Category Archives: etf

Facebook’s Oculus Rift: Reviews Mixed, As Content Still Lags

What’s clear from the swath of reviews of the Facebook ( FB )-owned Oculus Rift virtual-reality headset is that the technology has most certainly arrived, but for the most part, the content still needs to follow. From the reviews and my own experience with the Rift, it’s hard to argue that — at the very least — new types of video games are right around the corner. The Rift is a solid piece of technology that works reasonably well under most circumstances, and video game reviewers  mostly agree . Hardware-wise, the main gripe among the reviews was that the Rift didn’t ship with motion sensitive controllers that Oculus demonstrated this month at the Game Developers Conference in San Francisco. The Rift shipped with a Microsoft ( MSFT ) Xbox One controller. Such controllers would allow anyone donning the headset to make gestures and manipulate VR content in a more life-like fashion. The motion-sensitive controllers are coming later this year, Facebook says. But as IBD reported from GDC on March 17, the hardware is here (or within a whisker), but the content has yet to come. It’s not clear whether the software shipped with the VR headset will match the impressive hardware. Of the titles I tried at GDC, none were too compelling, though I sampled a mere seven games. Reviewers at the  New York Times , the  Wall Street Journal  Digits blog (but not the newspaper itself ), and gaming website IGN  (among others) agree with my assessment. The Rift debuted with 30 titles, ranging from $10 to $60. The majority of the reviews that IBD looked at for this post were in gaming publications, and reviewers acknowledged little out there yet in the way of worthwhile non-gaming VR content, such as VR movies that video-streaming companies such as  Netflix ( NFLX ) are exploring. The Rift headset’s $600 cost was cited in many reviews as a deterrent to all but the most dedicated of gamers — especially considering the headset requires a PC with advanced graphics hardware that runs about $1,000. And it doesn’t yet work with Apple’s OS X. Many reviews of this first-generation Rift, such as the review by the New York Times, said reviewers eagerly await better content and future generations of the device. And Facebook will soon have company. HTC plans to launch its VR headset, Vive, in April. It will retail for about $800 and feature hardware similar to that of Facebook’s Rift. Sony ( SNE ) also has a VR offering coming for its PlayStation console, likely to hit stores in Q3 or Q4.

Beat The Stock Market Without Any Shorting

I have often said that excellent strategy indices should be elegantly Zen – simple, powerful, and effective. Many people mistake complexity for power or effectiveness. Today, we will examine an index that is elegantly powerful and effective. Then, we will examine ways to improve it. Here are the Ultra-Low Volatility Index’s rules: Buy ZIV (NASDAQ: ZIV ) with 20% of the dollar value of the portfolio. Buy UPRO (NYSEARCA: UPRO ) with 40% of the dollar value of the portfolio. Buy TMF (NYSEARCA: TMF ) with 40% of the dollar value of the portfolio. Rebalance weekly to maintain the 20%/40%/40% dollar value split between the positions. Here are the results: (click to enlarge) Click to enlarge (click to enlarge) Click to enlarge The logic behind the strategy is that ZIV, the inverse mid-term VIX futures ETP, is a return generating component of the strategy by capturing the contango which exists (on average) in mid-term VIX futures. UPRO is a 3x leveraged S&P 500 ETP. It is a return generating component of the strategy which gives leveraged stock market exposure. TMF is a partially hedging component of the strategy through a 3X leveraged long duration government bond exposure. Statistically, often but not always, this instrument moves inversely to stocks, thereby providing an imperfect hedge. I want to stress that this simple three-instrument index trounces the U.S. stock market, without any stock picking required. This index is a multi-asset class (inverse volatility, equity, and fixed income) and is easily rebalanced. However, it is also a simplistic public version of our strategy index technology. Many readers of our public pieces believe the profits from our publicly released strategy indices are almost magical compared to anything else they have used. Even though their gung-ho confidence in our methods is flattering, I am very sincere when I say that our publicly disclosed strategies should be starting points for further investigation on the part of readers – not a combat-ready index that we would provide through our subscription service. I think it is important for combat-ready indices not only to contain multiple asset classes, properly weighted, but even more importantly, that they have a built-in risk control component. And robust, systematic risk control not only has rules for exit, but also rules for re-entry. Getting out of something is only half of the equation. Having a systematic method for when to get back in is the other half. When one studies financial markets during the financial crisis, and especially 2008, it is clear that one not only needs a multi-asset class framework, but also solid risk control rules, in order to try to avoid crippling drawdowns. Constant crises, drops, and fed policy responses should remind us that systematic risk control is just as important as asset class exposures going forward. For those looking for such an index approach, ZOMMA has strategy index solutions which incorporate risk control. Thanks for reading. We feature even more impressive strategy indices in our subscription service, with clear risk control protocols. If this post was useful to you, consider giving it a try. Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points, which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program, which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Closed-End Fund Craziness

By Alan Gula, CFA Last week, Barack Obama became the first U.S. president to visit Cuba in nearly nine decades. As you may recall, President Obama announced that the United States would re-establish diplomatic relations with Cuba in December of 2014. Of course, investors immediately began searching for ways to profit from the re-opening of trade and travel with Cuba. Some investors thought they had uncovered a gem called The Herzfeld Caribbean Basin Fund (NASDAQ: CUBA ), a closed-end fund (CEF). After all, the ticker seemingly told you all you had to know. From December 16, 2014 to December 23, 2014, CUBA rose 107%. The fund went from a discount of over 10% of its underlying net asset value (NAV) to a massive 70% premium . Except there was one big problem: CUBA had little direct exposure to Cuba. Close, but no cigar. By mid-January 2016, the fund had lost over 60% of its value and was once again trading at a discount to its NAV. CEFs, like CUBA, have a set number of shares outstanding. Therefore, supply and demand forces determine whether the shares trade at a premium or discount to NAV. CEFs tend to be relatively small and illiquid, so their holders are predominantly individual investors. As a result, CEF share prices are heavily influenced by the herding of retail investors – perfectly illustrated by the CUBA episode. However, CUBA is an especially small CEF. Such pricing anomalies would never occur with the larger funds run by prominent financial institutions, right? High-Yield CEFs In June of 2014, near the height of the “reach for yield” mania, I recommended selling two high-yielding PIMCO closed-end funds . At the time, the PIMCO High Income Fund (NYSE: PHK ) and the PIMCO Global StocksPLUS & Income Fund (NYSE: PGP ) were trading at absurd 57% and 66% premiums to their NAVs, respectively. Over the next 15 months, PHK and PGP both lost roughly 40% of their values (distributions included but not reinvested). The premium for PHK evaporated and the premium for PGP hit a more reasonable but still elevated 18%. But wait… The herd is back for more! The premiums have since re-inflated for both funds. In fact, the premium on PGP recently reached an unprecedented 103%. It seems as though many folks are using the snapback rally in the credit market as an excuse to bid up several closed-end funds with impunity. The following table is a list of several CEFs trading at high premiums: The premiums on Eagle Point Credit Company Inc. (NYSE: ECC ) and the DoubleLine Opportunistic Credit Fund (NYSE: DBL ) have recently surged to their highest levels ever. The Babson Capital Corporate Investors (NYSE: MCI ) is rated five stars by Morningstar and has a great track record, but no fund is worth a 20%-plus premium. The PIMCO Municipal Income Fund (NYSE: PMF ), PIMCO California Municipal Income Fund II (NYSE: PCK ), PIMCO New York Municipal Income Fund II (NYSE: PNI ), and PIMCO California Municipal Income Fund III (NYSE: PZC ) are all trading at very high premiums. No matter how bullish you are on muni-bonds, there’s no reason to pay up this much for exposure. The financial markets may not make sense all of the time, but, as you can tell, craziness is the norm in CEF land. When a CEF you own trades at a small premium to its NAV, you should at least consider selling it. When that premium exceeds 15%… hit the bid and get out as if you’re fleeing a communist dictatorship.