GBN.V Reciprocal Weekly

One chart that solidly demonstrates the intermarket relation between GBN.V and the long-dated U.S. treasury bond market is the GBN.V reciprocal chart. GBN.V is strongly inversely correlated with the bond market, meaning that commercial traders have taken advantage of their relaxed regulatory regime.

With a no-down-tick rule being abolished in 2011, traders could now sell unlimited numbers of shares into the market without first owning them straight into the bid, as long as this was part of a hedging strategy. The cash that is raised in this fashion is then parried into the rising trend.

You press the F9 key on your trading station keyboard at the bank where you work, and the computer gives you your hedging strategy, does your trading for you, and in aggregate will provide you a return monthly based on those trades. You can also sell the position to a client called an equity swap, packaged as a corporate bond.

The equity swap will then retain voting rights, even though the obligation is in the millions of shares that have to be bought back in the event the market moves against you, rather than owning any shares outright. So with these voting rights, you can seek out a buyer to take the obligation off your hands.

The Waterton deal precludes this eventuality, it re-asserts shareholder rights, but only to the point that shareholders are mere optionees holding an option in a share price advance. Clients holding corporate bonds comprised of hedging strategies with huge obligations in the gold mining sector have yet to wake up to recent changes.

It is generally considered a valid hedging strategy with zero risk to use gold mining companies, because of the likelihood of their failure, and the persistent advance of treasury bond prices. There isn't a single person out there that will agree with you that a producing gold mine in a gold bull market is worth more than bullion bars in a safe deposit box.

Note that the rise in GBN.V shares is appropriately proportional to the decline in the TLT, a proxy for the bond market. The 'buy-point' in GBN.V shares was late July, early August as the inverse correlation has begun to break down, and come off an extreme.

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-F6