A few random items with your mocha.IndexUniverse is reporting a couple of interesting ETFs in the works from StateStreet including an equity fund for frontier Africa, an equity fund for GCC and a convertible bond ETF.
Obviously Africa and GCC aka the middle east would be new exposures for US based investors and the convertible bond fund while not new offers the potential for a superior wrapper.
The exposure for now through CEFs is ok but in the last few months or so the flaws of the CEF structure have really been spotlighted. I would imagine that a convertible ETF would have to do a lot of index sampling and I'm not sure what sort of impact that would have on performance but I am hopeful that it turns out to be better than the CEFs. Individual issues in this space are one of the more difficult types of bonds to analyze and then pick, at least for me anyway.
There was an interesting article in Barron's by a couple of decision makers at Comstock Partners about operating earnings versus reported earnings and how people pick the one that supports their bullish or bearish argument.
I have never believed that the PE ratio was much of a predictor of price. It obviously helps with valuing companies but PEs can be high and prices go up and be low and prices drop.The accompanying chart of of the S&P 500 from the first six months of 2003 which saw a meaningful lift in prices that seemed to start when the PE was above 25. There are obviously other periods like this.
You might look at the chart, consider what happened over the previous couple of years and come up with a pretty good yeah, but which I think would only support the notion of PEs not being reliable predictors of future price action. First quarter 2003 was a major turning point in the market yet the PE was very high.
Charles Kirk had a couple of links that caught my eye.
First was this little ETF article from Morningstar about ETFs that they feel are candidates for closure due to insufficient assets and poor performance. The article is another example of their total lack of understanding of what ETFs are.
Obviously if a fund is not economically viable it runs the risk of being closed. I have read different numbers as to where they become profitable so while I do not know the exact number it is safe to say a $20 million fund is not a profit center.
But the notion of poor price action is not enough to determine whether an ETF has "stunk up the joint" or not. I counted 47 funds on the deathwatch list (if I miscounted feel free to leave the correct number). In eyeballing the list I don't believe there are any on there that I ever considered buying but included in there were several pure beta exposures.
Apparently the ProShares Ultra Russell 2000 Value (UVT)--so double long SCV--is on the list because it only has $9 million in assets and is down almost 34% over some period of time. Again if ProShares can't justify keeping a $9 million fund open then they should close it but the idea of poor performer makes no sense.
The fund listed in February, 2007. 2007 was a bad year for small cap. So the fund provides double long exposure to a segment that has done poorly (very normal for small cap in a bear market), of course the fund is down a lot. Do you think the next time small cap value leads UVT will be one of the best performers?
All this fund is is beta. Today is either a good time to own this specific beta or it isn't. Two years from now will either be a good time or a bad time to own this specific beta. Assuming the fund tracks what it is supposed to track, UVT will never be a good fund or a bad fund it will simply be exposure and the investor will either be correct or incorrect with his timing.
One last little tidbit where Daniel Gross debunks the idea that 1.3 million people are making a living on eBay. Personally I buy two or three things a year on eBay but this is one I hope can work out. I know one or two people who who make money on eBay (I do not know if they make enough to be more than walking around money) but there is demand for a lot of the stuff on there the variable is whether it is viable as a part time job or not. The idea of building a small stream of income by eBaying stuff seems ideal for retirement but perhaps this article is telling us it is not realistic for most folks.
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Frankly, i'm sick and tired of all the ETF's. Up to a point they were ok, but I still like a manager who thinks. Maybe not many think well, but I like my OAKBX, SGOVX, PRPFX, SAGENX, LCORX. RYPRX, BJBIX and I can do very well with out any ETF's. Yes I own a few, but I really don't need them. The simpler the better for most investors. Just my opinion.
simpler is better?
agreed but if you own a bunch of ETFs you know exactly what you own today and you know exactly what you will own six months from now.
in a portfolio of OEFs you do not know what you own today, you only know what you had three months ago, or maybe six.
if OEFs are right for you then by all means but there is a reasonable argument to be made that ETFs are simpler.
I have not read the article you mention but I do have several issues with ETFs.
I agree that it is absurd to talk about ETFs in terms of performance.
By applying that logic to the 2000-2002 bear market we would shut down all mutual funds that tracked the Nasdaq, the S&P 500 and the Russel 2000.
However the performance of the double inverse funds has been problematic. It is one thing to understand that the nature of the daily tracking would cause problems in the long run, it is another to actually see the results of those problems. It was all an interesting academic exercise initially. But once I started putting money in the double inverse ETFs I started to really dislike the way they "perform". I'd much rather have a straight-inverse fund instead of the double inverse stuff.
Also, other ETFs, like Wisdom Tree, have had problems with their payouts. While not strictly performance issue it is really puzzling why their payout is much lower than what you'd expect from a dividend weighted ETF.
Lastly, many of those ETFs are not good representative of their claims. I can think of the PHO (water) and PBW (Clean Energy) ETFs as examples of what I have owned. It is a big stretch to think of either as a pure play on the underlying concept as they include large percentage of companies that have very little to do with the concept.
Sami your comment offers far more utility than the original M-star article.
As far as WT's divs. Clearly frustrating but it goes something like this...If you 100 shares of stock on ex date buy 200 shares on the pay date you only get the div for the 100 shares.
WT collects dividends all year but as teh funds grows those dividends have to be paid out over more shares the reducing the percentage. Maybe they should switch to monthly pay.
"agreed but if you own a bunch of ETFs you know exactly what you own today and you know exactly what you will own six months from now."
yes, as long as I made the correct decision on not only what to own but when to own. When I select a great manager, I can feel comfortable he makes those decisions and I only decide my allocation and asset classes. Don't mean to beat this subject to death, so I'll stop now.
Roger,
I have read a lot people here talk about PRPFX. What would make that fund go down in spurts like it has {even though it certainly has done well over last few years}?? Also what would you consider it's pluses and minuses in this climate??
Thanks!!
I don't fully follow you on PRPFX. It has pretty much been a 45 degree angle on the chart for 6 years. The "short spurts" have been very short and shallow.
It was what appears to be 18% in gold. I imagine a drop in gold prices would matter. 28% of the equity allocation is financials, 20% each in energy and materials so those might matter.
The "short spurts" seem too short to cause concern but looking forward it is clear what the fund is vulnerable to.
Thanks for highlighting the p/e myth, Roger. It's a shame it's so often used by the tv folk as an indicator of when is a good time to buy stocks, lol. Your moving average is looking like it beats other indicators. I see Buffett is still buying, this time in Germany, and is still smarting from his derivatives trading losses.
Surprisingly my Africa fund has been the least volatile of all over the last 6 months. There wasn't any exposure to the Middle East here (UK) for retail investors, although JPM issued an Emerging Euro Middle East & Africa fund this week. That might be worth a good look into.
I know of one person who regularly sells items on ebay, but the income is just in addition to his salary (as a doctor). He'll often be carrying 2 or 3 items to the post office that he's purchased wholesale.
"PRPFX. What would make that fund go down in spurts like it has {even though it certainly has done well over last few years}?? Also what would you consider it's pluses and minuses in this climate?"
1. It holds a large position in gold coins and in bullion (including some mining companies)
2. It is classified as "conservative" by Morningstar probably because of its holdings in treasuries.
3. I would not expect the manager to hold such a high concentration in gold should it explode up in 2010.
4. It will go down if energy and materials stocks get smacked and the manager doesn't react fast enough should those sectors roll over.
"...agreed but if you own a bunch of ETFs you know exactly what you own today and you know exactly what you will own six months from now." True enough, but there are some of us for which that ain't a lot of help; i.e. we're not astute enough (or just too lazy) to know what sector generally does well at a given point in the economic cycle. For me, I prefer CGMFX, a go-anywhere, long or short, oef with a good 10-year track record; and I try to add return investing in the occasional individual stock when it looks like an obvious win, e.g. AAPL when it fell to the $120's awhile back. On a sports note, I predict Lakers in 6 over celtics and a bosox/cubs series.
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