Short Report: Gold Bug Pesticide?

June 09, 2010

Despite the ‘flash crash’ and jitters in financial markets, a rise in shorting of GLD was the big short-interest story in May, in a sign not everyone’s panicked and not everyone’s a gold bug.

With the “flash crash” behind us, it’s an appropriate time to see where the big short-side action was in ETFs right afterward—as reported in the May 15 short-interest reports. The biggest change was a rise in shorting of the SPDR Gold Trust (NYSEArca: GLD), which is telling us not all investors are gold bugs and some aren’t worried about the eurozone issues killing incipient signs of a global recovery.

Other than the rise in shorting of gold, things don’t look so different from the last time we looked at these numbers back in April, when bearishness on retail, small-caps and real estate were the big trends.

Before looking closely at the numbers, it’s worth sharing this word of caution: Short-interest reporting is buggy and flawed. Due to double-counting issues, it’s possible to have more reported short shares than actually exist in the market. However, it’s still a worthwhile exercise to see where the negative bets or hedges are.

That said, let’s look at where the money is:

Big Bets
Ticker Name Issuer Short Interest Ratio %Short (mm) $ Float Short
SPY SPDR S&P 500 SSgA 0.78 1146% $ 30,013.99
IWM iShares Russell 2000 BlackRock 1.94 -326% $ 13,103.25
QQQQ PowerShares QQQ Invesco PowerShares 0.68 394% $ 4,434.60
GLD SPDR Gold SSgA 0.97 10328% $ 3,496.32
EEM iShares MSCI Emerging Markets BlackRock 0.71 1996% $ 3,458.34
XRT SPDR S&P Retail SSgA 3.43 -23% $ 3,016.14
IYR iShares Dow Jones U.S. Real Estate BlackRock 2.61 -1497% $ 2,794.64
FXI iShares FTSE/Xinhua China 25 BlackRock 1.27 3202% $ 2,423.57
XLF Financial Select Sector SPDR SSgA 0.86 4698% $ 2,036.28
EFA iShares MSCI EAFE BlackRock 0.96 -1157% $ 1,948.40


When we ran this table six weeks ago, things looked mostly similar. Investors make heavy use of the largest and most liquid ETFs on the short side, just like they do on the long side. The biggest shift, again, was in SSgA’s physical gold ETF GLD, which rose to $3.4 billion from a relatively modest $1.5 billion.

While research showed GLD was the single most popular U.S. ETF last month, it seems a few investors out there are also taking on the gold bugs and those who ran to gold and other safe-haven assets such as U.S. Treasurys as
Europe’s problems began dominating headlines.

Dropping down the list, the iShares Dow Jones U.S. Real Estate (NYSEArca: IYR) fell from $3.7 billion short to $2.7 million. Otherwise, this list remains largely unchanged.


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