Author Archives: Scalper1

The ETF Monkey Vanguard Core Portfolio: April 13, 2016 Rebalance

Back on February 11, 2016, I executed a series of transactions to rebalance The ETF Monkey Vanguard Core Portfolio . As explained in that article, the severe decline in both domestic and foreign stocks left these two asset classes significantly underweight, with bonds being overweight. Here, for convenience, is a “before and after” snapshot of that transaction. Click to enlarge As it turns out, the timing of that rebalancing could not have been better. In hindsight, it can be seen that February 11 represented, at least to this point, the low point for 2016. I don’t take particular credit for this. My efforts were simply an application of the principles found in this article . As I also noted in my previous article, I executed a fairly aggressive set of transactions. Mindful of the fact that I am deliberately incurring trading commissions on all transactions in this particular portfolio, to make the exercise as “real world” as possible, I commented that I need to make each transaction count. This being the case, I temporarily underweighted bonds in favor of adding to the other two severely depressed asset classes. Here is the equivalent Excel spreadsheet for today’s transaction. Have a look, and then I will offer some comments. Click to enlarge Likely, the first thing that jumped out at you is that both domestic and foreign stocks have staged fairly stunning comebacks since February 11. The Vanguard Total Stock Market ETF (NYSEARCA: VTI ) registered a gain of 14.69% during this period, while the Vanguard FTSE All-World ex-US ETF (NYSEARCA: VEU ) did even better, at 15.55%! On the flip side, this incredible performance, combined with my aggressive rebalancing transaction, left bonds substantially underweight, with their 13.37% weighting being a full 4.13% below my target weight of 17.50%, or a full 23.6% in relative terms (13.37 / 17.50). Given these developments, it appeared to me that this was a fitting point to take some of those profits, so to speak, and get the portfolio more closely aligned with my target weights. While it is not yet May, I will admit that the old adage “Sell in May and go away” contributed in some small way to the timing of this decision. I didn’t want to take a chance on being overweight domestic equities, only to have them experience a summer swoon! You may also notice that foreign stocks were about even with my target allocation as I reviewed the portfolio today. This is because I did not add as heavily to this asset class in the prior rebalance. Therefore, I decided to only affect the domestic stock and bond asset classes with this transaction, saving me one trading commission. Take one last peek at the “after” section of the spreadsheet, and you will notice that all 3 asset classes are now fairly closely aligned with their targets. I hope that this sets the portfolio up nicely for the summer. Disclosure: I am not a registered investment advisor or broker/dealer. Readers are cautioned that the material contained herein should be used solely for informational purposes, and are encouraged to consult with their financial and/or tax advisor respecting the applicability of this information to their personal circumstances. Investing involves risk, including the loss of principal. Readers are solely responsible for their own investment decisions.

Will China Pull Copper ETFs Down?

Last week, copper prices witnessed the biggest weekly decline since January on oversupply concerns in China and sluggish demand growth. After a stressful stretch in 2015 due to softness in China’s manufacturing sector, global growth worries, a stronger U.S. dollar and surplus supplies, the red metal had shown a recovery in 2016. But the trend took a U-turn once concerns related to oversupply in China surfaced. While there are many factors influencing the price of copper, events in China are major contributors, as the country is the world’s biggest consumer of this industrial metal, making up roughly 40% of global copper demand. However, per the latest LME data, China’s shipments to Singapore jumped 4,800 tonnes, boosting exports and leading to worries about domestic oversupply in China. As per state-backed research firm Antaike , China could be holding more than 1 million tonnes of refined copper stocks at present, including bonded stocks, exchange stocks and metal held by traders and smelters. Historically, the strongest period of demand for copper from China is in the second quarter, as production of cables and wires is the highest during this period. However, sectors that import copper, including construction and manufacturing, have been hit hard. Thus, if China resorts to exporting copper instead of importing, it could send a major shockwave to red metal prices across the globe. Meanwhile, most of the other developed and developing economies are also experiencing sluggish growth, which in turn, is weighing on the global demand for copper and dampening its appeal. Oversupply concerns in China could intensify the global supply glut and drive copper prices further down. This brings our attention to copper ETFs – the iPath DJ-UBS Copper Total Return Sub-Index ETN (NYSEARCA: JJC ), the United States Copper Index ETF (NYSEARCA: CPER ) and the iPath Pure Beta Copper ETN (NYSEARCA: CUPM ). These funds have a Zacks ETF Rank of 3 or “Hold” rating (see all the Industrial Metals ETFs here ). iPath DJ-UBS Copper Total Return Sub-Index ETN The ETN tracks the Bloomberg Copper Subindex Total Return, which seeks to deliver returns through an unleveraged investment in the futures contracts on copper. The index currently consists of one futures contract on the commodity of copper (currently, the Copper High Grade futures contract traded on the COMEX). The product charges investors 75 bps a year in fees and has a lower level of AUM of $29.6 million. It trades in paltry volume of about 26,000 shares a day, on average. The ETN shed nearly 4.4% in the last week (as of April 8, 2016). United States Copper Index ETF The fund seeks to track the performance of the SummerHaven Copper Index Total Return, plus interest income from CPER’s holdings. The index provides investors with exposure to a portfolio of copper futures contracts. The product has amassed $2.8 million in its asset base, while it sees paltry volume of about 2,000 shares a day. Its expense ratio came in at 0.65%. The ETF has lost 3.8% in the last week. iPath Pure Beta Copper ETN This note seeks to match the performance of the Barclays Copper Pure Beta Total Return Index. This can roll into one of a number of futures contracts with varying expiration dates, as selected, using the Barclays Pure Beta Series 2 Methodology, lowering the effect of contango. The note has amassed $1.8 million in its asset base and trades in a meager volume of about 250 shares a day. The expense ratio came in at 0.75%. CUPM is gained 0.5% in the last week. Original Post