If this week’s volatility has unnerved you, take a deep breathe, sit back and consider the following assessments courtesy of global macro strategy think tank Rareview Macro and extracts of this a.m. edition of “Sight Beyond Sight.”
Today’s edition is not meant to be read as us preaching a gospel. Instead it is a collection of the thoughts we have gathered through a number of recent meetings/conversations with investors who take plenty of risk, and it has served us well in the past to just write down what people we respect are saying. Therefore, if at times the opinions below come across as too skewed one way or adopt the tone of a “bomb thrower” just take them with a grain of salt.
In the end, our biggest issue is that it is just a matter of a few hours to a couple of days before all investors catch up and put together a similar puzzle.
That is why you should read this entire edition even if it is lengthy and the only morning note you read. Continue reading →
ETF Securities has released 10 new exchange traded products that aim to provide direct exposure so the commodities boom.
The ten new exchange traded commodities products have been listed on the Australian Securities Exchange (ASX), bringing the total number listed to 15.
“Historically, gaining exposure to this asset class was typically achieved by investing in the shares of mining and resource companies or, for investors with adequate expertise, commodity futures markets,” said Fred Jheon, managing director, Asia Pacific, ETF Securities.
“ETCs provide a convenient, transparent and liquid solution to investors seeking more direct exposure.”
The products are structured as deferred purchase agreements based on the commodity ETCs that have been issued by ETF Securities since 2006. Five of the new ETCs provide exposure to individual commodities such as Brent crude oil.
For investors seeking broader exposure to this asset class, ETF Securities said four ETCs aim to replicate the performance of commodity baskets, in sectors such as energy and agriculture.
The ETFS All Commodities (CSP) provides exposure to 20 different commodities across a range of sectors, which ETF Securities said affords even greater opportunity for diversification.
The ten new ETCs are designed to reflect the performance of the Dow Jones-UBS Commodity Index and its sub-indexes. ETF Securities is an exchange-traded products provider specialising in commodities with US$26.9bn in AUM at 31 March 2012.
According to TradersMag, during Q1 2012, ETF volume as a percentage of total volume reported by major exchange fell to 16 percent from 19 percent (for all of 2011) because correlations between individual stocks and ETFs has declined. Once again, it appears to be a stock-picker’s market.
The same column in TM referenced a Credit Suisse reoprt that found that average correlation across the S&P 500 went as low as 13 percent in February. (It has since bounced back to around 40 percent.) In 2011, by contrast, correlation surpassed 80 percent in the fall and ended the year at 77 percent for December.
According to Credit Suisse analyst Ana Avramovic, ““If correlation is high, then macro fears tend to dominate, and ETFs are a great way to implement macro ideas since they give you exposure to an entire sector or theme with a single product. Naturally, as correlations come down, it makes sense that ETF activity would also come down.”
Industry sources suggest that while volumes in plain vanilla ETFs–those comprised of single-name stocks- may be declining, there has been an increased use of leveraged ETFs, and ETFs tied to commodities. One trader says, “We have so many more sector products that are out there, and so many different ETFs that are coming out that drill down to minutiae so you can get very specialized exposure. “People are going to use that instead of going in to buy a single stock.”
Now, let’s turn the page back a few weeks to the post that identified the ETFs with largest AAPL weightings. Now let’s look at the overall market averages vs. those ETFs and vs. AAPL. No surprises, right?