VGSH

[Xan]

VGSH (Vanguard short-term government bonds) has been considered as a pseudo-acceptable vehicle for PP cash, particularly in a Vanguard brokerage account.

I just noticed that it has shot up 1.32% on the day!  I'm not sure what to make of this.  Obviously going up is good, but cash shouldn't be that volatile, right?  And if it can shoot up on one day's news then it can shoot down too.  Does this disqualify VGSH as a vehicle for PP cash?

[dualstow]

Vanguard says the 52-week high was $61.19 (10/15/2014) and
the 52-week low was $60.77 (12/26/2014). Not counting today, of course.

So, whether or not there are other reasons to disqualify it, this doesn't seem too bad at all.

[AdamA]

It started the day at $68 and immediately dropped.

I'm not sure what causes something like that.

I emailed Vanguard b/c I'm curious to know.

[Xan]

That's even weirder!  Please let us know what you find out, Adam.

[Drewskers]

JMHO, this was the opposite of a "flash crash". Low (or zero) liquidity in the face of panic buying (into safety). Basically there was not enough of the underlying securities available to allow for ETF share creation, so the shares of the ETF began selling at a premium - for a minute or two, when trading in VGSH clearly halted. Take a look at a minute bar chart (freestockcharts.com) and you'll see ZERO trading from 9:32 EST to 10:07 EST, and the price dropped like a rock as soon as trading resumed. Whether the halt in trading was due to an exchange "circuit-breaker" or imposed by Vanguard would be interesting to know!

ZeroHedge asserts there were 4,500 flash crash events this morning due to liquidity issues:

http://www.zerohedge.com/news/2015-08-2 ... as-morning

Take a look at today's action in VB for another spectacular chart.

[AdamA]

That's even weirder!  Please let us know what you find out, Adam.

Here's what they told me.  I don't really understand it.

Thank you for taking the time to contact us about Vanguard Brokerage
Services(R).

We appreciate your thoughtful question. I attempted to call you to discuss
this in detail but there was no answer.

The Vanguard Short-Term Government Bond ETF (VGSH) was halted from trading
on August 24, 2015. VGSH was halted nearly immediately when the market
opened at 9:30 a.m. Eastern. (The trading was halted due to circuit
breakers based on price swings.) While halted, quotes reached $68.51. When
the ETF re-opened for trading at 10:06 a.m., it traded at $61.28.

It appears that there was strong demand for the ETF (and short term
government securities) as a "flight to safety" in a turbulent trading day.
As you know, news is often reported for publicly-traded companies, but
rarely for ETFs.

Although the ETF briefly quoted as high as $68.51, the ETF was not trading
at that time because it was halted.

I certainly hope I answered your question. We appreciate your business.

[Drewskers]

You may not understand his response because it's muddled and self-contradictory, and does not mention the cause behind the problem.

First, he says trading in VGSH was halted by circuit breakers due to price swings. (This much is true and can be seen on a minute bar chart as I previously posted).

Then he says it was during the halt that prices hit $68.51. This is not accurate: $68.51 is the price VGSH was trading at when trading was halted. In fact, VGSH opened trading at $64.30 and before trading was halted at $68.51 there were 16.5K trades executed.

Here are two articles from respected sources (e.g. not ZeroHedge) that explain in detail what happened to many ETFs on Monday.

http://www.etf.com/sections/features-an ... -some-etfs

http://seekingalpha.com/article/3464456-is-it-safe

While these articles focus on negative price dislocations (e.g. mini-flash crashes), what happened with VGSH is an example of how lack of liquidity can also cause positive price dislocations to occur. I suppose those could be called mini-flash bubbles.