In case you missed it the Emerging Market Sector Funds have started to come out, you can check the EGShares website for the particulars. I did a favorable write for theStreet.com that should be out today about the first two funds that are actually trading; the energy fund (EEO) and the materials fund EMT. I did a generally negative write up about what will be the financial fund which should have symbol EFN yesterday on GreenFaucet.
The website has the info for all the funds (including the ones that have not listed yet) which provides a great chance to look under the hood. There is generally a lot of BRIC and South Africa exposure in the funds. Some funds will be more useful than others but generally they will be useful for adding emerging volatility in for various sectors for people that do not want to pick stocks. Being able to narrowly manage volatility in this way is a big deal for people willing to learn about this.
One criticism of the current rally that started in March is the extent to which low quality and small cap stocks seem to be leading. The reason for the criticism is that because it is low quality and small cap that are leading it means that much of the rally is from short covering. David Rosenberg has been writing along these lines of late. It may be so that the rally is being driven by short covering but generally speaking it is small cap and the like that lead off the real bottom.
This is more of a how the market works concept and there certainly can be fakeouts but it is a good bet that the stocks leading now, ex-financials IMO, will lead whenever the turn comes. FWIW I think there needs to be at least one more run down but I will slowly heed the call if the SPX goes back above the 200 DMA which has dropped precipitously of late.
This brings up an interesting point. If the SPX does go above the 200 DMA anytime soon I have said that I will buy a name or two if it is still there late in the day on the second day. Invariably there will be a couple of comments asking why I didn't wait for the 200 DMA to slope upwards or wait for the 50 DMA to cross above the 200 DMA.
Aside from the fact that no strategy can be the single best for every bear market and my goal was simply to avoid the full brunt of the bear I think changing tactics in the middle of an event is bad idea in terms of opening the door to be less disciplined. If you pick a strategy that has a reasonable basis for working, as I would say has been the case for the 200 DMA, and you did so ahead of time when there was no emotion involved it is not a good idea to second guess some part of it now if you are feeling uncertain. Uncertainty may not be an emotion but it might as well be. The time to make a tweak or pick something different is before the next event not in the middle of the current one.
From the this one goes to eleven file Bill Luby mentioned that all the Direxion 3X ETFs are now optionable. Oh boy. Bill also noted that Direxion has 3X treasury ETFs which I did not know about. The 30 year bull is ticker TMF, 30 year bear TMV, ten year bull TYD and ten year bear TYO. Obviously you can't count on them offer 3X anything over longer periods of time but as a reminder when the interest rate of the ten year moves 1% it works out to about an 8% price move. A similar move in the 30 year yield is more like a 12% price move. Staying wrong in one of these funds could have a big price impact on the fund you buy.
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20 comments:
Off topic.
It was interesting listening to Marc Faber on Bloomberg Asia yesterday evening. Dr. Doom is certainly bearish on Obama (turning the U.S. into the "Soviet Union" plus his take hyperinflation,nationalization, budget blowouts, etc.) Yet, he was neutral on gold. Very positive on Asia, which encompasses a very wide geographical region in his universe (Turkey is in Asia).
I enjoyed his rapport with the host--he sounds like Boris Goodinov from the old Rocky and Bullwinkle show.
Now, the IRS states tax revenues for April are down 34% ($138b). No shocker there. Should we still be blaming Bush?
Just my two cents (soon to be a nickel) worth.
T
It seems that a couple of seeds were planted in the Clinton years (not sure that makes any portion his "fault"), the policy of Greenspan seems in hindsight to be a big catalyst but Bush was and probably will always thought to have been amazingly slow to have even an inkling. Obama inherited true crap and appears to be doing things that are not the most capitalist solution (don't know how even his supporters can deny that even if they agree with what is being done).
I wish I had a couple of good ideas but I don't.
I am watching Marc Faber as I type, thankfully do to DVR's
Roger,
your 200 dma plan is unemotional and valid, but it is far from optimal so it will always be criticized. The fact we critics do not have a clear alternative will not stop the criticisms from continuing :)
The current rally continues to surprise and I am looking forward to more of it, until it stops. I think this rallies end will be very difficult to predict
Index Universe article on diversification and asset calss correlations....
http://www.indexuniverse.com/sections/research/5911-etfs-a-diversification.html
RR- Serrapere has a decent article today over at IU.
http://www.indexuniverse.com/sections/features/5887-active-indexer-column-for-may.html
thank for the IU links haven't been over there yet today.
Wow, if I read this correctly Roubini is now proclaiming that the recession will be over by the end of the year and that there is light at the end of the tiunnel and we are closer to the bottom???
http://finance.yahoo.com/tech-ticker/article/254886/Even-Roubini-Now-Sees-Green-Shoots!?tickers=?sec=topStories&pos=7&asset=&ccode=
re African exposure - AFK from Market Vectors is an interesting play - a geographic as opposed to sector diversification candidate.
Anon 8:12- Blodget is a hack. This is what roubini had to say about the so called green shoots a week ago, now he has changed his mind???
http://www.forbes.com/2009/05/20/depression-recession-green-shoots-housing-jobs-opinions-columnists-nouriel-roubini.html
IMO, until this market sorts itself out cash is king! I also own a small amount of IG corporates via a fund. Long the 2-year and short the 10-yr. A few dividend stocks (VLO, COP) and commodities ETFs (DBA).
Trading the range-bound market from the short side whenever there is a big rally in equities.
Presently I am as cautious as I have been at any time since September. Waiting for a summer rally in Treasuries.
Isn't there always uncertainty in the market? You can't let uncertainty be a reason to "stay the course". If you have a plan for when the Sh*t hits the fan, you are probalbly not overly emotional or too panicked to make decisions at that time - like tweaking your preconceived plan and being opportunistic with what the market presents. I think this is what you do, RR, when you decide when and if to jump in and out of an inverse leveraged ETF - don't you? I think flexibility in the face of adversity is a much better plan then sticking to a preconceived plan you already made. I think Hussman calls it "responding to to market conditions as they arise".
That is just my opinion, I could be wrong.
I think its way to early to invest in the etf's market, globally no one has yet noticed the devaluation of porfolios, and assets of large companies. Yes every one knows that an upward trend is beginnining to emerge, but reality is .... most ets are supported heavily by consumer spending and the more secured cinsumers feel on their jobs, the more they spend, yet no one has come up with a solution for that.... its like all these ideas, and legislations here in the use to force banks to lend..... what good is it for banks to dole out the money, mortgage companies to fix rates and reduce home owners interest rates, cars to do the same, credit card companies and the list can go on ........ if the consumer doesnt have the ability to payback their loans?????? or in other words .... NO INCOME COMING in??? how come thats not addressed?
Roger,
With respect to the 200dma. Since you invest worldwide, do you only take the SP500 200dma into account? If so, why? Many of the world stock markets are above their 200dma right now. Thanx in advance.
Brian
Brian, so there is a fair bit of context to this, think of the posts as an ongoing dialogue here and the other places i write.
I have been very clear, maybe more on greenfaucet.com, about the countries I have been favoring during all of this--China, Norway, Chile and Brazil--almost to the point of being a broken record.
Roger
I guess I wasn't clear in my last question. I know you invest worldwide, that was the point of my question with respect to which 200DMA you use.
For instance if you are investing in Norway, do you use the 200DMA for Norway's stock market to enter it? Or is only the SP500 200DMA your guide?
how the market works? really?
a) CNBC, MSNBC, BLOOMBERG pump people up on how rich they can get if only they invest in "the market"
b) Financial Advisors and 401K sellers funnel middle calls assets into funds, ETFs, stocks, does not matter
c) Every takes a cut
d) Wall Street ultimiately pumps and dumps take %30-%50 every 10 years.
e) CNBC, BloomBerg, ... blame blah blah blame blah blah
f) Congress holds some hearing and changes loophole 1 into loophole 3
g) Repeat from a)
we benchmark against the SPX because clients are US based and that index is easy for anyone to find as opposed to MSCI world. We take defensive action when the SPX goes below the 200 DMA which means raising cash and maybe some double short. Deciding what to keep and how to ride these out is part of what I am paid for.
Brian - I agree with your thoughts. If you are going to use a metric like 200dma as a trigger for action, it seems like it should be the 200dma for the market which mimics your portfolio.
Roger, two realted questions -if/when the 200 dma is passed, why "only" add two positions? I assume two positions might only result in a small change in your overall allocation (maybe 5%). How large a range of allocations to equities do you feel is appropriate. i.e. if 60% equities is a person's "neutral" allocation to equities would you feel a 50-70% range is appropriate or would you feel a larger range could be appropriate?
i've written about this literally hundreds of times. I am trying to avoid getting whipsawed. all at once is just not how i do things. further, whether you believe it or not it takes very few trades to have a meaningful impact on how a portfolio behaves.
Great Blog! Would you be interested in mentioning a movie about Stock Market Manipulation that is coming out on June 10, 2009?
Please check out the site and movie trailer at stockshockmovie.com
It has been a really fun project and will hopefully help thousands of people to protect their investments!
Movie is called: Stock Shock!
All the best, Sandra Mohr
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