfdb-category/precious-metals/
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Re: ETFs similar to VGPMX (Metals & Mining)

Post by lack_ey » Tue Jan 12, 2016 12:11 pm

That link is for precious metals, including precious metals equity as well as the actual commodity exposure. Not mining overall.

iShares MSCI Global Metals & Mining Producers (PICK) is mostly non-precious metals miners. Its index has "ex gold & silver" in the name. Even so, it is the broadest of the miners ETFs, and also more expensive than Vanguard's fund (and trades at typical spreads of 50 bp). You could supplement it with gold miners and silver miners funds. For gold miners, take your pick between the popular Market Vectors Gold Miners (GDX) and the more diversified and cheaper iShares MSCI Global Gold Miners (RING). For silver, Global X Silver Miners (SIL) is your only reasonable choice. These are all more expensive than Vanguard's active fund.

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ajacobs6
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Re: ETFs similar to VGPMX (Metals & Mining)

Post by ajacobs6 » Tue Jan 12, 2016 12:21 pm

lack_ey wrote:That link is for precious metals, including precious metals equity as well as the actual commodity exposure. Not mining overall.

iShares MSCI Global Metals & Mining Producers (PICK) is mostly non-precious metals miners. Its index has "ex gold & silver" in the name. Even so, it is the broadest of the miners ETFs, and also more expensive than Vanguard's fund (and trades at typical spreads of 50 bp). You could supplement it with gold miners and silver miners funds. For gold miners, take your pick between the popular Market Vectors Gold Miners (GDX) and the more diversified and cheaper iShares MSCI Global Gold Miners (RING). For silver, Global X Silver Miners (SIL) is your only reasonable choice. These are all more expensive than Vanguard's active fund.
This is super helpful, thank you. My problem with the Vanguard fund is the high turnover, which might make the fund more expensive than the ETFs, correct? Also, it's an active fund with a small amount of holdings. Manager risk, etc. Not completely sold that this is the best way to access this part of the market.

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Re: ETFs similar to VGPMX (Metals & Mining)

Post by siamond » Tue Jan 12, 2016 5:36 pm

Not really the OP's question, but do pay attention to what happened to VGPMX in 2008/2009... The negative correlation with regular stocks wasn't exactly there when one needed it the most... Personally, after seeing that, this removed any temptation on my part to allocate a few % of my portfolio to precious metal miners. I'm still a tad on the fence about Gold itself.

Check this telling chart: http://stockcharts.com/freecharts/perf. ... 7&O=011000

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Re: ETFs similar to VGPMX (Metals & Mining)

Post by ajacobs6 » Fri May 13, 2016 10:55 am

lack_ey wrote:That link is for precious metals, including precious metals equity as well as the actual commodity exposure. Not mining overall.

iShares MSCI Global Metals & Mining Producers (PICK) is mostly non-precious metals miners. Its index has "ex gold & silver" in the name. Even so, it is the broadest of the miners ETFs, and also more expensive than Vanguard's fund (and trades at typical spreads of 50 bp). You could supplement it with gold miners and silver miners funds. For gold miners, take your pick between the popular Market Vectors Gold Miners (GDX) and the more diversified and cheaper iShares MSCI Global Gold Miners (RING). For silver, Global X Silver Miners (SIL) is your only reasonable choice. These are all more expensive than Vanguard's active fund.
Tell me about supplementing PICK with GDX. What percentages would you use?

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Re: ETFs similar to VGPMX (Metals & Mining)

Post by lack_ey » Fri May 13, 2016 11:21 am

ajacobs6 wrote:
lack_ey wrote:That link is for precious metals, including precious metals equity as well as the actual commodity exposure. Not mining overall.

iShares MSCI Global Metals & Mining Producers (PICK) is mostly non-precious metals miners. Its index has "ex gold & silver" in the name. Even so, it is the broadest of the miners ETFs, and also more expensive than Vanguard's fund (and trades at typical spreads of 50 bp). You could supplement it with gold miners and silver miners funds. For gold miners, take your pick between the popular Market Vectors Gold Miners (GDX) and the more diversified and cheaper iShares MSCI Global Gold Miners (RING). For silver, Global X Silver Miners (SIL) is your only reasonable choice. These are all more expensive than Vanguard's active fund.
Tell me about supplementing PICK with GDX. What percentages would you use?
The Vanguard fund is mostly gold miners. Check the annual report and current holdings.

That is, you'd use relatively little PICK and mostly precious metals equity.

Note that by this point you've already missed the PME train.

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Re: ETFs similar to VGPMX (Metals & Mining)

Post by lemonPepper » Thu Aug 25, 2016 1:00 pm

It looks like VGPMX would have been very good during the lost decade. The best time to buy VGPMX was 1999

http://stockcharts.com/freecharts/perf. ... 5&O=011000


I'm considering an allocation to VGPMX as well but I really doubt my ability to stick with an underperforming asset for decades. Atleast with TSM I know there is a fundamental reason why it will definitely be up after a 20-30 year period.

OTOH, VGPMX hasn't even kept up with bonds for 30 years.

See this chart on mornignstar

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Re: ETFs similar to VGPMX (Metals & Mining)

Post by lemonPepper » Thu Aug 25, 2016 1:06 pm

lack_ey wrote: That is, you'd use relatively little PICK and mostly precious metals equity.

Note that by this point you've already missed the PME train.
btw, can you explain your reasoning here? Is it because it has gone up to $11 from $7 or so in 6 months?

the price is still close to the 2002 time period and 60% lower than the peak in 2008

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Re: ETFs similar to VGPMX (Metals & Mining)

Post by lgs88 » Thu Aug 25, 2016 1:21 pm

Bear in mind that past correlation =\= future correlation. VGPMX may perform better relative to stocks in the next downturn than it did in '08; it may also do worse.

I wonder if its lousy performance had anything to do with the capital-intensive nature of mining. After all, people were concerned about a total lockup in the capital markets -- right?
merely an interested amateur

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Re: ETFs similar to VGPMX (Metals & Mining)

Post by Theoretical » Thu Aug 25, 2016 2:08 pm

It's specialized and with less than $70 million in assets, but its style purity for precious metals and mining is excellent: http://www.etf.com/PSAU. .75 ER

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Re: ETFs similar to VGPMX (Metals & Mining)

Post by asif408 » Thu Aug 25, 2016 3:14 pm

lgs88 wrote:Bear in mind that past correlation =\= future correlation. VGPMX may perform better relative to stocks in the next downturn than it did in '08; it may also do worse.
Interestingly, its correlation with the US stock market (VFINX) is down to where it was between 1985 and 2003 (right around 0): https://www.portfoliovisualizer.com/asset-correlations (you'll probably have to enter the funds yourself)

It looks like from 2004-2011 the correlation increased, peaked in early 2011 at around 0.9, then has fallen dramatically since 2011 and is around 0 again. I remember several people here saying that the fund was changed in the mid-2000s to add mining stocks, and there was some questioning whether the fund was the same. It doesn't appear to be as pure a PME play as something like GDX, but a 0 correlation is a good thing IMO. Who knows if it will last and if so for how long.

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Re: ETFs similar to VGPMX (Metals & Mining)

Post by Valuethinker » Thu Aug 25, 2016 3:50 pm

lemonPepper wrote:I

I'm considering an allocation to VGPMX as well but I really doubt my ability to stick with an underperforming asset for decades. Atleast with TSM I know there is a fundamental reason why it will definitely be up after a 20-30 year period.
]
Likely. Not definitely. Unfortunately there are no guarantees with equity investing.

We don't have enough independent 20 year or 30 year periods in our data to tell us much conclusive.

For example in US stock market data (which is flakey before the 1890s, as the newspapers didn't give the correct closing prices, necessarily) we have c. 180 years of data-- 6 independent periods.

If you read Benoit Mandelbrot "The Misbehavior of Markets" the longest price series we have of daily trading is Egyptian cotton prices back to about 1520s.

And there's no trend. The data is fractal.

It's one of those "bullseye" books in life, when I realized that what I thought was true, was not actually true.

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Re: ETFs similar to VGPMX (Metals & Mining)

Post by lemonPepper » Fri Aug 26, 2016 4:19 pm

lgs88 wrote:Bear in mind that past correlation =\= future correlation. VGPMX may perform better relative to stocks in the next downturn than it did in '08; it may also do worse.

I wonder if its lousy performance had anything to do with the capital-intensive nature of mining. After all, people were concerned about a total lockup in the capital markets -- right?
mining is a capital intensive business. Tight credit would definitely make things harder for them. Another reason for decline could be prices went up too much during 2000 to 2008 (similar to gold in early 80s).

This is all hindsight. As much as I see the value of VGPMX as a hedge in past years, I will not be putting it in my portfolio as I don't have the necessary conviction to stick with it long term

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Re: ETFs similar to VGPMX (Metals & Mining)

Post by lemonPepper » Fri Aug 26, 2016 4:22 pm

Valuethinker wrote: Likely. Not definitely. Unfortunately there are no guarantees with equity investing.

We don't have enough independent 20 year or 30 year periods in our data to tell us much conclusive.


And there's no trend. The data is fractal.

It's one of those "bullseye" books in life, when I realized that what I thought was true, was not actually true.
point taken. Sitting in silicon valley, I'm perhaps too optimistic about the future. I will read that book sometime.

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Re: ETFs similar to VGPMX (Metals & Mining)

Post by Valuethinker » Sat Aug 27, 2016 12:31 pm

lemonPepper wrote:
lgs88 wrote:Bear in mind that past correlation =\= future correlation. VGPMX may perform better relative to stocks in the next downturn than it did in '08; it may also do worse.

I wonder if its lousy performance had anything to do with the capital-intensive nature of mining. After all, people were concerned about a total lockup in the capital markets -- right?
mining is a capital intensive business. Tight credit would definitely make things harder for them. Another reason for decline could be prices went up too much during 2000 to 2008 (similar to gold in early 80s).

This is all hindsight. As much as I see the value of VGPMX as a hedge in past years, I will not be putting it in my portfolio as I don't have the necessary conviction to stick with it long term
I think the correlation is this:

- when economies are expanding, and monetary policy is relatively loose, that tends to buoy demand and prices for end products. Monetary policy may well tighten, but not usually fast enough to stop the cycle of consumer spending and commercial construction that tends to drive up metals demand

- supply lags demand in the mining industry-- both ways. So on the way up prices always rocket up as demand grows faster than supply can keep up. This also happens when you get a credit bubble in a big consuming economy (basically what China has been through) sucking in metal (something like half the world's copper supply was going into buildings in China at one point). The cost of mining equipment and skilled geologists etc. also rockets.

And new mines, costing billions, open, supply increases, demand peaks and flattens, and prices plummet. That is where we are now. Look at Caterpillar's results- that side of their business has looked like a rerun of the Great Depression for the last couple of years.

Mining companies make huge losses and cut back capital spending. Over time, this means there is less or no new supply. Meanwhile the economic cycle turns, and demand rises again.

Tight credit per se has the effect of reducing mining capex, but really only at the margin. The real killer is falling cash flows (thus less borrowing capacity) arising from lower prices.

Because opening a new mine is a 10-15 year project from inception, the cycles are *long*. The Chinese demand caused a commodity supercycle, that is unlikely to be repeated (unless India does the same thing).

Every metal of course has its own cycle. Aluminum is in a perma slump (see Bloomberg news article this week) due to Chinese smelters, state owned, keeping smelting. Steam coal has its own cycle, separate from metallurgical coal (which is linked to iron ore and steelmaking).

Precious metals are in their own world.

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Re: ETFs similar to VGPMX (Metals & Mining)

Post by Valuethinker » Sat Aug 27, 2016 12:33 pm

lemonPepper wrote:
Valuethinker wrote: Likely. Not definitely. Unfortunately there are no guarantees with equity investing.

We don't have enough independent 20 year or 30 year periods in our data to tell us much conclusive.


And there's no trend. The data is fractal.

It's one of those "bullseye" books in life, when I realized that what I thought was true, was not actually true.
point taken. Sitting in silicon valley, I'm perhaps too optimistic about the future. I will read that book sometime.
All you can really do is be diversified as possible, cross fingers and hope. US companies, their execs are partly rewarded by higher share price/ total shareholder return, so they tend to buy back equity to drive up stock prices.

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