Tag Archives: xle

ETF News, Global Macro Strategy, People Profiles

Smart Money Says: No Gold Needed As Capex Spending Kicks In to Global Economy

April 23, 2014 MarketsMuse Staff Reporter Leave a comment

For readers focused on expert views re: the precious metals, and in particular Gold, below a.m. note courtesy of macro-themed analyst Paul Krake to his “View From The Peak” audience of institutional investment managers provides a “bid-on” to market observations made last week by Neil Azous, principal of “bespoke macro strategy boutique” Rareview Macro LLC, and the publisher of “Sight Beyond Sight” :

“..Short gold has been one constant theme for VFTP for the past 18 months and I do not see any reason to adjust this structural stance. The reasons to be short gold are long and varied but they all go back to my basic theme that as the world becomes less risky, the need for safe haven assets declines. If real interest rates are on the rise then gold will decline. A more sophisticated thesis is being proposed by my good friend Neil Azous from Rareview Macro, an extremely thoughtful and thorough daily overview of the investment landscape (www.rareviewmacro.com). Neil’s argument revolves around a revitalized global capex cycle that will be driven by a spurt in bank lending and the global economy playing catch up after five years of underinvestment across the developed world. We have this expressed via our long energy (XLE) / short consumer discretionary (XLY) basket but short gold is also an excellent expression of what will be the end result of this recalibration of the capex cycle: higher global growth and higher real interest rates…”

Paul Krake’s observations are available via http://www.viewfromthepeak.com.hk/.

The “Sight Beyond Sight” newsletter authored by Neil Azous is distributed to leading investment managers, Tier 1 hedge funds and top gun traders across the universe of sell-side, cash trading desks. Additional info at www.sightbeyondsight.com

ETF News

The Risk On Rally That Keeps on Ticking: Benzinga

April 1, 2013 MarketsMuse Staff Reporter Leave a comment

Courtesy of Marketwatch/Benzinga.com

It seems like whenever the rally in the S&P 500 is discussed, at least when it is talked about in positive terms, it is associated with favorite Wall Street vernacular such as “risk on” and “animal spirits.”

With the SPDR S&P 500 SPY -0.39% up almost 41 percent in the past three years, including dividends paid, it is not illogical to think risk on has ruled the roost over that time.

A closer examination of sector ETFs paints a different picture. As was highlighted on Monday, the Consumer Discretionary Select Sector SPDR XLY -0.62% has been the standout of the nine sector SPDRs funds over the past three years. Thing about XLY is the ETF has a beta of one against the S&P 500 and annualized volatility of 16.88 percent.

Said another way, XLY is not the most volatile, nor is it the riskiest ETF out there. Simply put, this has been a risk off rally and it has been that way for three years. Returns accrued by sector ETFs prove as much.

High Beta Disappoints…Sort Of. Here is a trivia question: Excluding XLY, which is the only sector SPDR that is perceived as a high-beta play to outpace SPY over the past three years? Answer: The Energy Select Sector XLE -0.13% . XLE has topped SPY by 350 basis points over that time while being 660 basis points more volatile.

The 23.1 percent gain for the Materials Select Sector SPDR XLB -0.85% only look good in comparison to the 19.4 percent gain for the Financial Select Sector SPDR XLF -0.49% . Those ETFs have betas of 1.22 and 1.23, respectively, against the S&P 500. Continue reading →

ETF News, People Profiles

Does Size Really Matter? (with ETF Returns)

April 24, 2012 MarketsMuse Staff Reporter Leave a comment

According to Benzinga.com’s ETF Professor, its not necessarily the size of the ETF, but the motion when it comes to investor returns.

From Benzinga’s April 23 edition:

“..There are plenty of instances in life when bigger is better. When it comes to exchange-traded products, bigger isn’t always associated with better [4]. At least when it comes to what should be investors’ primary consideration: Returns.

It has been documented that ETFs and ETNs with low average daily volume [5] and an assets under management number that may not be viewed as impressive by the so-called experts can outperform. In fact, all investing in an ETF with a bigger AUM total does is lead investors to a bigger fund, not larger returns [6].

Fortunately, a move away AUM and average daily volume as the primary determinants of an ETF’s worth is already under way.

“Some of the traders we talk to are using AUM and ADV a lot less now,” said Chris Hempstead, head of institutional sales and trading at WallachBeth Capital. “Some hedge funds using ETFs to hedge might use the larger ETFs because they just need short-term exposure, but buy-side traders are using AUM and ADV less and less.”

The statistics back up the assertion that bigger isn’t always better with ETFs. In an interview with Benzinga, Hempstead noted that in the case of the nine Select Sector SPDRs, all have been outperformed by a comparable fund of smaller stature on a year-to-date basis. Continue reading →

ETF News, People Profiles

Expert ETF Trader: Liquidity Is There; Just Look Beyond the Screens

February 24, 2012 MarketsMuse Staff Reporter Leave a comment

Other than the ETF market “go-go names”, one of the more commonly-voiced, and according to many, often-misguided observations regarding most ETFs is “won’t trade it, there’s no liquidity in that name,” or “the screens are only showing 1000 shares offered and I have to pay up 50 cents to buy a lousy 25,000 shares?!”

As a consequence, any half-smart portfolio manager often quickly (if not wrongly) concludes that the “lack of liquidity cost” is a deterrent to their positioning what is otherwise a very compelling “basket” of underlying securities.

The editors here don’t buy into the lack of liquidity notion, and after getting our hands on desk notes published today by Chris Hempstead, Head ETF Trader for WallachBeth Capital (one of the more prominent players in the ETF space), we couldn’t resist the opportunity to re-publish.

But wait, there’s more!