Tag Archives: stocks

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.

The Timeless Wisdom Of Sir John Templeton

By Tim Maverick Sir John Templeton (1912-2008) may be gone, but he’s still remembered as one of the greatest investors of all time. For one, Sir John popularized the idea of investing globally for U.S. investors. He launched his flagship Templeton Growth Fund when most didn’t even think of investing outside U.S. borders . That pioneering fund racked up an enviable track record, returning an average of 13.8% annually from 1954 to 2004. To this day, many of Templeton’s timeless investing principles still apply. Indeed, some of his principles have shaped how I approach investing. Below are a few of them. They come courtesy of the Franklin Templeton website and the Templeton Foundation. #1: Buy Low Seems obvious, right? But in reality, many investors do the opposite. They chase hot sectors after dramatic moves higher. Sir John always scoured the globe for bargains. He told investors to buy when everyone else is selling, when things look darkest, when all the experts say a certain investment is too risky. Templeton advised us to “buy when others are despondently selling and sell when others are avidly buying.” He would often say, “People are always asking me where the outlook is good, but that’s the wrong question. The right question is: Where is the outlook most miserable? The obvious application of this concept in practice is to avoid following the crowd.” I wonder what Sir John would think of today’s market, where the elite tech and biotech stocks are loved and everything overseas and commodities-related is detested? #2: Invest for the Long Term Hand in hand with value investing is investing for the long term. Templeton said, “Experience teaches us that one of the most common errors in selecting stocks… is the tendency to emphasize only the most obvious factor – namely, the temporary outlook for sales and profits of the company.” In other words, ignore Wall Street’s emphasis on quarterly earnings reports. Too many investors spend too much time looking at the short-term market outlooks and trends. #3: Diversify Sir John didn’t believe that one specific investment is always best – although over the long term, stocks do outperform. More importantly, no one can predict the future. If you’re focused too much on one company, sector or country, your portfolio is at risk. Sir John advised us to diversify by risk, industry, and country. He would say, “In stocks and bonds, as in much else, there is safety in numbers.” #4: Learn From Past Mistakes Everyone makes mistakes investing, even Sir John. As he said, “The only way to avoid mistakes is to not invest – which is the biggest mistake of all.” Instead, Templeton advised us to not become discouraged by loss and especially not to take even greater risks and try to recoup our losses all at once. He believed that the difference between successful and unsuccessful investors is that successful investors learn from their mistakes and the mistakes of others. Relatedly, you should run for the hills anytime you hear someone on CNBC say it’s a new era or that it’s different today. According to Sir John, “The investor who says, ‘This time is different,’ when in fact it’s virtually a repeat of an earlier situation, has uttered among the four most costly words in the annals of investing .” #5: Don’t Be Overconfident In other words, always question your investment approach. Is it still valid? Sir John wrote, “Everything is in a constant state of change, and the wise investor recognizes that success is a process of continually seeking answers to new questions.” A great example of this is how much the investment climate has changed surrounding energy MLPs. Investors poured tens of billions of dollars into funds investing in the sector, only to see losses of up to 35% on some funds this year. Other Templeton Insights Of course, there are plenty more insights to be gleaned from Sir John’s vast experience. He wasn’t a fan of trading – “The stock market is not a casino” – or of index funds – “If you buy the same securities everyone else is buying, you will have the same results as everyone else. By definition, you can’t outperform the market if you buy the market.” He also gave other common sense tips for investors, such as remembering inflation and taxes when investing, doing your homework, and always monitoring your investments. If readers wish to look at a number of Sir John’s investing tips, here’s a link: Templeton Wisdom . Keep in mind that they were written in 1993, so some of the data is very outdated. The insights, however, are timeless. Original post

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.