Author Archives: Scalper1

ETF Update: A Look Back At December And 8 Funds To Kick Off The New Year

Welcome back to the SA ETF Update. My goal is to keep Seeking Alpha readers up to date on the ETF universe and to gain some visibility, both for the ETF community, and for me as its editor (so users know who to approach with issues, article ideas, to become a contributor, etc.) Every weekend, or every other weekend (depending on the reader response and submission volumes), we will highlight fund launches and closures for the week, as well as any news items that could impact ETF investors. Recently, Zacks published a piece on the funds that launched in 2015 and gained in assets under management right away. They were the S PDR DoubleLine Total Return Tactical ETF (NYSEARCA: TOTL ), the SPDR S&P North American Natural Resources ETF (NYSEARCA: NANR ), the iShares Exponential Technologies ETF (NYSEARCA: XT ), the Goldman Sachs ActiveBeta Emerging Markets Equity ETF (NYSEARCA: GEM ) and the SPDR Russell 1000 Momentum Focus ETF (NYSEARCA: ONEO ). While all of these funds saw strong support from investors, none ended the year with positive returns. Overall, markets took a turn for the worse in end of Q3 and beginning of Q4 and had to spend the rest of the year climbing out of that hole (most sectors are still stuck). There were 23 launches in December and no closures for the month. December Total Launches Fund Name Ticker SPDR S&P 500 Fossil Fuel Free ETF SPYX MomentumShares U.S. Quantitative Momentum ETF QMOM SPDR Russell 1000 Momentum Focus ETF ONEO SPDR Russell 1000 Low Volatility Focus ETF ONEV SPDR Russell 1000 Yield Focus ETF ONEY Direxion Daily S&P Biotech Bear 1X Shares LABS Direxion Daily Natural Gas Related Bear 3X Shares GASX Daily Healthcare Bear 3x Shares SICK Tierra XP Latin America Real Estate ETF LARE Elkhorn FTSE RAFI U.S. Equity Income ETF ELKU iShares FactorSelect MSCI Emerging ETF EMGF Pacer Trendpilot European Index ETF PTEU Pacer Autopilot Hedged European Index ETF PAEU Guggenheim Dow Jones Industrial Average Dividend ETF DJD SPDR S&P North American Natural Resources ETF NANR JPMorgan Diversified Return Europe Equity ETF JPEU WisdomTree Dynamic Long/Short U.S. Equity Fund DYLS WisdomTree Dynamic Bearish U.S. Equity Fund DYB MomentumShares International Quantitative Momentum ETF IMOM Legg Mason Developed ex-US Diversified Core ETF DDBI Legg Mason Emerging Market Diversified Core ETF EDBI Legg Mason US Diversified Core ETF UDBI Legg Mason Low Volatility High Dividend ETF LVHD Only a couple of these funds ended December with positive returns; it was a hard month to jump into the market. Hopefully, our rocky start to 2016 doesn’t set any trends in motion, otherwise these new launches from the last two weeks could have a hard time finding traction. There were 12 funds launched in the last 2 weeks, including the last 4 funds on the December launch list above. With tons to cover, let’s jump right in. Fund launches for the week of December 28th, 2015 Fund launches for the week of January 4th, 2016 Reality Shares launches its second ETF (1/6): The Realty Shares DIVCON Leaders Dividend ETF (BATS: LEAD ) was launched just over a year after the company’s first offering, the Realty Shares DIVS ETF. “Unlike many dividend funds based on decades-old dividend history or yield, the new passive ETF features rules-based stock selection and weighting using a proprietary dividend health rating methodology, DIVCON, which systematically ranks companies’ future dividend growth prospects based on a weighted average of seven factors,” according to a press release on Reality Shares’ site. WisdomTree rolls out 4 new Dynamic Currency ETFs (1/7): The following newly issued funds offer currency hedged exposure to international equities, each indicated in their names, and weighted by dividend yield: The WisdomTree Dynamic Currency Hedged International Equity Fund (BATS: DDWM ), the WisdomTree Dynamic Currency Hedged International SmallCap Equity Fund (BATS: DDLS ), the WisdomTree Dynamic Currency Hedged Europe Equity Fund (BATS: DDEZ ) and the WisdomTree Dynamic Currency Hedged Japan Equity Fund (BATS: DDJP ). iShares launches 3 Adaptive Currency Hedged ETFs (1/7): The iShares Adaptive Currency Hedged MSCI Japan ETF (BATS: DEWJ ), the iShares Adaptive Currency Hedged MSCI Eurozone ETF (BATS: DEZU ) and the iShares Adaptive Currency Hedged MSCI EAFE ETF (BATS: DEFA ) are new additions to the iShares lineup. Like the WisdomTree funds launched on the same day, these funds offer currency hedged exposure to international equities, but weighted by market capitalization rather than dividend yield. All 7 of these funds were launched on the BATS exchange. There were no fund closures for the weeks of December 28th, 2015 or January 4th, 2016 Have any other questions on ETFs or ETNs? Please comment below and I will try to clear things up. As an author and editor, I have found that constructive feedback is the best way to grow. What you would like to see discussed in the future? How can I improve this series to meet reader needs? Please share your thoughts on this first edition of the ETF Update series in the comments section below. Have a view on something that’s coming up or a new fund? Submit an article.

Going Shopping: Chicken Vs. Beef

The headlines haven’t been very rosy over the last week, but when is that ever not the case? Simply put, gloom and doom sells. The Chinese stock market is collapsing; the Yuan is plummeting; there are rising tensions in the Middle East; terrorism is rising to the fore; and commodity prices are falling apart at the seams. This is only a partial snapshot of course, and does not paint a complete or accurate picture. Near record-low interest rates; record corporate profits (outside of energy); record-low oil prices; unprecedented accommodative central bank policies; and attractive valuations are but a few of the positive, countervailing factors that rarely surface through the media outlets. At the end of the day, smart long-term investors understand investing in financial markets is a lot like grocery store shopping. Similarly to stocks and bonds, prices at the supermarket fluctuate daily. Whether you’re comparing beef (bonds) and chicken (stocks) prices in the meat department (stock market), or apple (real estate) and orange (commodities) prices in the produce department (global financial markets), ultimately, shrewd shoppers eventually migrate towards purchasing the best values. Since the onset of the 2008-2009 financial crisis, risk aversion has dominated over value-based prudence as evidenced by investors flocking towards the perceived safety of cash, Treasury bonds, and other fixed income securities that are expensively priced near record high prices. As you can see from the chart below, investors poured $1.2 trillion into bonds and effectively $0 into stocks . Consumers may still be eating lots of steaks (bonds) currently priced at $6.08/lb while chicken (stocks) is at $1.48/lb (see U.S. Department of Labor Data – Nov. 2015), but at some point, risk aversion will abate, and consumers will adjust their preferences towards the bargain product. Some Shoppers Still Buying Chicken While the general public may have missed the massive bull market in stocks, astute corporate executives and investment managers took advantage of the equity bargains in recent years, as seen by stock prices tripling from the March 2009 lows. As corporate profits and margins have marched to record levels, CEOs/CFOs put their money where their mouths are by investing trillions of dollars into share buybacks and mergers & acquisitions transactions. Despite the advance in the multi-year bull market, with the recent sell-off in the market, panic has dominated rational thinking. Once again, the rare occurrence (a few times over the last century) the dividend yield of stocks once again exceeds the yield on Treasury bonds (2.2% S&P 500 vs 2.1% 10-Year Treasury). But if we are once again comparing beef vs. chicken prices (bonds vs stocks), the 6% earnings yield on stocks (i.e., Inverse P/E ratio or E/P) now looks even more compelling relative to the 2% yield on bonds. For example, the iShares Core U.S. Aggregate Bond ETF (NYSEARCA: AGG ) is currently yielding a meager 2.3%. For a general overview, Scott Grannis at Calafia Beach Pundit summarizes the grocery store flyer of investment options below: While these yield relationships can and will certainly change under various economic scenarios, there are no concrete signs of an impending recession. The recent employment data of 292,000 new jobs added during December (above the 200,000 estimate) is verification that the economy is not falling off a cliff into recession (see chart below). As I’ve written in the past, the positively-sloped yield curve also bolsters the case for an expansionary economy. Source: Calafia Beach Pundit While it’s true the Chinese economy is slowing, its rate is still growing at multiples of the U.S. economy. As a communist country liberalizes currency and stock market capital controls (i.e., adds/removes circuit breakers), and also attempts to migrate the economy from export-driven growth to consumer-driven expansion, periodic bumps and bruises should surprise nobody. With that said, China’s economy is slowly moving in the right direction and the government will continue to implement policies and programs to stimulate growth (see China Leaders Flag More Stimulus ). As we have recently experienced another China-driven correction in the stock market, and the U.S. economic expansion matures, equity investors must realize volatility is the price of admission for earning higher long-term returns. However, rather than panicking from fear-driven headlines, it’s times like these that should remind you to sharpen your shopping list pencil. You want to prudently allocate your investment dollars when deciding whether now’s the time to buy chicken (6% yield) or beef (2% yield). DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds (ETFs) including AGG, but at the time of publishing had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.