Tag Archives: apple

Is It Time For Smart-Beta ETFs To Enter The Bond Markets?

By Detlef Glow The new year has started, but the financial markets are still affected by topics from the old year. One of the topics that has come up again is the liquidity of bonds in general-and bond funds in particular. From my point of view nearly all that can be said has been said about this topic. After all this discussion about liquidity in the bond markets and the possible implications for bond funds, especially exchange-traded funds (ETFs), one might raise the question of whether these issues could be addressed with smart-beta products. These products concentrate on the liquidity of securities in addition to using the two main drivers of performance-duration and credit risk. Since the liquidity of the underlying securities is already an issue for ETFs that track the broad indices, even “plain-vanilla” products are nowadays not far from being smart-beta products. That is because of the optimization techniques used to replicate the returns of the underlying index using the tradable securities in the index basket. In this regard a smart-beta strategy that employs the liquidity of the bonds would help to build liquid indices for all kinds of bond sectors, which could then easily be replicated by funds. In addition, a smart-beta approach could help investors overcome the major struggle of market-weighted bond indices: these indices give the highest weightings to issuers (companies, countries, etc.) with the highest outstanding debt in the respective investment universe. This approach can lead to high single-issuer risk within the portfolio, which is normally not the intention of an investor who buys into a broad market index. A smart-beta approach could limit the issuer risk by introducing a cap within the index methodology. From my point of view smart-beta ETFs could be the answer to the questions and concerns raised by investors around bond indices. Since investors tend to buy only products they understand, the index construction must be quite smart. At the same time it must be as simple as possible, so investors can easily understand the investment objective and the risk/return profile of the index and therefore of the ETF. That said, in my opinion it is time for smart beta to enter the bond markets. The views expressed are the views of the author, not necessarily those of Thomson Reuters.

Apple stock rises on rare positive analyst report

After weeks of negative analyst reports on Wall Street, iPhone maker Apple (AAPL) received a positive note and upgrade from Mizuho Securities on Sunday. Mizuho analyst Abhey Lamba changed his rating on Apple stock to buy from neutral. However, he trimmed his price target to 120 from 125 in the face of short-term worries about iPhone production slowdowns and weakness in China. “Investors seem to be too caught up in short-term data points,” Lamba

Last Week Showed Us What A Black Swan Panic Looks Like

This past week had the largest recorded percentage loss for the averages, for the first trading week of any year, going back to when George Washington was President. I have been warning about the markets being overvalued for sometime now and preparing for it for years. What triggered this sell-off was actually a Black Swan event (A Black Swan event is an event in human history that was unprecedented and unexpected at the point in time that it occurred), where North Korea supposedly exploded a Hydrogen Bomb. A Hydrogen Bomb is multiple times more powerful than the bombs that were dropped on Hiroshima and Nagasaki at the end of World War II, so North Korea has definitely gotten the world’s attention. What will happen next is anyone’s guess, but it’s not looking good based on investors’ reaction. This past Friday, we had a strong jobs report that should have made the markets go up, but instead of buying the dips, investors were selling the rips. Remember that we operate in a world and stock market where we cannot control events or how millions of investors will trade on any given day, but when the panic button was hit this week, our 79% cash position is what saved us. Why 79% in cash? Well simply because our Friedrich Algorithm is not finding much for us to buy these days. To demonstrate what I mean here are the real-time results of the Dow Jones 30 Index vs. what an investor would have seen in 2010 using the same stocks. Green means that each stock’s Wall Street Price is selling below its Main Street Price and Red means just the opposite or that the stock is overvalued according to Friedrich. Click to enlarge So with just using simple common sense and logic, one sees that in 2010 most of the list, according to Friedrich , was a bargain and in 2016, stocks in the Dow Jones Index above are way overvalued. Therefore, when most stocks in the Dow Jones 30 Index are overvalued, it does not take much for them to go down, but a Black Swan event like North Korea claiming to having set off a hydrogen bomb really panicked investors. This folks is what a Black Swan Panic looks like. (Percentage loss from December 31, 2015 close) Click to enlarge What happens next is anyone’s guess, but it seems that if one wants to practice “Capital Appreciation through Capital Preservation,” they better get busy and go through their portfolios with a fine tooth comb.