notes-investing2

specific investments

DISCLOSURE: THESE ARE MY PERSONAL NOTES! I MAY OR MAY NOT HOLD SOME OR ALL OF THESE INVESTMENTS. THIS IS NOT INVESTMENT ADVICE. I AM NOT RECOMMENDING THESE AND MOST ARE LISTED FOR PERSONAL INTEREST NOT BECAUSE THEY ARE GOOD INVESTMENTS. SOMETIMES I COPY SOMETHING INTO THESE NOTES BECAUSE I THINK IS IT A POOR INVESTMENT BUT I WANT TO REMEMBER IT FOR SOME OTHER REASON.


It will be no surprise if, thanks to the catalytic power of the bubble and market meltdown, the distinctions between the two camps disappear and a new paradigm emerges.

One economist leading the effort to define that new paradigm is Andrew Lo, of the Massachusetts Institute of Technology, who sees merit in both the rational and behavioural views. He has tried to reconcile them in the “adaptive markets hypothesis”, which supposes that humans are neither fully rational nor psychologically unhinged. Instead, they work by making best guesses and by trial and error. If one investment strategy fails, they try another. If it works, they stick with it. Mr Lo borrows heavily from evolutionary science. He does not see markets as efficient in Mr Fama’s sense, but thinks they are fiercely competitive. Because the “ecology” changes over time, people make mistakes when adapting. Old strategies become obsolete and new ones are called for.


beware products with fat spreads

you cannot completely negate spreads with limit orders b/c adverse selection will take the place of margins

always use limit orders with ETFs. always check indicitive value with ETFs.

"leave something for the other guy" -- realize that you need to pay a spread

on IB, i like to use REL orders with 0.01 offset, and a limit of the last price (or indicitive value) plus .01 (.01 in the unfavorable direction). remember to check "seek price improvement"


Q2 2012 U.S. equities outlook: It's a trap! (maybe)

http://stockcharts.com/freecharts/perf.html?$SPX,AFK,EFA,FXI,EEM,EMU,EWJ,VGK

(note: this is a chart of "total return", meaning including dividends, rather than just stock prices; apparently Yahoo finance just shows the stock price without adding in dividends, which can be highly misleading if some of the securities you are comparing have a high yield).

This sort of analysis is highly dubious, however. As you can see, the which line looks unreasonably high depends entirely upon which time you start from. To get a feel for this, I recommend going to http://stockcharts.com/freecharts/perf.html?$SPX,EFA,FXI,EEM,EMU,EWJ yourself and dragging on the left edge of the slider bar at the bottom, which changes the start time and redraws the chart dynamically.

So, on some timescales the S&P 500 appears to grow faster than developing countries, on others the developing countries appear to grow faster. However, in the long term, we know that mature economies cannot grow as fast as developing ones:

(figure 4 from http://faculty.insead.edu/fatas/wall/wall.pdf )

Note that the blob in the lower left of the above scatterplot shows that lack of maturity is a necessary but not a sufficient condition for the highest growth potential. Consistent with this, the blue line at the bottom of this figure represent the AFK Market Vectors Africa ETF:

http://stockcharts.com/freecharts/perf.html?$SPX,AFK,EFA,FXI,EEM,EMU,EWJ

My view on the U.S. economy is that, over the timescale of a few years, the U.S. economy (and the S&P 500) will continue to grow (but not as quickly as emerging economies). The question is whether or not the S&P 500 has recently gone up "too quickly", leading to a market correction, or whether it will continue to climb. I think neither outcome is unlikely.

The case for continued growth is simple: the U.S. economy is growing, so why shouldn't the stock market? The recent rise could just be the market climbing out of the last of the hole from the crash in 2008.

The case for a correction has two arguments:

1) In the 2011 index fund charts above, you can see that SPX appears to begin an anomalous ascent starting around September 2011. To me, it is scary to be in a market right after it has risen an unusual amount, because a rising market will tend to draw in more people, causing a self-reinforcing but ultimately unsustainable positive feedback loop on prices (a bubble).

When you see a fast ascent, you have to worry: how much of this ascent due to the same individuals upwardly revising their expectation of the value of stocks due to economic forecasts, and how much of it is just the result of a positive feedback process in which the rise in the market itself is the main cause of raised expectations?

2) The Fed has been intervening to push down interest rates and U.S. bond yields. This intervention is probably having the effect of causing investors to invest less in bonds than they otherwise would have, and to put more of their money into equities instead. I experienced this myself; a few months ago I was thinking of buying one or more government bonds, but when I saw that they are paying negative real interest, I balked.

The Fed will not keep doing this forever. At some point, bond yields will rise to their "natural" level, and then investors may take some of their money out of the stock market and put more of it into bonds, and at some point prior to that, there will be pressure on the stock market to fall in anticipation of that. I can't say if this pressure is a big deal, if will be enough to make the market go down; perhaps it will just cause it to rise imperceptibly less rapidly.

I would expect that this effect is buoying all equities around the world, and I don't know how much it would target U.S. equities. However, the fact that Operation Twist was announced in September 2011, the same time as the beginning of the anomalous rise in SPX in the above charts, worries me.

http://i0.kym-cdn.com/photos/images/original/000/001/384/Atrapitis.gif

What to do?

Of course, even if there is going to be a bubble, the best thing would be to stay in it until shortly before it pops (the "bigger fool" strategy), but I don't have much confidence in my ability to know when that will be. This suggests that the "safe thing" to do is to get out.

On the other hand, there is no reason for me to believe that I can "time the market". Nothing I'm saying here would be a surprise to many investors, so there fears are probably already incorporated into prices. This suggests that I should ignore my paranoia about the market being overbought and simply leave most of my long-term savings in stocks, because the average rate of growth of stocks is faster than other things.

When in doubt, interpolate, so I'm planning to invest in a mix of equity and other investment alternatives. While it may not be a bad idea to try to time the market, I think it is definitely a bad idea to bet too much on one's ability to due so (at least, unless you have evidence more rigorous than what I've presented). Similarly, because I don't want to bet too much money on my or anyone else's ability to beat the market, I like to simply "buy (a representative sample of) the market", which means mostly index funds.

But this doesn't mean that I'm buying the S&P 500. As you can see in the chart at the beginning of this article, I don't think that is really a representative sample of "the market". In upcoming columns I will go into detail about which equities, and which alternatives, I'm investing in.

Disclaimer: Please note that I am a cognitive studies student, not a successful investor, and I don't know what I'm talking about. The common wisdom is that most retail investors underperform the market and there is no reason to think I am any different. Long AFK, EWJ but going to sell EWJ soon; however I am long in equities in many of the regions discussed above via other vehicles, which will be discussed in future articles.


So, on some timescales the S&P 500 appears to grow faster than developing countries, on others the developing countries appear to grow faster. However, in the long term, we know that mature economies cannot grow as fast as developing ones:

(figure 4 from http://faculty.insead.edu/fatas/wall/wall.pdf )

Note that the blob in the lower left of the above scatterplot shows that lack of maturity is a necessary but not a sufficient condition for the highest growth potential. Consistent with this, the blue line at the bottom of this figure represent the AFK Market Vectors Africa ETF:

http://stockcharts.com/freecharts/perf.html?$SPX,AFK,EFA,FXI,EEM,EMU,EWJ

(note: this is a chart of "total return", meaning including dividends, rather than just stock prices; apparently Yahoo finance just shows the stock price without adding in dividends, which can be highly misleading if some of the securities you are comparing have a high yield).


I don't

But not necessarily U.S. equities.

So, if emerging economies are where it's at, why would you ever want to put any money in mature economies at all?

1) Fear of persistent underdevelopment. You are worried that you'll throw money into a country in the lower-left corner of the figure. 2) High volatility. When the world economy goes up, stock prices in emerging economies tend to go up more, but when it crashes, they tend to go down more. 3) Market timing. You think that in the long-term, emerging economy X will grow a lot, but right now, you think it's in a bubble. 4) Fear of market timing due to lack of local knowledge. You think you know whether or not there's a bubble in the country where you live but you have no idea what's going on in some other country. 5) Investing in multinational companies listed in a stock exchange in a mature economy isn't the same as betting on the growth rate of that particular economy. 6) Diversification. You want to put most of your money in emerging economies but you'll put some in mature economies just to be careful.

The U.S. no longer rules the world.


(click to enlarge)Total return chart from http://stockcharts.com/freecharts/perf.html?SPY,AFK,EFA,FXI,EEM,EMU,EWJ,VGK since 2010

(total returns chart from http://stockcharts.com/freecharts/perf.html?$SPX,AFK,EFA,FXI,EEM,EMU,EWJ,VGK)

This is a chart of a bunch of index funds for various regions of the world from 2010 until now. When I look at this, what I see is a bunch of lines relatively correlated with each other, presumably because they are all influenced by the same underlying variable, the strength of the "global equities market". Until, about 3/4s through, the red line loses sync with the rest and goes straight up.

This sort of analysis is highly dubious, however. As you can see, the which line looks unreasonably high depends entirely upon which time you start from. To get a feel for this, I recommend going to http://stockcharts.com/freecharts/perf.html?$SPX,EFA,FXI,EEM,EMU,EWJ yourself and dragging on the left edge of the slider bar at the bottom, which changes the start time and redraws the chart dynamically.

My view

My view on the U.S. economy is that, over the timescale of a few years, the U.S. economy (and the S&P 500) will continue to grow (but not as quickly as emerging economies). The question is whether or not the S&P 500 has recently gone up "too quickly", leading to a market correction, or whether it will continue to climb. I think neither outcome is unlikely.

The case for continued growth is simple: the U.S. economy is growing, so why shouldn't the stock market? The recent rise could just be the market climbing out of the last of the hole from the crash in 2008.

The case for a correction has two arguments:

1) In the 2011 index fund charts above, you can see that SPX appears to begin an anomalous ascent starting around September 2011. To me, it is scary to be in a market right after it has risen an unusual amount, because a rising market will tend to draw in more people, causing a self-reinforcing but ultimately unsustainable positive feedback loop on prices (a bubble).

When you see an unusually fast ascent, you have to worry: how much of this ascent is due to the individuals upwardly revising their expectation of the value of stocks because of data from the "real" economy, and how much of it is just the result of a positive feedback process in which the rise in the market itself is the main cause of raised expectations?

2) The Fed has been intervening to push down interest rates and U.S. bond yields. This intervention is probably having the effect of causing investors to invest less in bonds than they otherwise would have, and to put more of their money into equities instead. I experienced this myself; a few months ago I was thinking of buying one or more government bonds, but when I saw that they are paying negative real interest, I balked.

The Fed will not keep doing this forever. At some point, bond yields will rise to their "natural" level, and then investors may take some of their money out of the stock market and put more of it into bonds, and at some point prior to that, there will be pressure on the stock market to fall in anticipation of that. I can't say if this pressure is a big deal, if will be enough to make the market go down; perhaps it will just cause it to rise imperceptibly less rapidly.

I would expect that this effect is buoying all equities around the world, and I don't know how much it would target U.S. equities. However, the fact that Operation Twist was announced in September 2011, the same time as the beginning of the anomalous rise in SPX in the above charts, worries me.

Admiral Ackbar "It's a trap"

(maybe)

You and I aren't the first ones to notice this. We shouldn't assume that this information isn't already incorporated into prices; it would be foolish to bet a lot of money that we can "time the market". The average growth rate of stocks is faster than most other things, so if we don't think we know better than the market, we shouldn't do anything. That doesn't mean we should put 100% of our savings into stocks; we should put some of it into other things in any case, because lowering risk has value.

What to do When in doubt, interpolate.

While it may not be a bad idea to try to time the market, I think it is definitely a bad idea to bet too much on one's ability to due so (at least, unless you have evidence more rigorous than what I've presented). So I'm going to have a mix of equity and other things, but with less equity in the mix than I would have if I didn't have misgivings.

Another consequence of not wanting to bet too much money on my or anyone else's ability to beat the market is that try to buy a representative sample (in my opinion) of the entire market, which means I like index funds.

But this doesn't mean that I'm buying SPY (an S&P 500 index ETF). Because of the anomalous rise seen in the chart at the beginning of this article, I don't think that is really a representative sample of "the market". In upcoming columns I will go into detail about which equities, and which alternatives, I'm investing in.

Disclaimer: I am a cognitive studies student, not a successful investor, and I don't know what I'm talking about. I am certainly not a financial advisor, and my intention is just to share my thinking about my own investments, rather than to construct a portfolio that would be ideal for others. The common wisdom is that most retail investors underperform the market and there is no reason to think I am any different. Long AFK, EWJ but going to sell EWJ soon; however I am long in equities in many of the regions discussed above via other vehicles, which will be discussed in future articles.


http://seekingalpha.com/article/317709-the-known-unknowns-for-2012-part-2-positioning-in-the-global-equity-markets

http://seekingalpha.com/article/430441-why-is-there-so-much-confusion-about-total-return-investing

http://etfdb.com/2011/not-just-eem-vwo-emerging-markets-etf-options/

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New low-volatility ETFs: SPLV, LVOL, LBTA, SLVY, SLBT, BTAL.

http://seekingalpha.com/article/299413-analyzing-alternatives-to-the-20-most-popular-etfs

http://seekingalpha.com/article/428721-small-cap-etf-gems-russell-factor-etfs-shine


nbg-a

ire

btd bbva

GREK

NBG, STD. Also long NBG-A and STD-B.

std is above book value, so is bbva

ire is .3 IRE/BKIR arb http://seekingalpha.com/article/293163-bank-of-ireland-arbitrage-adrs-at-more-than-double-value-of-london-listed-shares

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http://finance.yahoo.com/news/Bond-ETFs-For-Every-Objective-etfdatabase-2839561883.html?x=0


derivatives:

start with a call. describe.

OTM example: IBM is trading at $10.

a guy goes up to another guy and says, 'hey, how much will you charge me to purchase a contract that gives me the right, but not the responsibility, to buy IBM from you, anytime I want between now and a week from now, for $16'?

the second guy says, "Um, hey buddy, I'll write that the contract if you want, but you know that IBM is $10 right now, don't you? Why don't you just buy it now for $10?"

the first guy says, "I'm worried that it might go down and I don't want to take the risk. I want you to take that risk for me. Or, maybe I think IBM is going to $100 over the next few days, but I don't have $10 right now (or maybe i'd rather invest it somewhere else in the meantime*). Or maybe I want to bet that IBM will go DOWN, not up, but if I short IBM and i'm wrong and it goes way up I could go broke so i want some protection but only if it skyrockets."

the second guy says, "Huh? Well, whatever. I don't think IBM is going anywhere but down, so i don't want to buy it now and hold it for you -- if it doesn't go above the strike, you won't exercise the contract, and i'd be stuck with a loss. I'll just buy it next week if you really want it. Most likely it won't go past $16 and you won't do anything. But.. i guess if IBM DOES go to $100 in a week, I'd lose a lot of money. I'll have to charge you some money now to make up for that. Or I guess i could buy it now and charge you enough to cover my expected loss (in case it goes down)."

the first guy says, "OK, but it better not be much. Certainly not more than $10, because then I could just buy IBM, and if i did that, i'd still have $10 if it didn't go up. In fact, it better be a lot less than $10, because, really, what's the liklikhood that IBM will go over $16 anyway?"

Now, ITM example:

Same as the above but IBM is trading at $20.

a guy goes up to another guy and says, 'hey, how much will you charge me to purchase a contract that gives me the right, but not the responsibility, to buy IBM from you, anytime I want between now and a week from now, for $16'?

the second guy says, "Um, well IBM is $20 now, so I agreed to that you could just exercise your right as soon as I signed that paper and I'd lose $4. So I'll have to charge you at least $4, and i'll have to add an additional fee on top in case IBM goes up. Why don't you just buy IBM for $16 now?"

the first guy says, "Well, the reasons are pretty much the same as that other time I bought the OTM call from you with the $16 strike."

the second guy says, "Why do you want to pay me $4 plus a fee now, then, instead of just setting the strike at $20 and just paying me the fee?"

the first guy says, "Well, it's true that if IBM goes below $16, i will wish i had set the strike at $20 and not paid you that $4. But i think it's fairly likely that IBM will stay above $16. In case I do exercise the contract, I don't want to have paid you much in addition to the cost of the stock; the additional fee that you should charge me should be less than the fee if i had set the strike at $20"

the second guy says, "Why should I charge you any less in this case? I still have to worry about IBM going to $100. And I have to put aside that $4 that you gave me because you can exercise the contract anytime."

the first guy says, "Yeah but what if IBM goes under $16? Then I won't exercise, you keep your fee, AND the $4. In fact, if it goes under $20, you'll still have made more money because you keep the $4 regardless. Another way to look at it is that you could choose to hedge by buying IBM now using the $4 i gave you and another $16 of your own money, and then if IBM loses money, you still come out ahead unless it goes lower than $16 (minus your additional fee); so it's like only 16/20th of your money is at risk, compared to if the strike was 0."

the second guy says, "OK, i'll still have to charge you a fee to cover my loss in the case that IBM goes up, but I guess it can be a little less because of that."

Note that in the limit, a call with a $0 strike is equivalent to the underlying (excluding dividends and details like that). So the price for this should be the same for the underlying.

At some point the cost of the bid-ask spread for buying the option could mean that an option with a strike greater than zero would cost as much as the underlying -- there would be no point to buying such an option.

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mb a simpler presentation than the above. later note: not sure i agree with the following anymore, but i'm not going to bother to reread it just yet to see.

Options for the rest of us

Usually, when you buy a security, when it's price goes up, you make money, and when it goes down, you lose money. But have you ever had a stock and you thought, 'Gee, I want to own this stock because I think it'll go up, but what if it goes DOWN? I don't want to lose all that money'. Well, this is capitalism, and in fact there is an insurance service that you can buy that will pay you if your stock goes down. It's called a "put option". What you do is you buy a put option on your stock, and you specify a "strike price" (for now, just assume you choose the strike to be the current price of the stock), and if the value of that stock falls below the strike, the insurer will buy the stock from you for the strike, so that in effect you haven't lost any money (if you choose, you could take the money they paid you for the stock and use it to buy the same stock back again, except that now the stock is cheaper -- so in effect you could end up owning the stock but you got paid the amount by which it fell). Of course, you have to pay an insurance premium up front for this service.

So, you can buy a put option when you want to insure yourself against a fall in the price of a stock you own. Put options are more flexible than that, though; you can even buy a put if you don't own the underlying stock at all. In this case, you will still get paid if the price of that stock falls, so what you are really doing is making a bet that the stock price will fall.

Instead of thinking of buying a stock as making a bet that its price will rise, imagine breaking that bet into two parts: (A) a bet that the price won't fall past its current price, and (B) a bet that the price will rise past its current price. The "put" option is the opposite of (A); when you buy a put option, you are betting that the price WILL fall. This bet cancels out the bet in (A) and the result is that if you buy a stock and then buy a put on that stock with the "strike price" set to the current price, you no longer care if the price falls, but you are still happy if it rises (you still have bet (B)).

Now amazingly, the financial system is so flexible that this form of insurance doesn't have to be provided by an insurance company, but rather anyone, even another individual, can create put options and sell them to people. Why would you want to do that (to create and sell a put option to someone else, that is, to "write a put option")? Well, first off, you might just want to sell insurance to people and get paid the premiums. But let's look at another case.

What if there is a stock that you are interested in, but you think it's "overbought", that is, you think it's a good company overall but you are worried that its current price might be too high? You might think that there's nothing to be done, that you'll just have to wait and hope the price comes down so that you can buy it. But, if you're sure that you'd buy it if it got cheaper, you can formally promise to do that, and get paid by the market in exchange for this (markets love to know things, so they'll pay you for creating certainty). So, say stock XYZ is at $300 and you would buy it if it went down to $250. You sell a put option with a strike price of $250, and you get paid a premium up front. Now, if the price goes down lower than $250, you have to buy the stock at a price of $250. At that point, you might wish you could pay the lower, market price, but a promise is a promise -- and this way, everyone wins: the other person got the peace of mind knowing they wouldn't have to worry if it fell below $250, you get to buy your stock at the price you wanted, and you even got paid a premium for doing what you wanted to do anyways.

You can also look at the put seller as just taking the other side of bet (A); the put seller is betting that the price won't fall below the strike price (actually, the seller's breakeven point is a little bit lower than the strike because they got paid a premium; if the strike is $250 and the premium is $5, and the price falls to $245, then the seller was paid $5 as a premium but has to pay out $5 of insurance and so they breakeven).

So, now we know why someone would want to buy a put, and why someone would want to sell a put. Now we turn to the symmetrical opposite of a put, a "call option". Whereas puts concern the bet that the stock will fall (or will not fall, from the seller's point of view), a call concerns a bet that the stock will rise. That is, calls concern the bet (B), above; the bet that the stock price will go up past its current price.

Let's say you think a stock will go down. So you want to short the stock, but then you worry, what if the price goes up? Well, you can buy a call, which is insurance against the stock price going up. So just like buying a put, a call protects you from losing money on your position, but whereas a put protects a stock buyer (someone who is long the stock), the call protects a short seller.

Why would someone sell a call? Again, they might want to sell insurance and collect the premiums. Or, they might own a stock but they want to get out of their position. But they think the stock is currently underbought and that its price is too low and might go up soon. So, conditional upon the price rising past a certain level, they plan to sell the stock. In exchange for promising to do this in advance, they get paid a premium. And, the third way of looking at a call option is that it is a bet that the stock won't rise past a certain price.

So, all four roles (put buyer, put seller, call buyer, call seller) can be explained in terms of breaking the bet (the risk) that the underlying security will rise in price into two parts: a bet that it won't fall past the strike price, and a bet that it will rise past the strike price.

Other crazy things you can do with options: when the strike price is not equal to the current price

Now why would someone want to sell you a put option? Let's say that

You can think of buying a stock as making two bets:

--

flot fltr flrn 1.66 yield? Royal Bank of Scotland, Danske Bank, and Toronto Dominion Bank blkn -- junk bono latin american bonds WisdomTree? Emerging Markets Local Debt (ELD) and Market Vectors EM Local Currency Bond ETF (EMLC). "Obviously, the heavyweight funds in the space--which sport limited but nontrivial exposure to Latin America--are WisdomTree? Emerging Markets Local Debt (ELD) and Market Vectors EM Local Currency Bond ETF (EMLC). WisdomTree? also has its own Latin American bond fund in registration with the SEC, as we mentioned last October." Guggenheim Enhanced Adjustable Rate Senior Loan ETF, Rydex S&P SmallCap? 600 Equal Weight ETF " Accuvest Global Opportunities ETF (ACCU), which we wrote about two weeks ago after AdvisorShares? had issued a press release on its plans, would employ Accuvest Global Advisors' top-down macroeconomic scoring system to evaluate and pick countries, and not individual equities. Then, the proposed fund would invest in single-country ETFs, with an overall aim of seeking long-term capital appreciation in excess of global equity benchmarks like the MSCI All Country World Index. "

short ? Topping the list is iShares S&P North American Technology-Software Index (IGV), which was propelled by strong results from BMC Software (BMC) and Symantec (SYMC)

d Vanguard Total Stock Market ETF (VTI),

Global X Files for Risk Parity ETF On Friday, April 20, Global X submitted paperwork with the SEC seeking permission to launch a "risk parity" ETF.

First, the proposed PowerShares? China A-Share Portfolio would hold derivatives providing exposure to China A-Shares stocks. At present, most non-Chinese investors are barred from investing in the A-Shares market. To circumvent that restriction, some U.S. ETF issuers have started using total return swaps on A-Shares companies to gain that exposure.

Next, the proposed PowerShares? DWA SmallCap? Technical Leaders Portfolio would track an equal-weight Dorsey Wright index that culls about 200 small-cap companies from a universe of about 2,000 small caps. The index identifies firms displaying powerful relative strength characteristics by scrutinizing their market performance. PowerShares? currently issues three other ETFs using the Dorsey Wright methodology.

Finally, PowerShares? filed for permission to create five actively managed allocation-oriented ETFs employing quantitative, rules-based strategies. The proposed PowerShares? Global Macro Portfolio would hold commodity, foreign exchange, and financial derivatives, while the proposed PowerShares? Emerging Markets Equity Allocation Portfolio would hold emerging-markets stocks, futures contracts on the MSCI Emerging Markets Index, and futures contracts on an emerging-markets volatility index.

LEMB - Emerging Markets Local Currency Bond Fund Profile

http://etfdb.com/etfdb-category/emerging-markets-bonds/

http://etfdb.com/2012/five-juicy-high-yield-bond-etfs-for-2012/

Vanguard Short Term Corporate Debt ETF (VCSH)

CAD Canada Bond Index Fund $103.97 -0.22% $18,745 2,702 +1.07%

http://etfdb.com/type/bond/emerging-markets/

toread: http://finance.yahoo.com/news/Bond-ETFs-For-Every-Objective-etfdatabase-2839561883.html?x=0

bkln

Use These ETFs to Bet Against Europe Like Paulson (EUO, BUND ... www.benzinga.com/.../bonds/.../use-these-etfs-to-bet-against-europe-l... Apr 17, 2012 – Use These ETFs to Bet Against Europe Like Paulson (EUO, BUND, EWI) ... fund manager John Paulson is shorting European sovereign bonds ...


SLBT XLBT

EMHY HYXU

MLPA


" RBS China Trendpilot ETN (TCHI) tracks an index that invests either in a basket of Chinese stocks listed on U.S. exchanges or in an investment in three-month U.S. Treasury bills. When TCHI's index closes at or above its historical 100-day moving average for three consecutive trading sessions, it shows a "positive trend" and shifts to Chinese equities. When the index is at or below that moving average for three straight trading days, the ETN detects a "negative trend" and shifts to an investment in three-month Treasuries.

Much evidence suggests that investor underreaction to new information creates the potential for price momentum, which could bolster risk-adjusted returns here relative to a traditional static strategy.

The index's Chinese equities all are listed in the United States, with about a fourth of the index devoted to IT companies such as Baidu (BIDU) and NetEase? (NTES) and another 24% composed of energy companies such as PetroChina? (PTR) and CNOOC (CEO). Telecommunication-services firms such as China Mobile (CHL) make up another 19% of the index.

Similar to RBS' other ETNs, TCHI has a high, hybrid pricing structure, charging a 1.1% fee when its index contains Chinese equities and assessing 0.50% when the index shifts to Treasuries. Given Treasury exchange-traded funds' low price tags and given China ETFs' lower fees, this is a fairly expensive strategy, but investors here are paying as much for convenience as anything else. Investors could replicate this strategy more cheaply by buying a pair of very liquid ETFs. First, an investor could buy an ETF holding U.S.-listed securities of companies deriving the majority of their revenue from China, such as PowerShares? Golden Dragon Halter USX China Portfolio (PGJ) (0.60% expense ratio). Then, an investor could pair that fund with SPDR Barclays Capital 1-3 Month T-Bill (BIL) at 0.14%. "

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etfs i dont like right now:

ibnd: duration 4.7 yrs picb: duration 6 yrs ihy: duration 4.7 yrs (but good yield) cwb: avg maturity (effective duration not given) >10 yrs


"

However, ordinary investors may want to give the bonds a go in their income portfolios. First, these bonds act like an insurance policy for equities. In falling markets, bond holders sit back and collect the securities juicy yields. While in rising markets, the bonds can be "converted" into shares of the underlying firm, benefiting from capital appreciation. According to Bloomberg, since 1995, the S&P 500 had negative performance for 51 out of 185 rolling 12-month periods. During that time, a broad measure of convertible bonds outperformed the S&P during 44 of those periods, by an average of 7.6%. In addition, converts participated on average in 83% of the upside during the rising phases. Secondly, during bankruptcy proceedings, converts rank higher than equities, given them a more favorable position on the ladder. Finally, yields for the average convertible bond tend to be higher than the company's stock dividend yield. This helps with outperformance during sideways or flat markets. "

With nearly $800 million in assets, the SPDR Barclays Capital Convertible ETF (ARCA:CWB) is the largest exchange-traded fund (ETF) in the sector. The fund tracks 99 different converts from issuers such as Wells Fargo (NYSE:WFC) and EMC (NYSE:EMC) and yields a healthy 3.37%. The ETF has performed well, producing an annualized 14.75% return since its inception in 2009. Offering a lower maturity profile and cheaper expenses, the smaller PowerShares? Convertible (ARCA:CVRT) makes an interesting choice as well.

Some the biggest and largest bargains in the space could be had in the various convertible closed-end funds. Asset manager Calamos (Nasdaq:CLMS) made their name specializing in the bond type. However, the firm has recently begun closing their funds to new investments. The Calamos Convertible & High Income Fund (NYSE:CHY) offers exposure to the asset manager at almost a 2.5% discount to its net asset value. Likewise, the Advent Claymore Global Convertible Securities & Income Fund (NYSE:AGC) offers global exposure to the convertibles market, with nearly 40% of its holdings outside of the U.S. The fund can be currently had for about an 8.96% discount and 8.28% yield. (For additional reading, see Open Your Eyes To Closed-End Funds.)

The Bottom Line Given the low interest rate environment, income investors have continually sought new ways to find yields. One such ignored opportunity, is in the world of convertible bonds. These securities which offer both attributes of bonds and equities could be exactly what a portfolio needs. The previous funds, along with the Bancroft Fund (AMEX:BCV) make interesting choices within the sector. (To learn more, check out Convertible Bonds: An Introduction.)


gmtb BOND ---

http://seekingalpha.com/article/21780-powershares-preferred-stock-etf-just-doesn-t-stack-up

PGF inadequately diversified


BPP $11.42 0.02 (0.18%) BlackRock? Credit Allocation Income Trust III

huh this isnt in ETFdb, are exchange traded CEFs not considered ETFs?

" ETFs are investment companies registered under the Investment Company Act of 1940 as open-end funds or unit investment trusts. ETFs do not sell or redeem individual shares at net asset value, but only in large blocks (such as 50,000 shares). " http://seekingalpha.com/article/487921-investors-should-avoid-these-best-performing-cefs

FFC $18.43 0.06 (0.33%) Flaherty & Crumrine / Claymore Preferred Securities Income Fund Inc

http://seekingalpha.com/article/479901-preferred-cef-showdown-final-the-shootout-my-top-pick

http://seekingalpha.com/article/89666-income-etfs-vs-cefs

http://www.hapetfs.com/pub/en/etfs/?etf=HPR&r=o

http://www.nuveen.com/CEF/Product/Overview.aspx?fundcode=JFP

http://www.nuveen.com/CEF/Product/Overview.aspx?fundcode=JPC

---

low beta international cefs:

Total Results: 11 Default View (criteria)

    Edit View
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Total results meeting all criteria : 11AS OF 11:59 pm ET 05/08/12 Quotes delayed at least 15 minutes. Log in for real time quote. Don't see a security you expected? Action Score† CEF Name Symbol Leveraged Asset Class Beta (Month-End 3 Yr) 15 JAPAN SMALLER CAP FUND

JOF No International Stock 0.35 17 JHANCOCK TAXADVANTAGED GBL SHRHLDR YLD

HTY No International Stock 0.48 19 ING GLOBAL ADVANTAGE AND PREMIUM OPP

IGA No International Stock 0.50 20 JAPAN EQUITY

JEQ No International Stock 0.55 20 MORGAN STANLEY CHINA A SHARE

CAF No International Stock 0.55 21 ING GLOBAL EQUITY DIVIDEND AND PREM OPP

IGD No International Stock 0.57 22 WELLS FARGO ADVANTAGE GLBL DIV OPPORT

EOD No International Stock 0.58 24 NUVEEN GLOBAL VALUE OPPORTUNITIES

JGV No International Stock 0.63 24 EATON VANCE TX-MGD GLBL BUY-WRITE OPP

ETW No International Stock 0.64 25 MORGAN STANLEY FRONTIER EMERGING MARKETS

FFD No International Stock 0.65 26 BLACKROCK S&P QUALITY RANKINGS GLB EQ MG

BQY No International Stock 0.69

http://screener.fidelity.com/ftgw/etf/goto/snapshot/snapshot.jhtml?symbols=FFD

low beta high 3-yr sharpe etfs:

PROSHARES ULTRA YEN

YCL ETF Leveraged -0.15 0.69 56 ISHARES BARCLAYS 1-3 YEAR CREDIT BOND

CSJ ETF No 0.28 2.56 53 DB-X 2010 TARGET DATE FUND

TDD ETF No 0.28 1.60 53 SELECT SECTOR SPDR-UTILITIES

XLU ETF No 0.31 1.53 53 VANGUARD UTILITIES INDEX FUND

VPU ETF No 0.34 1.57 54 POWERSHARES PREFERRED PORTFOLIO

PGX ETF No 0.34 1.69 54 ISHARES DOW JONES US UTILITIES

IDU ETF No 0.36 1.59 56 ISHARES S&P CONSERVATIVE ALLOCATION FUND

AOK ETF No 0.40 1.89 54 GUGGENHEIM S&P EQUAL WEIGHT UTILITIES

RYU ETF No 0.41 1.54 38 PROSHARES ULTRA GOLD

UGL ETF Leveraged 0.42 1.03 54 POWERSHARES DYNAMIC FOOD AND BEVERAGE

PBJ ETF No 0.46 1.52 56 SELECT SECTOR SPDR-CONSUMER STAPLES

XLP ETF No 0.47 1.78 40 POWERSHARES DB GOLD DOUBLE LONG ETN

DGP ETN Leveraged 0.47 1.06 56 VANGUARD CONSUMER STAPLES INDEX FUND

VDC ETF No 0.48 1.81 57 GUGGENHEIM S&P EQUAL WEIGHT CONSUMER STAPLES

RHS ETF No 0.52 1.78 51 FIRST TRUST UTILITIES ALPHADEX FUND

FXU ETF No 0.52 1.33 56 ISHARES S&P TARGET DATE RETIREMENT INCOME ETF

TGR ETF No 0.52 1.74 55 FIRST TRUST CONSUMER STAPLES ALPHADEX FUND

FXG ETF No 0.53 1.61 58 VANGUARD SHORT-TERM BOND ETF

BSV ETF No 0.54 2.18 55 POWERSHARES DYNAMIC CONSUMER STAPLES SECTOR

PSL ETF No 0.55 1.54 40 E-TRACS UBS BLOOMBERG CMCI GOLD ETN

UBG ETN No 0.56 1.05 58 GUGGENHEIM DEFENSIVE EQUITY ETF

DEF ETF No 0.57 1.99 45 SPDR GOLD TRUST

GLD ETF No 0.58 1.13 53 SELECT SECTOR SPDR-HEALTH CARE

XLV ETF No 0.58 1.36 58 FIRST TRUST MORNINGSTAR DIVIDEND LEADERS

FDL ETF No 0.58 1.79

http://research2.fidelity.com/fidelity/screeners/commonstock/index.asp?page=landing.asp

low beta:

	1	POWERSHARES DB US DOLLAR BULLISH FUND

UUP ETF No -47.36 2 IPATH S&P 500 VIX SHORT-TERM FUTURES ETN

VXX ETN No -3.37 6 IPATH S&P 500 VIX MID-TERM FUTURES ETN

VXZ ETN No -1.64 9 IPATH OPTIMIZED CURRENCY CARRY ETN

ICI ETN No -1.05 9 MARKET VECTORS-RENMINBI/USD ETN

CNY ETN No -1.04 10 PROSHARES ULTRA YEN

YCL ETF Leveraged -0.15 11 SPDR BARCLAYS HIGH YIELD BOND ETF

JNK ETF No -0.06 11 WISDOMTREE DREYFUS CHINESE YUAN FUND

CYB ETF No -0.05 11 ISHARES BARCLAYS SHORT TREASURY BOND

SHV ETF No 0.01 11 IPATH DOW JONES-UBS LIVESTOCK ETN

COW ETN No 0.03 11 ISHARES IBOXX $ HIGH YIELD CORPORATE BOND

HYG ETF No 0.07 11 POWERSHARES HIGH YIELD CORPORATE BOND PORTFOLIO

PHB ETF No 0.09 11 E-TRACS UBS BLOOMBERG CMCI LIVESTOCK ETN

UBC ETN No 0.11 12 ISHARES S&P SHORT TERM NATIONAL AMT-FREE BOND ETF

SUB ETF No 0.20 12 IQ HEDGE MULTI-STRATEGY TRACKER ETF

QAI ETF No 0.25 12 POWERSHARES ACTIVE LOW DURATION FUND

PLK ETF No 0.27 12 SPDR BARCLAYS SHORT TERM MUNICIPAL BOND

SHM ETF No 0.28 12 ISHARES BARCLAYS 1-3 YEAR CREDIT BOND

CSJ ETF No 0.28 12 DB-X 2010 TARGET DATE FUND

TDD ETF No 0.28 12 ISHARES BARCLAYS 1-3 YEAR TREASURY BOND FUND

SHY ETF No 0.29 13 SELECT SECTOR SPDR-UTILITIES

XLU ETF No 0.31 13 WISDOMTREE JAPAN SMALLCAP DIVIDEND

DFJ ETF No 0.33 13 VANGUARD UTILITIES INDEX FUND

VPU ETF No 0.34 13 POWERSHARES PREFERRED PORTFOLIO

PGX ETF No 0.34 13 S&P CTI ETN

LSC ETN No 0.34

low beta with poor performance last year:

	30	GULF STATES INDEX ETF

MES ETF No 0.64 -10.13% 28 ISHARES S&P/TOPIX 150

ITF ETF No 0.56 -9.99% 28 ISHARES S&P GLOBAL UTILITIES

JXI ETF No 0.64 -11.18% 28 ISHARES MSCI-JAPAN

EWJ ETF No 0.53 -9.89% 27 SPDR RUSSELL/NOMURA PRIME JAPAN ETF

JPP ETF No 0.50 -10.18% 24 E-TRACS UBS BLOOMBERG CMCI LIVESTOCK ETN

UBC ETN No 0.11 -10.58% 17 IPATH S&P 500 VIX MID-TERM FUTURES ETN

VXZ ETN No -1.64 -15.09% 17 IPATH DOW JONES-UBS ALUMINUM ETN

JJU ETN No 0.65 -25.67% 14 S&P CTI ETN

LSC ETN No 0.34 -23.83% 11 IPATH DOW JONES-UBS NATURAL GAS ETN

GAZ ETN No 0.61 -49.68% 10 UNITED STATES NATURAL GAS FUND

UNG ETF No 0.59 -62.02% 5 IPATH S&P 500 VIX SHORT-TERM FUTURES ETN

VXX ETN No -3.37 -31.72%

---

http://etfdailynews.com/2011/02/08/using-etfs-to-access-alternatives-vixy-vixm-wdti-alt-rals-grv-lsc-hdge-xvix-qai-mna-csma-mcro/

http://www.closed-endfunds.com/FundSelector/Classifications.fs#ClassDetailResults


http://www.cefconnect.com/


fidelity convertible cef screen:

ADVENT CLAYMORE CONVERTIBLE SEC & INC

AVK Yes Convertible Bond

ADVENT CLAYMORE CONVERTIBLE SECS& INC II

AGC Yes Convertible Bond

AGIC CONVERTIBLE & INCOME

NCV Yes Convertible Bond

AGIC CONVERTIBLE & INCOME II

NCZ Yes Convertible Bond

BANCROFT FUND

BCV No Convertible Bond

CALAMOS CONVERTIBLE & HIGH INCOME FUND

CHY Yes Convertible Bond

CALAMOS CONVERTIBLE OPP INC

CHI Yes Convertible Bond

ELLSWORTH FUND

ECF No Convertible Bond

GABELLI CONV INC SECS

GCV Yes Convertible Bond

PUTNAM HIGH INCOME SECURITIES

PCF No Convertible Bond

---

MORGAN STANLEY FRONTIER EMERGING MARKETS

FFD No Diversified Emerging Markets


CEF 1-mo discount < -7, 1-yr discount > -5:

BLACKROCK UTILITY & INFRASTRUC

BUI No -7.15% -0.64%

FIRST TRUST ACTIVE DIVIDEND INCOME FUND

FAV No -9.28% -4.37%

NUVEEN BUILD AMERICA BOND OPPORTUNITY

NBD Yes -7.05% -4.80%

NUVEEN PENNSYLVANIA MUNICIPAL VALUE

NPN Yes -7.54% -4.70%

CEF 1-mo discount < -7, 1-yr discount > -7:

ADVENT CLAYMORE CONVERTIBLE SECS& INC II

AGC Yes -7.03% -5.96%

ALPINE TOTAL DYNAMIC DIVIDEND

AOD Yes -7.42% -6.11%

BLACKROCK ENHANCED CAPITAL AND INCOME

CII No -7.35% -5.75%

BLACKROCK ENHANCED DIVIDEND ACHIEVERS

BDJ No -10.93% -6.92%

BLACKROCK INTERNATIONAL GROWTH & INCOME

BGY No -8.61% -5.63%

BLACKROCK UTILITY & INFRASTRUC

BUI No -7.15% -0.64%

FIRST TRUST ACTIVE DIVIDEND INCOME FUND

FAV No -9.28% -4.37%

JOHN HANCOCK HEDGED EQUITY & INCOME FUND

HEQ No -10.39% -6.86%

KAYNE ANDERSON MIDSTREAM ENERGY FUND

KMF Yes -7.08% -6.92%

NUVEEN BUILD AMERICA BOND OPPORTUNITY

NBD Yes -7.05% -4.80%

NUVEEN PENNSYLVANIA MUNICIPAL VALUE

NPN Yes -7.54% -4.70%

TEMPLETON EMERGING MARKETS

EMF No -7.82% -6.12%

< -10, > -10

BLACKROCK ENHANCED DIVIDEND ACHIEVERS

BDJ No -10.93% -6.92%

DWS GLOBAL HIGH INCOME

LBF Yes -10.32% -9.86%

INDIA FUND

IFN No -10.26% -8.33%

JAPAN EQUITY

JEQ No -11.13% -10.00%

JOHN HANCOCK HEDGED EQUITY & INCOME FUND

HEQ No -10.39% -6.86%

LAZARD WORLD DIVIDEND & INCOME

LOR Yes -10.62% -8.01%

MONTGOMERY STREET INCOME SEC

MTS No -10.13% -9.58%

MORGAN STANLEY EMERGING MARKETS DEBT

MSD Yes -10.18% -9.91%

MORGAN STANLEY INDIA INVESTMENT

IIF No -11.21% -8.02%

NUVEEN TAX-ADVANTAGED FLOATING RATE

JFP No -11.96% -8.05%

PYXIS CREDIT STRATEGIES FUND

HCF Yes -11.70% -7.61%

WESTERN ASSET CLAYMORE INFL LNKD SEC&INC

WIA No -10.28% -8.58%

< -20, > -20

RENN GLOBAL ENTREPRENEURS FUND

RCG No -22.31% -19.90%

---

	11	FOXBY CORP

FXBY Yes -23.48% -29.03% 2.03%

dont like, apple and google


todo: preferred shares funds

http://etfs.morningstar.com/quote?pgid=hetopquote&t=pgx

http://etfs.morningstar.com/quote?pgid=hetopquote&t=pgf

http://etfs.morningstar.com/quote?pgid=hetopquote&t=psk

http://etfs.morningstar.com/quote?t=IPFF&region=USA&culture=en-us

http://etfs.morningstar.com/quote?t=IPFF&region=USA&culture=en-us

http://us.ishares.com/product_info/fund/overview/PFF.htm

buy/write:

nuveen buy/write

http://seekingalpha.com/article/463281-nuveen-s-buy-write-funds-do-work?source=yahoo

http://cef.morningstar.com/quote?pgid=hetopquote&t=jpg

http://cef.morningstar.com/quote?pgid=hetopquote&t=eTv

http://seekingalpha.com/article/314510-the-best-buy-write-closed-end-funds


Powershares Autonomic Balanced Growth NFA Global Asset Portfolio (PAO) and the IndexIQ? Hedge Fund (QAI) are two examples of such funds.

PTO - Ibbotson Alternative Completion Portfolio Profile

MATH - Meidell Tactical Advantage ETF Profile

ONEF - Russell Equity ETF Profile

GCE - Claymore CEF GS Connect ETN Profile

IYLD - Morningstar Multi-Asset Income Index Fund Profile

http://seekingalpha.com/article/299483-can-hedge-fund-replication-etfs-offer-safety

http://seekingalpha.com/article/286425-do-sophisticated-hedged-etfs-deliver

---

dont buy http://seekingalpha.com/article/511271-mlpa-another-c-corp-double-taxation-etf

Like its two predecessors, Alerian MLP ETF (AMLP) (see AMLP’s Dirty Little Secret) and Yorkville High Income MLP ETF (YMLP) (see YMLP: Another Abomination of the ETF Wrapper), MLPA exploits a suspected loophole in SEC regulations.

but mb buy those MLPs directly..

GYLD has some MLP that doesnt have this prob...

mb clone this guy?

http://etfs.morningstar.com/quote?pgid=hetopquote&t=pcef

or buy pcef outright if the discount increases.. or mb just buy it now..

mb clone guys like these:

http://seekingalpha.com/symbol/aok


http://seekingalpha.com/article/316960-leveraged-loan-investments-cef-and-etf-possibilities-part-i


ok where to park cash?

A: sell http://www.interactivebrokers.com/en/trading/pdfhighlights/PDF-ExchPhysical.php (use "Yield Optimizer" in TWS and "invest excess cash")

be sure and compute the commission rates to see if a round trip transaction would still be profitable --- however due to the spread (.5% on the one i checked) it probably would not be

Q: is the yield displayed in the Yield Optimizer annualized?


toread

http://www.investopedia.com/stock-analysis/2012/Floating-Rate-Loans-Look-Attractive-BKLN-FLOT-FLRN-PPR-FCT0402.aspx#axzz1uVnZv7gu

http://www.istockanalyst.com/finance/story/5577009/new-etf-floating-rate-bond-spdr-flrn-fltr-agg-flot


"

Kevin, nice find. That CZA looks interesting. I was also looking at NFO for some quant alpha. Claymore really has to get their marketing act together and promote themselves. They've had some interesting ETF's that have gone dark. Check out IRO for instance, that dividend rotation ETF trounced all other dividend ETF's as well as the Alpine closed end divvy rotation train wrecks (AOD & AGD). "

---

http://etfdb.com/2011/quant-based-etfs-in-focus/

KNOW NFO TTFS

http://articles.businessinsider.com/2011-04-21/markets/30061651_1_etfs-exchange-traded-products-capitalization-weighted

http://www.etftrends.com/2010/08/ins-outs-quant-etfs/

http://www.quant-shares.com/

CHEP

http://etfdb.com/2010/four-alpha-seeking-etfs-crushing-spy/

http://seekingalpha.com/article/40917-a-guide-to-strategy-etfs ALT

CRO MNA GCE PNXQ WDTI

here's what's wrong with MNA, it's not actually doing merger arbitrage as traditionally understood: http://thedealsleuth.wordpress.com/2009/11/10/wheres-the-arbitrage-in-the-new-merger-arbitrage-etf/

the index that csma tracks is better, according to Credit Suisse Merger Arbitrage Liquid Index - Liquid Alternative Beta ... alternativebeta.credit-suisse.com/.../... File Format: PDF/Adobe Acrobat - Quick View Credit Suisse Merger Arbitrage Liquid Index. Asset Management. Contacts ir.betastrategies@credit-suisse.com www.credit-suisse.com/alternativebeta. ILAB<Go> ...

however its performance is unimpressive: http://finance.yahoo.com/echarts?s=CSMA+Interactive#symbol=csma;range=2y;compare=spy;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

whereas private hedge fund merger arbitrage has done better: http://beta.fool.com/bhessel/2012/04/20/hedge-fund-strategy-etfs-reconsidered/3791/

http://wallstreetpit.com/91006-13f-etfs-are-coming-stay-away

http://www.tradingmarkets.com/.site/etfs/how_to/articles/-75909.cfm

http://seekingalpha.com/article/31075-quant-strategy-broad-etfs

http://seekingalpha.com/article/61532-will-2008-be-the-year-of-the-quant-etf

http://seekingalpha.com/article/207924-under-the-microscope-powershares-dynamic-magniquant-etf

http://etfdb.com/2009/special-report-alpha-etfs-come-of-age/

http://etfdb.com/issuer/first-trust/

http://www.morningstar.co.uk/uk/ETF/articles/106423/Innovative-ETFs-A-Rules-Based-Strategy-ETF.aspx

http://www.investopedia.com/stock-analysis/2010/Spice-Up-Your-Portfolio-With-Quantitative-ETFs-MNA-PDP-PWC0413.aspx#axzz1uVnZv7gu

http://etfdailynews.com/2011/04/21/passive-or-active-closer-look-at-quant-based-etfs-fex-pdp-ryj-spy/

http://beta.fool.com/bhessel/2012/04/20/hedge-fund-strategy-etfs-reconsidered/3791/

--- dont like this particular one but mb there are others: http://covestor.com/kc-capital-management/quantitative-etf



http://www.quora.com/What-are-the-best-innovations-to-come-out-of-the-financial-industry-in-recent-times ---

https://www.wealthfront.com/


http://www.guggenheimfunds.com/cef/fund/ffc

---

http://www.benzinga.com/markets/bonds/12/05/2565731/the-definitive-guide-to-non-usd-em-bond-etfs


There are a number of mutual funds available that invest in the same type of assets. One I recommend is RidgeWorth? Seix Floating Rate High Inc(SAMBX). It has an expense ratio of .53%, is yielding 5.79% and has a 5 star Morningstar rating. If you have a Schwab account, it trades commission free (must own it at least 90 days to sell commission free).

The only downside is that it is not an ETF so you can't put a stop loss order on it and the price only changes once per day as do all mutual funds.

Since I have owned it the price has only varied by $.01 per share. Like all of the alternatives, SAMBX is vulnerable to the credit risk and therefore the economic cycle. It got killed in the 2008 recession period, but all of the investments in this category suffered the same fate.

Eaton Vance offers an actively managed closed end fund, Eaton Vance Senior Floating Rate Trust (EFR), which has a higher distribution yield, at 7%. The expense ratio for EFR is 1.22%.

SRLN FONE ROOF


interesting chart:

http://finance.yahoo.com/echarts?s=CVRT+Interactive#symbol=cvrt;range=1y;compare=spy+wdti+bkln+dgs;indicator=sma%285%29+volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=on;source=undefined;

http://stockcharts.com/freecharts/perf.html?RSP,CVRT,BKLN,AGG,IAU


things i bought and then sold at a quick loss:

EMLC, LEMB: i figured soverign debt might decline less in a downturn than junk bonds but i was wrong; today these each lost 1% whereas SPY was down .79%. Also, these are trading at a premium to IV of more than 1%.

GYLD: similarly to SPY, declined .73% today. Also, premium of more than 1%.

todo: consider buying these back when i think SPY has fallen enough

note: BKLN didnt fall at all tho, i bought more of that. PHB is rising too, not sure why.

also to buy: HYEM


the purpose of buying put options:

the purpose of buying call options:

the purpose of precious metals:

the purpose of other commodities:

the purpose of stocks:

the purpose of trading strategies:

the purpose of corporate bonds:

the purpose of goverment bonds:

the purpose of junk bonds:

the purpose of bank loans:

the purpose of convertible bonds:


an annual 47 put option on DGS costs ~$882.86 per year righ now ( (12/7)*515 , may 14)

100 units of DGS cost 4474

octave:3> 1/(4474/882.86) ans = 0.19733

so the put option costs more than the yield

but wait 47 is no longer ATM..

an annual 45 strike put costs about 210

octave:6> (12/7.)*210. ans = 360 octave:7> 1/(4474/360) ans = 0.080465

http://www.wisdomtree.com/etfs/fund-details.aspx?etfid=53 claims the SEC 30 day yield on DGS is 9.81% (morningstar doesnt list one)

so the put option is less than the yield..

so, if fully insured, this security yields

octave:8> .0981 - 1/(4474/360) ans = 0.017635

but there is also the possibility of capital appreciation

the SEC yield for FLOT is only 1.21% right now

---

STIP is shorter than STPZ

---

" The Inflation Trader Comments (1212)

WIP is a passive, international inflation-linked bond ETF. It is the only one that I know of. Research by Ciccarelli and Mojon and published in 2005 (ECB Working Paper Series 537), 2007 (Kiel Institute Working Papers 1337), 2008 (Federal Reserve Banks of Chicago Working Paper Series WP-08-05), and 2010 (The Review of Economics and Statistics, MIT Press, vol 92(3)) - current abstract at ideas.repec.org/p/chb/...) illustrated that a large portion of the inflation in any of the OECD countries is sourced from a global inflation process. Enduring Investments confirmed this phenomenon. The implication is that a diversified portfolio of international inflation-linked bonds is an interesting alternative to domestic ILBs (especially if idiosyncratically domestic inflation risk shows up in the currency...in which case it would be great to have non-dollar bonds).

Enduring developed a strategy of actively managing ILBs to exploit some valuation anomalies, but WIP captures the systematic "global inflation" bit and is interesting for that reason, IMO. "


a very interesting post arguing convincingly that inflation will shoot up now:

http://mikeashton.wordpress.com/2012/05/08/now-it-begins-again/


" Too many advisors placed precious metals, or grains, or other undiversified commodity bets into customer portfolios, in particular without understanding the effects of contango (e.g., OIL). And they are not as good investments when real yields are high. But over a very long period of time (our studies go back to 1959), commodity indices have been very profitable when invested in beginning in periods of low real rates. It is my opinion that they will be very profitable this time as well. "


INFL ETN and the RINF ETF.

---

http://etfdailynews.com/2012/05/14/seven-biggest-bond-etfs-by-assets-under-management-shy-jnk-hyg-agg-bnd-lqd-tip/


PICB


"

Some of the more interesting choices in the floating rate loan sector can be had via closed ended funds. The ING Prime Rate Trust (NYSE:PPR) is one of the oldest closed end funds (CEF) operating in category and holds 275 different loans. Likewise, the First Trust Senior Floating Rate (NYSE:FCT) and Pioneer Floating Rate Trust (NYSE:PHD) offer broad exposure as well. The funds currently yield 6.23%, 6.25% and 7.03%, respectively. In addition, investors may be able to snag these funds at discounts to their net asset values. All three are trading very close or slightly under their NAVs. "

-- woah, expense rates near 2%!


http://www.zacks.com/stock/news/66482/do-you-need-a-floating-rate-bond-etf

CSJ

http://seekingalpha.com/article/445231-bond-etfs-to-buy-as-rates-rise

http://seekingalpha.com/article/309560-if-you-own-csj-i-would-sell

http://seekingalpha.com/article/473601-adding-relative-strength-to-your-bond-etf-portfolio

http://seekingalpha.com/article/473601-adding-relative-strength-to-your-bond-etf-portfolio

http://seekingalpha.com/article/319612-under-the-hood-exploring-yield-with-csj-and-flot


CSJ MINT BSV VCSH

https://www.google.com/search?q=bsv+csj+mint+bsv&ie=utf-8&oe=utf-8&client=ubuntu&channel=fs#q=bsv+csj+mint+bsv&hl=en&client=ubuntu&hs=Lo&channel=fs&prmd=imvns&psj=1&ei=at-xT56uFYm06gHQtOyZCQ&start=10&sa=N&bav=on.2,or.r_gc.r_pw.r_cp.r_qf.,cf.osb&fp=1641ae474a1dd5eb&biw=900&bih=1308

---

MBB

---

http://www.vaneck.com/funds/FLTR.aspx http://us.ishares.com/product_info/fund/overview/FLOT.htm https://www.spdrs.com/product/fund.seam?ticker=FLRN

http://www.vaneck.com/funds/FLTR.aspx is 91% financials! http://us.ishares.com/product_info/fund/overview/FLOT.htm is 53% financials https://www.spdrs.com/product/fund.seam?ticker=FLRN is 67.81% (!) financials

---

http://seekingalpha.com/article/276942-considering-the-implications-of-flot

decision: FLOT but also some other corp bonds that aren't 50% in finance...

consider: CSJ, MINT, BSV, VCSH

http://www.selfdirectedinvestor.com/article/201106/ishares-launches-floating-bond-etf-flot-ishareslaunches.htm/

"The exposure to credit risk creates a yield that is significantly higher than money market-like ETFs such as MINT or BIL."


http://etfdb.com/2010/picking-the-right-money-market-etf/

PowerShares? VRDO Tax-Free Weekly Portfolio (PVI)

This ETF also isn’t really a money market fund, but presents another short-term, low risk option. Variable rate demand obligations (VRDOs) are actually long-term floating-rate bonds. But investors have the option to put VRDOs back to an investment dealer whenever the yield is reset, which is typically on a monthly basis. Generally, interest from VRDOs is exempt from federal income taxes, and often is exempt from state and local income taxes for residents of the issuing state (see holdings of PVI here) .

etfdb.com/2010/picking-the-right-money-market-etf/

CEW

note: CEW has been hit by the recent euro crisis


CEW MINT


http://www.market-topology.com


For a crisis: What would be a relatively liquid basket of liquid instruments uncorrelated to equities such that in almost any given crisis in which equities are crashing, much of the basket's value would be intact?

given the view: that nominal interest rates may rise sharply, and real ones might too

short term cash-ish: 1x MINT (money market) 1x CEW (emerging currency money market) (after it falls) (warning: volatile) 1x Exchange For Physical (EFP)

short term bonds: 1x FLOT (floating rate corporate bonds) 2x STIP (short duration inflation-protected treasuries) 1x ILB (international floating rate bonds) (after it falls) (warning: volatile)

commodities and gold: 1x IAU gold (after it falls) (warning: volatile) 1x USCI (commodities) (warning: volatile)

cash equivalents: 1x cash

real estate: 1x REIT (warning: volatile)

this should survive the scenarios of:


augment with insured traditional portfolio:


http://www.benzinga.com/analyst-ratings/analyst-color/12/04/2489467/fast-yield-grabs-with-etfs-pose-risks-fitch-says-mint says mint is too risky

http://etfdb.com/etfdb-category/money-market/

---

http://seekingalpha.com/article/317664-locally-denominated-debt-etfs-the-safest-exposure-to-emerging-market-performance

http://www.zacks.com/stock/news/66946/the-best-bond-etf-you-have-never-heard-of-fwdb

FWDB


http://amateurassetallocator.com/2011/02/18/there-is-no-such-thing-as-a-money-market-etf/

http://seekingalpha.com/article/332962-etfs-for-the-capital-preservationist


http://seekingalpha.com/article/332962-etfs-for-the-capital-preservationist

--- exchange for physical investment risks:

http://ibkb.interactivebrokers.com/taxonomy/term/106

" Are there any particular risks that one should be aware of when using SSFs to either invest excess funds or borrow funds at available synthetic rates? Overview:

While the High and Low Synthetic strategies are both hedged positions, the futures leg is subject to a daily cash variation of the mark-to-market gain or loss whereas the stock leg is not (mark-to-market gain or loss is reflected in account equity but there is no cash impact until the position is closed). If, for example, an account holds a High Synthetic position and the stock prices increases significantly, the resultant variation pay on the short futures leg may erode the account’s cash balance resulting in a debit balance which is subject to interest payments. The net effect in this example would be to reduce and potentially erase the earnings on the High Synthetic position "

(also, you want to use Dividend Protected SSFs)


" PVI is a VRDO fund. Another VRDO fund is VRD. Both are currently paying about 0.01%/month, which makes them useless in my view. "


PLK:

http://seekingalpha.com/article/191174-active-etfs-good-place-to-stash-your-cash ---

http://etfscreen.com/corrsym.php?s=SPY

-0.26 TIP iShares Barclays TIPS Bond Fund -0.20 BSV Vanguard Short-Term Bond ETF -0.16 CFT iShares Barclays Credit Bond Fund -0.09 WDTI WisdomTree? Managed Futures


http://www.macroaxis.com/invest/marketCorrelation/SPY--SPDRs


http://seekingalpha.com/article/343931-5-etfs-to-consider-for-protection-against-inflation

http://seekingalpha.com/article/473601-adding-relative-strength-to-your-bond-etf-portfolio


correlations:

etfscreen.com/corrsym.php?s=SHM

etfdb.com/etfdb-category/inflation-protected-bonds/

http://seekingalpha.com/article/187568-duration-and-tips-the-looming-scandal


AGLS


todo: consider buying wdti and more commodities if the market rebounds

compare wdti to RYMFX after the commodities market gets better

gold seems to be tracking commodities down recently

a mistake of mine: to hold junk bonds when i thought the market would fall


a good analysis of the situation right now in the markets:

http://crackerjackfinance.com/2012/05/deja-deja-vu-%E2%80%93-a-third-summer-of-european-crisis/

basically my previous analysis, namely that U.S. stocks are too high relative to the sluggish growth in Europe, missed out on this important new risk factor -- namely, that Greece may exit the EU -- not that that would shake the markets IN ITSELF, but it would shake the markets because this means that questions would be raised about the rest of the EU, and in particular it might cause a run on the banks as people worry about the Euro losing value. In fact, the banks in Belgium, France, and Italy are having problems too. http://www.reuters.com/article/2012/05/17/us-banks-deposits-idUSBRE84G0MG20120517

The EU has no lender of last resort so we have a problem.

My analysis, which seems to be identical to everyone else's is that the politicals leaders in the EU are by now familiar enough with the situation to take action, so most likely any crises will be contained. But there is substantial tail risk.

The Greek election is on June 17th. Expect volatility to rise until then.

I expect stocks to continue to fall, but i'm not very sure. maybe it's a good time to buy.


http://quantifiableedges.blogspot.com/2012/05/strong-move-to-new-high-in-vix.html

VQT

acwv http://news.morningstar.com/articlenet/article.aspx?id=555214

---

http://www.businessinsider.com/japan-is-never-going-to-default-2012-5


publically traded hedge funds:

The Man Group’s problems are a cautionary tale for others in the industry, and other hedge funds have also suffered after going public, including Och-Ziff Capital Management and the Fortress Investment Group. Och-Ziff is currently trading at less than a third of its initial public offering price. Fortress, which was trading in early 2007 at about $31 a share, closed Tuesday at $3.73.

By contrast, Winton Capital Management, another computer-driven trading shop, has flourished. Founded by one of the original scientists behind AHL, David Harding, Winton’s assets have swelled to nearly $30 billion. The firm charges management fees of 1 percent and performance fees of closer to 20 percent.

EMG.L Man Group Plc Unsp A (MNGPY.PK MNGPF.PK lon.emg

" With $59 billion of assets, Man Group is now facing the uncomfortable fact that it could be kicked out of the FTSE 100 index in June, which would lead index funds to dump the stock. The traders at AHL who pursue a managed futures strategy will have to turn performance around quick. They are already 14% below their high water mark. "

Oaktree Capital

http://www.forbes.com/sites/nathanvardi/2012/05/07/the-hedge-fund-and-private-equity-stock-stock-train-wreck/

http://www.businessweek.com/investing/insights/blog/archives/2007/05/you_want_publicly_traded_hedge_funds_we_got_em.html

http://www.bloomberg.com/news/2012-04-24/man-group-rises-as-ubs-says-hedge-fund-firm-is-a-takeover-target.html

http://en.wikipedia.org/wiki/Hedge_fund#Listed_funds

http://www.reuters.com/finance/stocks/overview?symbol=EMG.L

http://uk.reuters.com/article/2012/04/19/uk-mangroup-hedgefund-idUKBRE83I14M20120419

knight capital kcg runs trading algorithms: http://seekingalpha.com/currents/post/455711


scary picture: https://www.etfguide.com//contributor/UserFiles/8/Image/2007%20vs%202012%20Yahoo.gif


http://www.cnbc.com/id/47515182

OECD growth should be 1.7% barring euro catastrophe

US growth 2.5% but i think this doesn't mean the stocks would want to grow that much, b/c the reason ppl like large cap US stocks is partially that they're international.

So let's say that US stocks "want to" grow 2% this year, plus a little more out of irrational exhuberance (let's say 2% exhuberance).

however this must be balanced against a potentially large decline if this event takes place: http://www.intrade.com/v4/markets/contract/?contractId=713737 . Currently intrade rates that at about 40%

so if X is the magnitude of the decline, the arithmatic expected value of US stock growth is 4% * .6 - X*.4

the breakeven point is then X = 6%. Which doesn't seem impossible if someone leaves the EU.

therefore, it's not unreasonable to bid U.S. stocks at 0% growth over this year, although most likely the EU will be fine and stocks will rise.


http://finance.yahoo.com/echarts?s=SPY+Interactive#symbol=spy;range=1y;compare=iev+eem+scif+pek;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

the markets recently:

Middle of 2010: Markets: Ok here we are recovering Central banks: here's some MONEY! Markets: yay!

Second half of 2011: US market: yay! US market to Europe: hey why u lagging? Italy: i still have some debts here y'know Markets: i'm scared! Central banks: O Rly? here's some more MONEY! Markets: yay!

beginning of 2012: US market: i'm bored AAPL: Hey guys! US market: Yay!

EU market: Guys? Where'd everybody go?

April 2012: US market: Wow companies make lots of $$$! Imagine how much they'll be making next year! Team America! Yeah! India: I'm tired Spain: I don't feel so great.

Beginning of May 2012: EU market: Guys? I'm getting scared US market: Letsee it's May what's on my calendar for may -- oh everyone sells in May (goes down a little) Alex Tsirpas: Hi guys! Markets: meh.

Spain: ouch. Some ppl: hey US market, why did you, like, go way up if you were scared of Europe? Nothing's changed since last year. Alex Tsirpas: Btw we're like, seriously, NOT leaving the Euro. Markets: (applying postmodern deconstruction; "Derive another reading of the text, one in which it is interpreted as referring to itself. In particular, find a way to read it as a statement which contradicts or undermines either the original reading or the ordering of the hierarchical opposition (which amounts to the same thing).") AAA!

May 21: G-8 meeting: message to world: "We definitely, certainly hope that everything works out ok" Traders, to US market: y'know, you can't just fall forever. US market: oh ok fine, i'll go up today

May 22: Asian market: oh the US went up, they must know something, because that's where all the money is, so i'll go up too EU market: oh the US market went up, they must know something, because that's where all the money is, so i'll go up too US market: oh the EU market went up, they must know something, because that's where the crisis is. i'll go up. Papademos: Hypothetically, if you thought about us leaving the Euro, you see that it would be a terrible idea and we shouldn't do it, and therefore we won't. US market: WHAT THEY THOUGHT THE FORBIDDEN THOUGHT that does it i'm not going up

May 23: Asian market: what, i heard someone in Greece talked about leaving the EU! (goes down) EU market: hot damn, we forgot to go down for the last few days! (goes down extra, making up for lost time) US market: oh no the EU market went down, they must know something, because that's where the crisis is! (goes down)


www.tradestreaming.com/2012/05/23/why-im-a-converted-believer-in-investing-in-p2p-loans/

---

http://greenbackd.com/2012/05/23/dividend-yield-doesnt-work-what-does-three-key-conclusions/

---

http://www.mebanefaber.com/2012/05/24/global-shiller-capes/

---

http://www.slate.com/articles/health_and_science/new_scientist/2012/05/risk_intelligence_how_gamblers_and_weather_forecasters_assess_probabilities_.html


"You scored 84.27 out of 100"


http://www.mebanefaber.com/2012/05/23/trading-system-backtesters-and-updates/


http://blogs.ft.com/beyond-brics/2012/05/24/em-investing-check-out-the-grid/


Another superb ETP site, ETFreplay.com, recently launched a Volatility Target Backtest tool. What this tool is designed to do is to demonstrate what historical returns would have looked like if one had taken a high volatility ETP such as a leveraged ETP, a VIX-based ETP, etc. and combined with a dynamic cash allocation and historical volatility data to limit exposure to a target volatility ceiling.

An example may make this easier to visualize. Let’s assume that you are bullish on the Russell 2000 index of small capitalization stocks and want to get some long exposure to these stocks with the +2x leveraged ETP, ProShares? Ultra Russell2000 (UWM). Last August, however, the 10-day historical volatility in UWM spiked over 160 and right now it is at 41 – and you decide those levels of volatility are unacceptable, particularly with all the uncertainty in Greece and across the euro zone.

The solution? How about a portfolio that dynamically allocates between UWM and cash, (here using the iShares Barclays 1-3 Year Treasury Bond, SHY), based on 10-day historical volatility data and targets a forward volatility level of 20%.

The graphic below shows the ETFreplay backtest results of such a portfolio, using a monthly rebalancing period and starting in January 2007, when UWM was launched.


http://www.crossingwallstreet.com/archives/2012/05/so-wheres-the-value-premium.html


http://seekingalpha.com/author/imfdirect/articles

http://blogs.worldbank.org/prospects/

i was missing this energy story:

http://www.istockanalyst.com/finance/story/5839258/ghosts-of-the-2008-financial-crisis-continue-haunt-stock-prices

---

EIRL


http://seekingalpha.com/article/619351-bonds-do-not-make-stocks-cheap?source=yahoo


this paper suggests that companies that make political donations tend to give lower returns to shareholders:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=972670


load-to-deposit ratios for a number of banks (ldr):

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/05-2/Bank%20LTV%20Ratios.jpg


sukuk: http://news.xinhuanet.com/english/business/2012-05/27/c_131612993.htm


http://rfs.oxfordjournals.org/content/22/5/1915.abstract http://seekingalpha.com/article/332262-the-limits-of-quant-models-for-tactical-asset-allocation?source=yahoo


" Robert Martorana picture More articles by Robert Martorana »

    When The TIPS Bubble Bursts: A Cautionary Tale From Argentina Mon, Mar 5
    Time To Add VIX? A Negative Roll Yield Makes It An Expensive Form Of Insurance Tue, Feb 28
    Book Review: Frontiers Of Modern Asset Allocation, Part II Wed, Feb 8
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Comments (24) Track new comments on this article

    PompanoFrog Comments (451)
     
    A "quant" model that trend follows is a "momentum" model. They may use the "quant" name, but they are not. Most hedge funds use true quant models. These use fundamental factors such as money supply, interest rates, valuation factors, etc plus some technical factors.
    The real benefit of a quant model is not only understanding the ongoing economic relationships, but in being able to invest with some degree of confidence during periods of chaos.
    My own research suggests that all of the double digit performance of equities is during periods of chaos in the real economy. During the periods of calm there are little long term profits.
    1 Feb, 06:11 PMReply! Report AbuseLike0
    Frank123456 Comments (22)
     
    <<I welcome comments from readers to point out the mistakes and limitations of my thinking.>>
    It sounds like you are glossing over the fact that you can blend human decision-making with quantitative analysis. Indeed, all quantitative work is programmed by humans and assumptions on economic and financial relationships can be viewed to be stable or changing. If its changing -- then the assumption based on historical data is probably false --- and you could consider fading it. If you believe the relationship is stable, then perhaps it's a go-with variable. Or perhaps its just deemed to be a random walk and you can't use it. In any case, you consider it and make a decision on it.
    In your moms portfolio, it sounds like you are biased towards dividend stocks and corporate bonds in your allocation. So there is a built-in assumption that you think those will perform reasonably well on a risk-adjusted basis. A quant could take that same idea and choose to tilt 20% towards dividend stocks or corporate bonds based on X, Y or Z. Or could choose to just leave as is.
    There is no right answer -- every allocation has assumptions baked into it, whether conscious of these assumptions or not. Saying quants are X and you disagree with X is to attack a straw man.
    http://bit.ly/zrR413
    1 Feb, 06:47 PMReply! Report AbuseLike0
    Robert Martorana Comments (516)
     
    Frank,
    I can see how you would think I'm setting up a straw man to win the argument. In a sense, I am debating with a hypothetical quant who is slavishly following a mathematical system.
    I did this because I did not want to publicly attack a fellow contributor on Seeking Alpha. I have someone in mind, but I don't think it's constructive to call him out. Instead, I will invite him to a debate offline.
    For now, I stand by my core thesis: "Using a pure quant system for tactical asset allocation is irresponsible, no matter how popular it becomes."
    I appreciate your comments--hope I addressed your point.
    Rob
    1 Feb, 07:28 PMReply! Report AbuseLike1
    candy-ra Comments (32)
     
    The behavioral research suggests the exact opposite. Of course, it's hard to debate humans in general vs models in general. But most people have behavioral biases (hold losses too long, sell winners too soon, overallocate to areas they believe they know better than anyone else etc.) that cause their investment performance to lag. I do believe simple models (the ivy/cambria/jeremy-seigel one - roughly asset-class timing based on a 10-mo/200-day moving average) help humans correct for these biases and reduce risk (improve risk-adjusted return). Yes, that is a momentum model... it helps you remember to sell your losers and move on, which most people don't do.
    In the end, you need balance. If your black box is telling you something that your brain tells you is stupid, you probably shouldn't do it. But you should think and consider what it's saying - maybe it's your behavioral blinders that are letting you down.
    2 Feb, 01:41 PMReply! Report AbuseLike0
    Robert Martorana Comments (516)
     
    Pompano:
    Thanks. In retrospect, I should have just said a momentum model, though it's not always the same thing.
    As you noted, a true quant model allows for fundamental inputs, and for human judgement. Unfortunately, I have seen some quants that slavishly follow whatever the black box tells them. I'm even thinking of challenging one to a debate.
    But I digress. As you noted, the profits are in the chaos. I actually did OK during 2008-2009, since there were ample warning signs. I got back in too early, but not much. How about you?
    Rob
    1 Feb, 06:47 PMReply! Report AbuseLike1
    SeekingTruth Comments (832)
     
    In my early 30's,. I devised a layman's file that I called my FIESTA file.
    It served me fairly well when I tended it.
    My job, family, hobbies, golf, moving around, designing and building houses, etc. did blunt its effectiveness however.
    FIESTA was an acronym for:
    F = Fundamentals
    I = Interest rates (all of them), and Insiders.
    E = Economy (as much as I could absorb)
    S = Sentiment & Seasonalities
    T = Technical's (mostly for tie breakers, timing and close calls), also Taxation. Also Treasuries, including Zero coupon bonds.
    A = Administrative (Congress, new laws, etc.), and "most trusted" Advisors"

GTAA is Melane Faber's thing! why doesn't it work?

this article basically argues "because trend following is stupid": http://seekingalpha.com/article/332262-the-limits-of-quant-models-for-tactical-asset-allocation?source=yahoo

it makes a lot of good points

http://seekingalpha.com/article/349061-book-review-frontiers-of-modern-asset-allocation-part-i

note: ppl say that mean/variance portfolio optimization would be a good idea in theory, except: (a) due to the nature of exponential growth, small estimation errors in the mean expected return and variance of expected return of various asset classes lead to large mistakes in the outcome (b) since real-world data is scarce, we end up using datasets that probably overweight the last decade or two (since that's all the data we've got). Which means the model will tell us to overweight assets classes which have done well recently, which is the opposite of what we should be doing

http://rfs.oxfordjournals.org/content/22/5/1915.abstract suggests that we'd need 3000 months (250 years) of data before the error bars on this sort of estimation would get reasonably low !


recc'd by Robert Martorana as examples of 'good', human-run trend following: http://portfolios.morningstar.com/fund/holdings?t=WASCX&region=USA&culture=en-us http://quote.morningstar.com/fund/f.aspx?t=paaix although he may not like human-run trend following in general

---

http://alphaclone.com/

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" The Real Markowitz Portfolio: How did Harry Markowitz manage his own money? Did he use a complex algorithm to determine his asset allocation? On page 306 we find that Markowitz told Jason Zweig the answer in 1988: Markowitz had a 50/50 mix of stocks and bonds. Somehow I find it heartening to know that Harry Markowitz used heuristics for his own portfolio. " -- http://seekingalpha.com/article/349081-book-review-frontiers-of-modern-asset-allocation-part-ii

" Reported Volatility Is Too Low: Kaplan showed how the reported volatility is too low for small-cap stocks, real estate, and hedge funds. He offers detailed analysis of each, and proves his case. "

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black turkeys: big downturns happen often but we like to pretend they don't http://www.slideshare.net/morningstarfr/beyond-the-bell-curve


dunno if this is what they mean to recommend but the last slide says:

stocks 66% long term bonds 12% IT bonds 22% cash 0%

http://www.slideshare.net/morningstarfr/beyond-the-bell-curve


in the short term, market returns explain 80% of performance. In the longer term, (static) asset allocation explains 20% and active management explains 20%.

" "What the Active Share research has revealed is that managers relying on market timing are less likely, on average, to add value than managers who engage in stock picking," Prahl said. For those opting for passive portfolios, "stock picking is a lot to give up. That's what the Active Share literature shows," he added. " -- https://www.lordabbett.com/advisor/commentary/investmentperspectives/asset-allocation-setting-record-straight/


http://m.kiplinger.com/article.php?url=%2Fcolumns%2Fpractical-economics%2Farchives%2Finvesting-lessons-great-recession.html


http://www.fa-mag.com/fa-news/9853-morningstar-cio-questions-attack-on-diversification.html?tmpl=component&print=1&page=


http://www.morningstar.co.uk/uk/655/articles/97062/Investing-in-Europe-with-More-Style.aspx

need to look at quadrants large-cap/small-cap, value/growth; two of these quadrants may be favored at a particular time

---

has a piechart of total estimated market capitalization of various asset classes:

Asset Allocation in the 21st Century corporate.morningstar.com/.../Ph.D.%20Paul%20Kaplan,..

---

over most periods of 60 years and longer, stocks perform better than bonds

but over the past 30 years, bonds have performed better! so stocks can do worse for an extended period of time!

--- http://seekingalpha.com/article/621501-balancing-risk-reits-that-outperform-in-good-times-and-bad


SWPSX uses Schwab equity ratings (but is too high on IT for my liking)

http://www.schwab.com/public/schwab/resource_center/expert_insight/investing_strategies/exchange_traded_funds/what_to_know_about_actively_managed_etfs.html


http://seekingalpha.com/article/593741-rising-rates-etf-portfolio

http://aswathdamodaran.blogspot.com/2012/05/how-much-is-growth-worth.html


" But the move into giant funds could result in lower returns. Studying performance for the 15 years ending in 2010, PerTrac? found that young funds delivered the best results. For the period, funds that were less than two years old returned 16.2 percent annually, while funds that were two to four years old returned 12.2 percent, and those with track records of more than four years returned 10.9 percent. The young funds delivered extra returns while recording lower risk as measured by standard deviation. In addition, small funds with less than $100 million in assets outperformed larger funds by a wide margin. "


http://seekingalpha.com/article/627141-street-estimates-for-high-and-low-s-p-500-earnings-and-growth-rates-with-p-es-and-pegs?source=yahoo

http://seekingalpha.com/article/626611-global-macro-the-u-s-equity-rundown?source=yahoo

country rotation accu

. The new ETFs, including the Horizons Universa Canadian Black Swan ETF (HUT) and Horizons Universa U.S. Black Swan ETF (HUS) will combine traditional exposure to stock indexes with an actively-managed options strategy.

from lowest risk to highest: COBO QLTA LQD HYG QLTC

http://etfdb.com/2012/which-sector-etfs-are-cheap/

etf news: http://etfdb.com/features/

sustainable investing AdvisorShares? Launches Global Echo ETF (GIVE)

DFJ (japan small cap)

btal (low beta)


position sizing for trading:

i think the thing to do is to make positions just the size so that you care.

if the position is big enough that you care too much, you lose the ability to think rationally about it. this is obvious but i'll give my anecdotal evidence anyhow. right now i have a position that is too big on. it's more than 2% of my money. it's not so much that i'd be in financial trouble if i lost all of it, but it's enough that i'd be happy if it went the right way and unhappy if it went the wrong way. i find that i have trouble sleeping as late as i usually do because i want to get up and check the market. i am constantly questioning if i should close the position. i find myself thinking about this even though i've already worked out my strategy for deciding when to close it and even after i've determined that none of the new information of the day should make me take any action. i find myself wanting to lookup more data on financial blogs to get some clue about what i should do, even though i already know the answer and it's unlikely i will learn anything that will make me change my mind. because of this, i feel like i should reduce the position size, but when i think about this i get clouded by emotion and so i don't want to make any decisions in this state, and so i decide to just follow through on the strategy i thought of before. this is a silly position to be in. i still have the possibility to make money off of the thinking i did when designing the strategy, but i am impaired in my ability to incorporate new information and change my mind -- and competing against other market participants who are not impaired in this way.

the more surprising anecdote, at least for me, is that if the position is too small, you aren't motivated to really think about it. i used to buy very small numbers of shares of stock. sometimes i made money, sometimes i lost it, but the amounts were trivial compared to the amount of money i spent on groceries each week. later, when i started taking larger positions, i found myself actually thinking through what might happen, and learning about all sorts of things i didn't know about before, such as bid-ask spreads.


i don't quite understand this but i think it's important: http://www.pimco.com/EN/Insights/Pages/Wall-Street-Food-Chain.aspx


an argument for decoupling:

http://wallstreetexaminer.com/2012/05/30/safe-haven-could-u-s-markets-rally-in-a-global-decoupling/


http://www.irishtimes.com/newspaper/finance/2012/0601/1224317056033.html


the social utility of finance:

An example in which you can see all of these is: funding tech startups.


http://www.forbes.com/sites/tomaspray/2012/05/23/global-etfs-warned-of-us-weakness/?partner=yahootix


the current U.S. national debt per taxpayer is about $138558 ( http://www.usdebtclock.org/ ). maybe a good rule of thumb would be for each taxpayer to keep at least that much in relatively liquid assets?

note that total debt per FAMILY is higher (693561)


http://seekingalpha.com/article/632591-aim-for-the-middle?source=yahoo


VQT vs splv vs vspy: http://vixandmore.blogspot.com/2012/01/comparing-splv-and-vqt.html

http://vixandmore.blogspot.com/2012/01/three-new-risk-control-etfs-from.html VSPY? VSPR? VLAT? not recommended (b/c actually you should be OVERWEIGHT during exceptionally high volatility, see below)

INSD, KNOW


" One of the interesting aspects of the approach taken by VSPY, VSPR and VLAT is that these products will tend to have minimum exposure when the VIX is at its highest – and as anyone who has ever looked a chart of the VIX and SPX/SPY knows, this is typically when stocks bottom and begin a sharp bullish move.

With impeccable timing, EconomPic? Data just happened to publish a study yesterday, VIX as a Predictor of Equity Returns, which concluded that for the most part, SPY daily returns were much higher with an elevated VIX than with a historically low VIX. "

http://vixcentral.com/


http://www.multpl.com/

http://sixfigureinvesting.com/2012/05/why-18-5-is-the-right-pe-ratio-for-the-sp-500/ argues that you can invest in the S&P 500 whenever this number is less than 18.5 (or rather, he says that you should NOT invest when it is higher)


http://stocktwits.com/symbol/VQT

http://marketsci.wordpress.com/2012/05/31/taa-model-for-june-2012/

when it is high, sell puts instead of buying stocks: when volatility is ridiculously low, buy calls instead of stocks;

http://econompicdata.blogspot.com/2012/05/put-selling-as-replacement-for-stocks.html


" Q: Is there a strategy or style which is most effective at generating return?

[Jack Schwager] The diversity of strategies people use is truly remarkable, I saw people using completely different strategies to the degree that if I had set out to invent 15 different strategies for a fictional work…. I couldn’t have made the strategies more different to the ones I saw in real life! This illustrates a point I have made in all my works insofar as there really is no ‘holy grail‘ or single style that is most effective. Those people looking for a single unified strategy are not asking the right question.

...

It’s important to also look at the importance of doing nothing. The inspiration for this comes from something Debussy once said, “…music is the space between the notes.”

This is a great analogy as the key to successful trading really is the space between trades! It’s not just a matter of making the right trades… but also not doing anything when things aren’t right. I use one specific example in my book which I think highlights this really well, and that is a fellow called Kevin Daley (manager of the Five Corners Fund). Kevin has a hedge fund, but not in the conventional sense… It’s an account he runs from his home. If anyone wants to invest that’s fine, but fundamentally it’s a one man operation that he has never really looked to expand. He’s essentially different from many other traders by being someone who is very close to only trading long equity positions. He does go short on occasion, but these positions are contained to well under 10%. What I found particularly interesting about his track record is that over 12 years, he has a cumulative return in excess of 800%. The really interesting point is that over the same period the S&P had a return of 0%! How did he make over 800% as a near long-only when the index is flat? There are two elements… Firstly, he is a very good stock picker. The more important reason is that during the big bear markets like 2000-2 and 2008… while he may be down, he’s only down single digits. When opportunities are not good, he simply does not invest! or does so very lightly. Instead of losing money, he treads water. "

" Q: What are the distinctions between trades that are “Winning or Losing” vs. “Good or Bad?”

[Jack Schwager] If you asked most people to categorize good trades and bad trades, you would find the answers to be quite simple… If it makes money it’s a good trade, and if it loses money, it’s a bad trade. That’s not true at all… "

" Q: Do successful traders share any behavioral or personality characteristics?

[Jack Schwager] I can assure you that the personalities of traders are extraordinarily diverse. You meet people who are painfully shy, overly extroverted, egocentric, academic, athletic and more. If you put the most successful traders up together, you wouldn’t find any common personality denominators.

There are however, some successful traits. People who are successful traders will have the ability to quickly admit that they’re wrong. Regardless of their personality, they will have flexibility. The worst traders in the world are those who are politically committed one way or another and don’t listen to anything else. This is really critical to trading success and a trait which has been shared by virtually every trader I’ve met.

Discipline is also important. People who are successful will do things because they have to be done. If they go on vacation, they will probably check-in… getting up in the middle of the night often. They will do things which may be uncomfortable and contrary to living a ‘happy‘ or ‘good‘ life. "

" Q: Have success methodologies changed much in the last 25 years?

[Jack Schwager] I once asked Ed Seykota if markets were different ‘back then‘ looking at the world 20 years ago. He told me markets are the same now as they were, they’re always changing. Markets are always different and part of the process is adapting and maintaining traits that allow you to win in any environment.

The past 25 years have seen an increase in the diversity of strategies. Going back to the beginning of this period, a lot of complex strategies we use now simply didn’t exist. There wasn’t credit arbitrage, structured products and more. Alongside this, computers have become more important meaning that simple algorithmic strategies such as trend-following don’t work as well now. As the market moved from having very few managers of scale to having a lot of single managers running $10-20 billion, you saw an environment that changed from having a few big fish and a lot of small ones to having a huge amount of big fish in the pond. "

http://seekingalpha.com/article/648521-coming-week-market-movers-spain-and-3-other-sources-of-panic?source=yahoo

advocates owning Swedish krona: http://www.ft.com/intl/cms/s/0/45b0ca1a-a42a-11e1-84b1-00144feabdc0.html#axzz1xS9ANe4S

advocates owning canadian, norwegian, swedish, and singaporean currency, as well as swiss, dollar, and japanese

Currencies from fiscally healthier nations (Canada, Norway, Sweden, Singapore) Traditional safe havens: CHF, USD, JPY. Note: If the EZ continues to deteriorate the odds rise that safety demand for the CHF overwhelms the SNB, it abandons or lowers its peg to the EUR ,and the CHF soars. Also, despite their deep fundamental weaknesses, the USD and JPY continue to perform well in times of fear.


alternatives:

http://www.forbes.com/sites/katestalter/2012/04/19/7-etfs-for-givers-bears-and-others/?partner=yahootix

http://seekingalpha.com/article/641041-getting-whipsawed-only-in-hindsight?source=yahoo

faber on what happens when things are below 200 MA: http://www.mebanefaber.com/2009/04/03/where-the-black-swans-lie/

http://www.moneyshow.com/investing/article/44/DailyGuru-27177/7-New-Market-Neutral-ETFs/&scode=024328


europe ETFs:

http://seekingalpha.com/article/651301-top-10-european-regional-etfs

---

indicators that Chris Ciovacco looks at: S&P 500 Dow Copper VIX commodities treasuries (both US and foreign) semiconductors global stocks nasdaq european banks foreign stocks S&P 500 equal weight


The “Predicted Surprise” – for earnings – the percentage difference between StarMine’s? SmartEstimate?, which puts more weight on recent forecasts and top-ranked analysts, and the mean estimate of all analysts

---

http://www.optionpit.com/blog/vxapl-aapl-iv-index-near-jan-lows

---

dividend screens:

http://seekingalpha.com/article/649571-before-they-were-stars-secrets-to-finding-hidden-dividend-growth-stocks-before-they-get-famous

---

http://www.ritholtz.com/blog/2012/01/revisiting-quant-approach-to-tactical-asset-allocation/

---

"

Scott Teresi Says: January 15th, 2012 at 5:17 pm

I think GTAA is underperforming because the market is rising while bouncing around the 200-day SMA (similar to 10-month SMA). GTAA went risk-averse just after SPY plunged 15-20% in August. Then as SPY recovered, GTAA was still in risk-averse assets and has fallen behind. If the market plunges again soon, GTAA will look very smart. Otherwise, its market call based on the moving averages had a cost in lost opportunity.

With not much data on GTAA over very many market conditions, it’s hard to see if this will be typical of the algorithm or just the occasional price of using a risk-managed asset allocation fund.

Maybe so many advisors are now using trading strategies similar to GTAA that the fund will become a contrarian indicator. (Hope not, since I have some money on it, believing in the strength of Mebane Faber’s long-term tests in his 2007 paper!) "


http://www.financial-planning.com/news/actively-managed-etfs-pimco-gross-kickstart-2677580-1.html?portal=etfs&id=2677580&sponsor_info=1311


http://investingforaliving.wordpress.com/2012/01/17/market-timing-portfolio-5-year-performance-2007-2011/


http://online.barrons.com/article/SB50001424053111904582604576432140042746566.html

http://www.thedigeratilife.com/blog/momentum-investing-chasing-performance-following-trends/

http://www.etfreplay.com/

http://www.advisorperspectives.com/dshort/updates/Monthly-Moving-Averages.php

http://www.bogleheads.org/forum/viewtopic.php?f=1&t=92413


prosper

lending club

--- GURU ALFA (long-short although the chart doesn't show this!)

  oh here's why "Dynamic Hedging. to manage systemic market risk, the index utilizes AlphaClone's dynamic hedge mechanism which can vary the index between being long only and 50% long/50% short a broad US market index depending on certain market price targets. The mechanism seeks for the index be long only during protracted market run ups and well hedged during multi-month bear markets."

http://www.forbes.com/sites/abrambrown/2012/06/10/a-new-etf-built-on-stocks-from-top-hedge-funds/

mb should construct a hedged version of these..


FNSAX


" Todd Sullivan (Value Plays): Rail traffic/Temp employment. If you had cut off all communication with the outside world & only looked at those two indicators over the last 4 years, you would have known both the timing of the economic recovery and you would have known a “double dip” was simply not going to happen. Yet, every day we sees more second and third tier metrics being used because they back to bias of the person using them….. It is simply, rails & temp employment ….if you want to get fancy, add car sales housing starts. "


http://dynamichedge.com/2011/11/18/how-to-identify-program-trading/


http://falkenblog.blogspot.com/2010/07/batesian-mimicry-explanation-of.html


ed thorp (not to be confused with Mackenzie Thorpe) on his trend following strategy: http://abnormalreturns.com/ed-thorp-on-trend-following-an-excerpt-from-hedge-fund-market-wizards/


http://www.reuters.com/article/2012/06/15/japan-economy-boj-idUSL3E8HF0J420120615


" Income-seeking investors should certainly look at British companies. That's because British shares generally pay higher dividends, mostly because our government doesn't tax dividends twice. A fair number of British companies are already listed on the New York Stock Exchange, so you don't need to worry about foreign-exchange costs, and these companies pay their dividends to American shareholders in dollars. "

" Cheaper shares If you take two companies that are identical in every respect, except that one is based in America while the other is located in Britain, then the British company's shares would probably trade at a lower price-to-earnings ratio.

One reason for the discrepancy is that it's easier to do business in America, mostly because British society is still influenced by the lingering remains of a mixture of socialism and the medieval feudal system that America rejected in the Constitution. So some Britons still consider trade and commerce to be "vulgar" and beneath them, longing for the days depicted in television's Downton Abbey, while others (far fewer than there used to be) still believe that every problem can be solved by more government.

But in several industries, Britain leads the world, and when you buy shares in some "British" companies, what you're really obtaining is an investment in a global company that just happens to be listed on the London Stock Exchange. We're the nation that invented international capitalism, along with the Dutch, and we're still pretty good at it! "

---

http://money.cnn.com/2011/02/10/markets/dollar/index.htm

http://en.wikipedia.org/wiki/Special_drawing_rights

                        dollar           euro              yen               pound2011–2015[47][note 2] 0.6600 (41.9%) 0.4230 (37.4%) 12.1000 (9.4%) 0.1110 (11.3%)

$NYA200R


Greek VC fund:

http://theopenfund.com/Investors/Apply

the minimum investment is too high for me (30,000 Euros) but i think this could be an excellent investment. I'd invest in it if i had more money.

TaxiBeat? sounds particularly interesting


ideas for safeguarding your money in the event of major trouble:

http://www.businessinsider.com/it-starts-the-governments-plan-to-steal-your-money-2012-6

zerohedge guest post has some simple steps too: "

    Maintain significant bank and brokerage accounts outside your home country. Consider setting up an offshore asset protection trust. These things aren't as easy to do as they used to be. But they'll likely be much less easy in the future.
    Make sure you have a significant portion of your wealth in precious metals and a significant part of that offshore.
    Buy some nice foreign real estate, ideally in a place where you wouldn't mind spending some time.
    Work on getting official residency in another country, as well as a second citizenship/passport. There's every advantage to doing so, and no disadvantages. That's true of all these things.

" -- http://www.zerohedge.com/news/guest-post-how-save-your-money-and-your-life


quantitative metrics to evaluate strategies:

http://onlinelibrary.wiley.com/doi/10.1002/9781118267684.app4/pdf

High-Performance Managed Futures: The New Way to Diversify Your PortfolioPublished? Online: 2010 by Mark H. Melin Appendix D: Identifying True Risk and Utilizing the Best Managed Futures Performance Measure


i like this guy's weekly summaries. mb someday i should invest in his Strategic Growth HSGFX or Strategic International HSIEX fund

http://www.hussmanfunds.com/theFunds.html


i think this is right on target, i was going to write about some of these mystelf:

http://www.minyanville.com/business-news/editors-pick/articles/AMZN-AAPL-FB-NFLX-investing-lessions/6/20/2012/id/41862

" Four Real-World Investing Rules That Should Be Taught in Schools By Michael Comeau Jun 20, 2012 12:00 pm When investing in the real world, textbooks and theory aren't much help.

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MINYANVILLE ORIGINAL The idea that I've been on Planet Earth long enough to have actually learned meaningful life lessons from my own mistakes kind of makes me sick.

That applies across the board to family situations, career choices, my love life, and the topic of today's discussion: investing.

After over a dozen years of looking at the market on a more-or-less daily basis, and throwing a decent amount of money down the drain on idiotic trades, I've grasped some key realities about how money moves in the real world, far away from the textbooks and theory pushed at your average business school.

With that in mind, I'd like to present four investing rules I wish they had taught me back in school.

1. What You Know, Everyone Else Probably Knows, Too.

Investors have a tendency to overestimate the uniqueness of their ideas, even though they are usually inspired by widely-disseminated news and financial reports. Furthermore, the presence of social media outlets like Twitter and Facebook (FB) have drastically accelerated the speed at which investable information is distributed. That means that with few exceptions, everything gets priced into the market pronto.

So if you’re thinking of running out to buy Amazon (AMZN) because it’s eating Best Buy’s (BBY) lunch, or shorting Facebook because of slowing revenue growth, slow down and take a deep breath.

It’s important to understand the past and present. But to a certain extent, to be a successful investor, you’ll have to predict the future -- a far bigger challenge than skimming through 10-Ks and listening to earnings calls. In other words, focus on examining not where fundamentals are, but where they may be going.

Remember, when a guy on TV tells you a stock is good because it’s trading at X times earnings and has Y in cash on its balance sheet, he’s simply repeating the bare minimum of what the market knows.

As wise men have said, “What the market knows is not worth knowing.”

2. Timing Is Everything.

At Minyanville, when looking at the market, we believe it’s important to understand not only "the what," but "the why."

However, the more I think about it, the more I’d argue that "the when" trumps both those considerations.

Let me tell you a story.

I once interviewed at a hedge fund that was making a major bet on its prediction that the housing bubble would implode.

Smart money, right?

However, that interview took place in early 2003, right before the Housing Index (^HGX) doubled.

Likewise, a lot of folks were short Netflix (NFLX) last year as it crashed and burned from that $304.79 high hit on July 13, 2011.

However, many a bear's butt was fried on the 73% rally the stock staged before it finally died out.

So when you have an investment thesis in your mind, ask yourself, “What makes now the right time to bet on this?”

Furthermore, if the S&P 500 (^GSPC) is skyrocketing, it is entirely likely that junky companies rally big-time.

Likewise, if the market’s in meltdown mode, even the best of the best can get smashed.

Apple (AAPL) closed out 2007 at $198.08. But in 2008, even in the face of enormous earnings beats and the halo of the iPhone’s unprecedented success, Apple finished the year at $85.35 -- a drop of 57%!

You may be smart, but remember: Sometimes Mr. Market just does not give a damn about what you think.

3. You May Be Suffering From Confirmation Bias.

The Oxford Dictionaries defines confirmation bias as “the tendency to interpret new evidence as confirmation of one’s existing beliefs or theories.”

Translated into financial terms, it means that if you’re bullish on gold (GLD), you interpret everything you see as bullish for gold. In fact, you’ll hunt around for more reasons to be bullish for gold.

I know the power of confirmation bias from a horrible experience with a former tech highflier called Rackable Systems, which changed its name to SGI (SGI) after it acquired Silicon Graphics in 2009.

Rackable Systems was essentially the Fusion-IO (FIO) of 2006. It was pulling in boatloads of money selling energy-efficient servers to major data-center operators like Microsoft (MSFT), Amazon, and Yahoo (YHOO).

And then -- let me point out that I had complete knowledge of this -- competitors like Hewlett-Packard (HPQ) decided they wanted to get a whole lot more of those data-center dollars.

Maybe I should have imagined what would happen if Rackable lost Microsoft (34% of revenues) or Yahoo (26% of revenues) as a customer, or at the very least, the margin pressures that could be introduced in a more competitive server environment.

However, I viewed the new competition as nothing less but a complete confirmation that Rackable was on the right track -- a massive barrel of stupidity that resulted in me watching Rackable crash from $56 to under $10.

It is impossible to stay perfectly objective when performing research.

However, you can stay one step ahead of your own bias by regularly asking the question, “Am I just telling myself what I want to hear?”

4. In Isolation, Valuation Ratios Are Useless.

Far too often, investors take an incredibly simplistic view of valuation ratios, automatically assuming that if something is "cheap," it’s good, and if it’s "expensive," it’s bad.

However, oftentimes you’ll see the cheap get cheaper and the expensive get more expensive.

For example, over the past few years, how many times have you heard that Research In Motion (RIMM) was cheap based upon a P/E ratio? And yet due to declining market share and earnings power, it’s down 93% from its 2008 high, and down 26% this year alone.

On the other side of the equation, Salesforce.com (CRM), the poster boy for supposedly "overvalued" stocks with its 100+ P/E, is up 37% in 2012.

A P/E ratio, like every other valuation ratio, is 100% meaningless in isolation.

Rather, it is far more important to examine how the "E" part of the equation is changing. (Or sales for EV/S ratios or EBITDA for EV/EBITDA ratios, etc.)

A company trading at five times earnings can look awfully expensive following a bad quarter that destroys future earnings expectations. That’s how a stock like Nokia (NOK) can go from $10 to $5 to $2.50 in the blink of an eye.

It also works the other way around -- a high-priced momentum stock can suddenly look cheap if earnings come in ahead of expectations and forward estimates rise.

However, investors should note that the expensive momentum names that rally strongly when the market is up also tend to get hit hard when things go south.

Twitter: @MichaelComeau?" -- http://www.minyanville.com/business-news/editors-pick/articles/AMZN-AAPL-FB-NFLX-investing-lessions/6/20/2012/id/41862


not sure i agree with this:

mortgage reits: http://seekingalpha.com/article/683451-some-fallacies-about-mortgage-reits-and-why-they-re-ideal-for-income-investors


http://alletf.com/content/a-practical-market-seasonality-portfolio

"mutual fund managers are better than controlled money burning by the thinnest of margins:

    The average manager adds an economically signi ficant $140,000 per month (in Y2000 dollars). The standard error of this average is just $30,000, implying at t-statistic of 4.57. There is also large variation across funds. The least skilled manager amongst the top 1% of managers generated $7.82 million per month. Even the least skilled manager amongst the top 10% of managers generated $750,000 a month on average. The median manager lost an average of $20,000/month and only 43% of managers had positive estimated value added. In summary, most funds destroyed value but because most of the capital is controlled by skilled managers, on average, active mutual funds added value." -- http://dealbreaker.com/2012/06/mutual-fund-managers-have-the-wrong-skills/

http://news.morningstar.com/articlenet/article.aspx?id=557930


" Have a hankering to play the Obamacare ruling? It's risky, but if you must, here are a couple non-levered long-only ETF's ideas that traders are currently focused on: The Health Care Select Sector SPDR (XLV +1.1%) and the iShares Dow Jones U.S. Medical Devices Index Fund (IHI +1.6%). "


" Morgan Stanley listed sixteen stocks who have a consensus 2012 dividend yield above its median bond yield on the respective company's outstanding debt issues, and where Morgan Stanley has a overweight rating on the stock. Low bond yields signal that the credit markets believe that the company can continue to internally finance their operations, or that bond investors will lend the company incremental money at low nominal rates, lessening the company's need to reduce its dividend. The sixteen companies listed below are in descending order by the difference between dividend yields and bond yields.

http://seekingalpha.com/article/686881-a-dividend-investing-history-and-tips-for-today-s-market

The sixteen names above actually form a widely diversified portfolio with exposures in energy, (DO, CVX) information technology , consumer staples (GIS, PEP, PM), healthcare (PFE, SJM), materials (NUE, FCX), telecommunications , industrials (EMR, GE), and financials . Twelve of the sixteen names are in the Dividend Sweet Spot of between 3% - 6%, which has produced higher total returns on average over time. Only Centurylink, the wireline telecommunications company, has a dividend yield of above six percent, and it is also singularly the only below investment grade rated company listed given its challenging and secularly declining business model. "

"

On a second screen, Morgan Stanley listed stocks with attractive and sustainable dividends and an overweight rating by MS analysts. The screen included companies with a market capitalization of greater than $2 billion, a dividend yield of between 2.25% and 6%, and analysts estimates of growing dividends, a dividend payout ratio of less than 75%, a net debt/cap less than 15%, and a free cash flow yield of greater than 5%. GE, PFE, PM, CL, EMR, NUE are again included on this second screen, which also includes Honeywell with a 2.8% dividend yield (HON), Accenture 2.8% (ACN), Las Vegas Sands 2.3% (LVS), Baxter 2.7% (BAX), ACE Limited 2.7% (ACE), LyondellBasell? Industries 3% (LYB), Archer Daniels Midland 2.3% (ADM), Marsh & McLennan? 3% (MMC), Cardinal Health 2.4% (CAH), Marathon Petroleum 2.5% (MPC), Western Union 2.4% (WU), Invesco 3.2% (IVZ), Interpublic Group of Companies 2.3% (IPG), and Lear 2.9% (LEA).

The aforementioned ADM, CL, EMR, NUE, and PEP are all also members of the Dividend Aristocrats, companies that have paid increasing dividends for at least twenty-five years. The Dividend Aristocrat investing style can be approximated through SPDR S&P Dividend ETF (SDY). My earlier analysis demonstrated that companies with this dividend payout profile have produced higher average returns with less volatility of returns over a long time period. "

-- http://seekingalpha.com/article/686881-a-dividend-investing-history-and-tips-for-today-s-market


"

The Seasonality of Gold - The Autumn Effect

Dirk G. Baur

University of Technology, Sydney (UTS) - School of Finance and Economics

May 13, 2012

Abstract: This paper studies recurring annual events potentially introducing seasonality into gold prices. We analyze gold returns for each month from 1980 to 2010 and find that September and November are the only months with positive and statistically significant gold price changes. This “autumn effect” holds unconditionally and conditional on several risk factors. We argue that the anomaly can be explained with hedging demand by investors in anticipation of the “Halloween effect” in the stock market, wedding season gold jewelery demand in India and negative investor sentiment due to shorter daylight time. The autumn effect can also be characterized by a higher unconditional and conditional volatility than in other seasons. " -- http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1989593

thesis that a run on money-market funds was the real fulcrum of th 2008 financial crises (maybe not the underlying cause, but the amplifier): http://brooklyninvestor.blogspot.com/2012/06/real-cause-of-financial-crisis-money.html

here's a good idea: a modular plug-in pipeline for retail investors to decide how to invest: http://www.alexhfrey.com/?p=31

"Emerging Hedge Funds, defined here as those funds with less than 36 months of history and whose AUM < $300m, have generated excess compound average annual returns of +3.66% per annum over and above the return of their older ( > 36 month ), typically larger, brethren. " http://allaboutalpha.com/blog/2012/06/21/emerging-managers-have-delivered-twice-the-returns-of-established-managers/

bank loans vs. high yield bonds: http://www.learnbonds.com/bank-loan-mutual-funds/

" What’s the Bottom Line?

If the US is entering a multi-year period of rising interest rates, Bank Loans Mutual Funds should outperform High-Yield Bond funds while providing a similar level of yield. "

SPDR Blackstone/GSO Senior Loan ETF

distressed debt funds?

"

Lazard Emerging Markets Equity has returned an average of 15.5% a year over the past decade, ranking among the top 10% of peers, according to Morningstar (MORN: 57.97, 1.43, 2.53%) . It recently had less exposure than the MSCI benchmark to China but more to Brazil. There is no upfront sales charge and yearly expenses are 1.42% of assets."

" Over the past two years Herro has amassed huge stakes in banks like France's BNP Paribas, the Bank of Ireland (IRE), and Spain's Banco Santander (SAN). He is the biggest U.S. shareholder of Italy's Intesa Sanpaolo. "

The strategy has prevailed over the long term -- Herro's $7.7 billion fund, Oakmark International (OAKIX), has returned 9.2% a year since 1992, while the MSCI EAFE index, which tracks developed markets outside North America, has returned just 4.9%.

OAKIX

" But he has fine-tuned his approach. He now thinks the price/earnings ratio, perhaps the most widely used metric in investing, is a "useless measure"; he cares about free cash, not earnings. "

" For those who aren’t aware, Buffett is quoted saying that the total market cap vs GNP is one of his preferred valuation metrics. The current reading of 89% is still above his preferred buying range (70-80%), but well off the highs we’ve seen in the last 15 years. Buffett has previously explained his thinking behind the indicator:

    “For me, the message of that chart is this: If the percentage relationship falls to the 70% or 80% area, buying stocks is likely to work very well for you. If the ratio approaches 200%–as it did in 1999 and a part of 2000– you are playing with fire.”"

most important macro indicators are jobs, Building Permits, S&P Case-Shiller Home Price Inde, University of Michigan: Consumer Sentiment, http://dynamichedge.com/2012/06/20/fundamental-top-down-macro-for-the-brain-damaged/

what does a price chart look like when a trend ends: http://ivanhoff.com/2012/06/21/this-is-how-upside-momentum-often-ends/

" You would lose about 10% a year if you bought the same stocks that mutual funds and hedge funds did as soon as they disclosed their holdings, according to Thomson Reuters research. "

http://finance.yahoo.com/news/5-favorite-etfs-launched-past-110000055.html BOND, ILB, FLOT, (DXJ

NKY EWJ)

http://www.forbes.com/sites/ericjackson/2012/06/28/the-64-biggest-investing-cliches-to-sound-like-a-pundit/

WETF


vix seasonality: http://vixandmore.blogspot.com/2009/06/vix-at-seasonal-cycle-low.html


http://community.nasdaq.com/News/2012-07/fxis-not-the-best-china-etf.aspx?storyid=153147


private equity from earliest IPO to latest, with cumulative price change since ipo on the right:

fig -89% bx -64% ozm -74% kkr +26% apo -33% oak -6%

richard ferri's "economic tilt portfolio to mimic PE:


GBI physical gold


folio investing

motif investing


bond funds

http://online.barrons.com/article/SB50001424053111903431804577502700106343044.html?mod=BOL_hps_highlight_top#articleTabs_article%3D3

summary: PIMCO is global macro, Fidelity is bottom-up quantitative, T. Rowe Price is consensus-building and conservative.


dividend stock selection:

http://seekingalpha.com/article/718611-dividends-from-our-quantitative-selection-approach-vs-s-p-1500-with-3-standout-stocks?source=yahoo

--

Market Vectors Preferred Securities ex-Financials ETF (NYSEArca: PFXF) started trading Tuesday.

--

1:05 PM Stable or shrinking yield premiums to Treasurys suggest some emerging market sovereign debt is emerging as a safe-haven play. Of note are Mexico, Brazil, and Colombia, but the Philippines and Indonesia are also on the list of those not necessarily selling off every time markets go into "risk off" mode. [Global & FX] Comment!

" These bonds' recent correlation with U.S. Treasurys won't protect them from selloffs if global markets undergo a severe downturn, analysts warn. As such, their haven status is largely confined to one within emerging markets. "

" Such debt has also seen its typical relationship with global risk markets gradually break down, showing its shift into a relatively safer asset class compared with global and emerging-market equities. For instance, the correlation of Brazilian external debt with world equity markets now stands roughly at zero, after seeing high positive correlations less than a decade ago, according to Barclays. "

" For instance, the 30-day correlation between Mexico's 10-year sovereign bond and U.S. 10-year notes is about 0.89, according to CQG. A correlation of one means that the two assets show no variance between each other. Meanwhile, Colombian sovereign debt's risk premium has shrunk to just 163 basis points over U.S. Treasurys from around 191 basis points at the start of the year, according to the J.P. Morgan Emerging Market Bond Index Global, or Embig. " -- http://online.wsj.com/article/BT-CO-20120725-713670.html

"

Asia (Developed and Emerging)

The WisdomTree? Asia Local Debt Fund (ALD) offers access to a dozen Asian economies including both developed and emerging markets: South Korea, Malaysia, Indonesia, Philippines, Thailand, India, China, Hong Kong, Singapore, Taiwan, Australia and New Zealand. The debt held by ALD is denominated in the local currencies of the constituent countries [see also Asia-Centric ETFdb Portfolio ETFdb Pro Members Only]. "

" JPMorgan Emerging Markets Bond Fund (EMB): This ETF holds dollar denominated debt from issuers in a number of emerging markets, including Mexico, Brazil, Russia, Turkey, and the Philippines. "

" Asia (Developed and Emerging)

The WisdomTree? Asia Local Debt Fund (ALD) offers access to a dozen Asian economies including both developed and emerging markets: South Korea, Malaysia, Indonesia, Philippines, Thailand, India, China, Hong Kong, Singapore, Taiwan, Australia and New Zealand. The debt held by ALD is denominated in the local currencies of the constituent countries [see also Asia-Centric ETFdb Portfolio ETFdb Pro Members Only]. "

"

    Market Vectors Emerging Markets Local Currency Bond ETF (EMLC): This ETF also offers exposure to local currency debt; EMLC’s largest holdings are to Malaysia, Brazil, Poland, South Africa, and Mexico (each account for 10% of the index).

"

    Emerging Markets Local Currency Bond Fund (LEMB): The largest country weightings in this local currency ETF are to South Korea (about 20%), Brazil (15%), and Mexico (7%)."

"

    SPDR Barclays Capital Emerging Markets Local Bond ETF (EBND): This ETF has the heaviest weightings in Brazil, Korea, and Mexico."

" For exposure to Latin American bonds, the Market Vectors LatAm? Aggregate Bond ETF (BONO) is the only option out there. BONO’s portfolio consists primarily of Brazilian and Mexican debt, but this ETF also includes debt of issuers in Colombia, Venezuela, Argentina, Chile, Peru, Panama, and even Jamaica. "

also BOND

--- yes there is an illiquidity premium:

http://venturepopulist.com/tag/asymmetric-outcomes/ --

" Modeling: A Superficial Industry Still, he acknowledges the financial world s quest to quantify alpha and separate it from beta and he shares his thoughts on factor modeling: The idea of factor modeling is essentially to play around with the data long enough until one finds empirical evidence to prove one s preconception, that is, curve fitting, then go on and pretend one has found something meaningful such as cause and effect. Again, Ineichen uses an example to prove his point. He shows the results of a regression analysis using Fama & French s three factors (the index, value/growth & market cap). He acknowledges that these three factors explain a significant portion of the volatility of the HFRI Equity Hedge Index between April 1997 and March 2003. But he goes on to say that this 1997 to 2003 time period can be divided into two regimes - a bull and a bear market. So he runs the same regression on each period individually. His results: the correlations to each of the three factors changed dramatically between the two regimes. In other words, equity hedge fund managers adapted to the new regime by jumping to another horse mid- period. Says Ineichen:

The more important metrics, from Ineichen s viewpoint, are the ratio of the size of monthly gains to monthly losses ( the ratio of magnitude ) and the ratio of the frequency of gains to losses ( the ratio of frequency ). Thus, he spends considerable time working through each of the primary hedge fund strategies, comparing them to passive strategies geared to match their volatilities. As you might expect, the hedge funds come out on top in nearly all cases.

Alpha and the Renaissance Man Asymmetric Returns is chalked full of colourful analogies (giving Lars Jaeger and others a run for their money). But perhaps the most useful and insightful analogy in the book is one that we have heard applied to other disciplines, but not yet to the hunt for alpha:

"investors who are capable of introducing a bias toward the current regime are producing alpha even though factor modeling tells us that, looking back, it was actually beta."

"

" Throughout the book, Ineichen also questions the use of kurtosis as a risk parameter. He argues that standard deviation is far more important than its 4th (moment) cousin by actually analyzing the tails in the distribution of (fat-tailed) hedge funds and (thin-tailed, but higher volatility) market indices. In case after case, he shows that the low standard deviation of most hedge fund indices makes up for the relatively fatter tails of these returns streams.

The more important metrics, from Ineichen s viewpoint, are the ratio of the size of monthly gains to monthly losses ( the ratio of magnitude ) and the ratio of the frequency of gains to losses ( the ratio of frequency ). Thus, he spends considerable time working through each of the primary hedge fund strategies, comparing them to passive strategies geared to match their volatilities. As you might expect, the hedge funds come out on top in nearly all cases.

"

" In the concluding pages of Asymmetric Returns Alexander Ineichen returns to his central thesis - that the future is all about risk management, not returns management: The asset management industry is at a crossroad. In our view, the belief that returns are manageable must be relaxed. Risk is manageable, but not returns. "

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http://stream.marketwatch.com/story/markets/SS-4-4/SS-4-8035/

--- To represent the asset class of non-european, international developed countries (which are mainly Asian markets), the Vanguard MSCI Pacific ETF, VPL, is a preferred choice with limited competition in the ETF space. Over the last 10 years, according to Morningstar, VPL has had a 70% correlation to the S&P 500, though it is mainly caused by its 60% holding in Japanese companies (Japan has its own economic concerns and major national debt issues). Over the last 3 years, currency has given this fund a 10% annualized boost for US investors against local currency investors. Yields are around 3% according to Morningstar.

---

knight capital lost a bunch of money via an autotrading bug yesterday, here ar similar companies:

KCG Knight Capital Gr... 3.44 -3.50 -50.43% 337.85M ITG Investment Tech. ... 7.87 -0.16 -1.99% 305.43M GFIG GFI Group Inc. 3.06 -0.01 -0.33% 367.12M PLCC Paulson Capital C... 1.03 0.00 0.00% 5.94M PNSN Penson Worldwide,... 0.110 0.000 0.00% 3.08M BGCP BGC Partners, Inc. 4.87 +0.05 1.04% 680.52M MS Morgan Stanley 13.11 -0.40 -2.96% 25.92B SCHW Charles Schwab Corp 12.11 -0.34 -2.73% 15.42B FXCM FXCM Inc 10.47 -0.01 -0.10% 246.70M IBKR Interactive Broke... 13.37 -0.32 -2.34% 609.40M GLCH Gleacher & Compan... 0.700 0.000 0.00% 89.03M

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http://blogs.barrons.com/incomeinvesting/2012/08/02/verizon-att-altria-among-top-cds-adjusted-dividend-stocks/

--

next 11: ts in the Goldman Sachs N-11 Equity Fund. (GSYAX) O

http://www.bloomberg.com/news/2012-08-07/goldman-sachs-s-mist-topping-brics-as-smaller-markets-outperform.html

The so-called MIST nations -- Mexico, Indonesia, South Korea and Turkey -- are the four biggest markets in the Goldman Sachs N-11 Equity Fund. (GSYAX)

---

i dont understand this but it seems important:

http://www.bloomberg.com/news/articles/2016-04-14/say-goodbye-to-the-fed-you-once-knew

---

"betting markets, and speculative markets more generally, seem to do very well at aggregating information. To have a say in a speculative market, you have to "put your money where your mouth is." Those who know they are not relevant experts shut up, and those who do not know this eventually lose their money, and then shut up. Speculative markets in essence offer to pay anyone who sees a bias in current market prices to come and correct that bias...such markets seem to do very well when compared to other institutions. For example, racetrack market odds improve on the predictions of racetrack experts, Florida orange juice commodity futures improve on government weather forecasts, betting markets beat opinion polls at predicting U.S. election results, and betting markets consistently beat Hewlett Packard official forecasts at predicting Hewlett Packard printer sales. In general, it is hard to find information that is not embodied in market prices. " -- http://mason.gmu.edu/~rhanson/futarchy.html

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this study says that selling when volatility rises and buying when it falls can make money: http://som.yale.edu/news/2016/03/re-assessing-classic-risk-return-trade

but i thought the vixandmore guy had computed that it's better to be in the market when volatility is up?

and what about those studies that say that almost all the gains are on the day of fed meeting decisions?

---

" “Risk Neglect in Equity Markets” by Malcolm Baker of the Harvard Business School—looks at an obvious flaw in the CAPM. The model suggests that stocks which are more volatile than the overall market (high beta in the jargon) should display higher returns while stocks that are more stable (low beta) should deliver lower returns. More risk means more reward.

But that is not what has happened. Mr Baker assembles two portfolios from 1967; one consists of the 30% of US stocks with the lowest beta; another of the 30% with the highest beta (the portfolios are adjusted as betas change). By the end of the period, $1 in the low-beta portfolio had grown to $190, while the high-beta portfolio rose to just $18. The difference in compound returns is huge—5.5% a year. The low-beta portfolio is a lot less volatile and the maximum drawdown (peak-to-trough loss) is 35% compared with 75% for the high-beta portfolio.

Think about that; low risk meant higher reward. It was the equivalent of finding $20 notes lying on the street.

When you move to the world of asset classes, however, the traditional rule held; over the entire period, equities returned 10.9% a year while safe Treasury bills paid just 5%. Investors did get paid for owning risk.

Was this a fluke? Mr Baker is not the first to notice the anomaly. One of finance’s best-known academics, Fisher Black, wrote up the low-beta anomaly in 1993. That means the period since his paper was published is “out of sample” and thus a good test of the hypothesis. Sure enough, low-beta stocks have outperformed since then, despite a period in the late 1990s when, thanks to the dotcom bubble, high-beta stocks were all the rage.

Why might this be? Veteran readers might recall a column from 2012 which explained the outperformance in terms of low beta. AQR, a fund management group, explained the low-beta effect in terms of institutional constraints. Fund managers want to beat the market and deliver higher than average returns; so they buy high-beta stocks, as academic theory suggests. This makes high-beta stocks too pricey and drives down their returns. The answer should be to buy low-beta stocks and combine them with leverage. But investors are generally constrained from using borrowed money. So the anomaly persists.

Mr Baker thinks part of the reason that private equity has been successful is down to this strategy; the likes of Blackstone and KKR are buying less volatile (cash-generating) businesses with borrowed money. "

i'm guess Taleb might say that both high- and low- beta stocks are in the same broad risk bucket (equities), and that what you should really do is assume that the actual risk profile of assets in this class is unknowable due to fat tails. He may advocate a barbell strategy where you look for extremely high risk, high reward opportunities and then balance this with extremely low risk stuff like cash and possibly bonds; the low beta equities would be too risky for the safe part of the barbell and the high risk equity indices would probably be not risky enough for the high risk part of the barbell.

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