Adam Hamilton's Sloppy, Inept Commentary On GLD

I was somewhat shocked to read  Adam Hamilton's freebie essay posted on http://www.goldseek.com/ in which he tries to discredit the growing chorus of analysts who are taking a close look at GLD's Prospectus and throwing up a big red flag on the GLD operations.  It is readily apparent that Hamilton has not spent time reading the GLD prospectus.  His critcism is of the fringe element out there hurling obviously unfounded accusations.  Hamilton, in an uncanny display of incompetent analyis, completely avoids the obvious legal loopholes - loopholes large enough to drive a freight train through - and he fails to address the real problems with GLD's legal structure.  If you're interested, please review my 12/2 post on GLD:  LINK

One of the biggest problems with GLD is the lack of any accountability from the Custodian, HSBC, for the location and physical inventory of the actual gold bars.  Hamilton tries to address the issue of the lack of a bona fide audit of GLD by throwing up that he's an ex-auditor ("I eat breakfast every morning 300 yards from 3000 Cubans who are trained to kill me" - Jack Nicholson in "A Few Good Men"), and since GLD links its audit report on its website and he's read that audit report, it's okay.

HOWEVER, if Hamilton had spent time thoroughly reviewing the Prospectus, he would see that a physical audit is not required and that the annual financial audit is nothing more than an inspection of the financial records provided by the Trustee.  As per the Prospectus, there are several ways in which the Custodian can throw roadblocks to an actual, bona fide physical audit. I leave it to the reader to look at my report on GLD and read the Prospectus for themselves.

Hamilton also points to the "Inspectorate Certificate" newly linked on the GLD website.  But this "certificate" is a complete farce.  Again, I admonish Hamilton for sloppy, incompetent work.  The certificate clearly states "As per the records of the Custodian..." LINK.  THE PRIMARY PROBLEM WITH THE VERY LEGAL STRUCTURE OF GLD IS THE WAY IN WHICH THE CUSTODIAN HAS NEARLY ZERO ACCOUNTABILITY.  Do your goddamn homework Adam.  This "inspection of the bullions bars" is nothing more than an inspection of the records - paper records - provided by HSBC.  Anyone see a problem here?  There is still NO bona fide physical audit of the actual bars.  And the legal structure of GLD makes it impossible to force a genuine bar count AND formal assay audit..  We know we need an assay inspection of the bars because of all the "salted" London bullion bars being discovered in depositories across the globe ("salted" = gold plated tungsten).

One more point about Hamilton's defense of the audit firm and audit process of GLD.  I guess he wasn't around when Enron imploded from massive fraud.  I vividly remember Enron because I started shorting it in the $40's and made a lot money when Enron imploded a few months later.  In fact, the Enron Ponzi scheme took down its auditor, the formerly highly regarded Arthur Andersen.  Next time an ex-CPA tries to defend his profession, grab ahold of your wallet and run.  In my GLD report, written 10 months ago, I suggest that GLD has the possibility of being the next Enron.

When I first started exclusively researching/investing/trading the precious metals and mining stock sector eight years ago, I actually subscribed to Hamilton's newsletter for a short period of time.  It didn't take reading too many issues before I understood that Hamilton's research and analysis of mining stocks lacks any real substance and due diligence.  His reports are overly verbose, self-adulating and narcissistic.  They do contain some excellent statistical work in which he meticulously massages empirical trading data in the context of simple technical analysis.  This current commentary on GLD, however, reminds me why I haven't paid attention to his work for over 6 years.