Tag Archives: etf professor


Only Idiots Use USO ETF to Trade Oil-It Can’t Tango!

For those who are confused as to the near-term, or even longer-term price direction of Oil, even J.R. Ewing would tell you there isn’t an oil man in Texas, including Boone Pickens, who can see far beyond the prices posted at the pump. Especially when one gas station in Oklahoma is now selling one gallon for .99 –a price that has been seen in certain spots, but not since 1993 has oil been so ‘cheap.’ For those who try to express a bet on price direction via a financial instrument, one leading markets muse is going so far as to infer that “..Only idiots use the ETF $USO to make a bet with.” Why? It Can’t Tango!  Well…that’s perhaps a poetic license pun on words, but..

Courtesy of the universally-known ETF Professor Todd Shriber, who pens for financial news site Benzinga, the markets muse in question turns out to be one of the global macro world’s more eloquent and most thoughtful gurus.. Here’s the extract from Shriber’s early a.m. column:

To say the United States Oil Fund LP (ETF) (NYSE: USO), which tracks West Texas Intermediate crude oil futures, is a flawed product is accurate and fair. Over the past three years, USO is down 77.1 percent, but the exchange-traded product remains a favorite, on both sides of the oil trade, of professional traders.

Inflows to USO confirm as much. After adding nearly $3.1 billion in new assets last year, USO has seen year-to-date inflows of almost $900 million. USO’s 2016 inflows put it just outside of the year’s top 10 asset-gathering ETFs.

USO And Contango

Perhaps the greatest source of criticism against USO comes from the fact that the ETF is frequently in contango. As it pertains to USO, contango occurs when the West Texas intermediate futures currently held by the ETF trade at higher prices than the market expects that contract to trade at for the months ahead.

“Oil traders should be aware that USO tracks front-month WTI future contracts and the underlying oil market is currently in a state of contango. Consequently, USO could experience a negative roll yield when rolling a maturing futures contract, or selling a contract that is about to expire in exchange for the next month contract,” according to ETF Trends.

WTI And Negative Yield Rolls

Speaking of negative yield roll, West Texas Intermediate futures are currently facing an epic negative yield roll.

neil azous
Neil Azous, Rareview Macro

“The widening in the ‘contango’ between the first and second futures contracts, or the March-April spread (CLH6-CLJ6), has exploded to ~8 percent in negative roll yield,” said Rareview Macro founder Neil Azous in a note out Wednesday evening.

As Azous noted, West Texas Intermediate’s current level of contango is quadruple that of Brent crude, the global oil benchmark contract, on a percentage basis.

The problem for any trader, professional or retail, who is long USO is that instances of exaggerated West Texas Intermediate have previously given way to savage declines for that contract and USO.

“The extrapolation that the market will likely make into next week’s crude oil futures roll and options expiration is that the next leg lower in the barrel has started and this CLH6-CLJ6 spread can widen out dramatically as evidenced by the extreme widening to 25 percent back in the winter of 2008-2009 when the barrel finally bottomed out for that cycle,” added Azous.

Read more: http://www.benzinga.com/news/16/02/6246307/how-contango-could-affect-a-popular-oil-etf#ixzz3zt6Cpp2D


Healthcare ETFs–Free Prescriptions Here…

seekingalphalogobenzinga-logo   Courtesy of “The ETF Professor”–his work appears courtesy of Benzinga.com, and is also re-distributed through leading publishers

Conservative investors and risk-takers alike have been rewarded for owning U.S. health care stocks and ETFs focusing on those names in recent years.

The data supports that assertion. A look at three major health care ETFs, all of which do things a little bit differently, shows significant out-performance of the S&P 500 over various time frames.

For example, the Health Care Select SPDR (NYSE: XLV) is up 30.3 percent in the past five years compared to 12.3 percent for the S&P 500.

Since December 2011 when it became a Market Vectors fund, Market Vectors Pharmaceutical ETF is up almost 20 percent. The iShares Nasdaq Biotechnology ETF (NASDAQ: IBB) has nearly doubled in the past five years.

Bottom line: Investors have done well when staying at home with U.S. health care stocks, but that does not mean there are not global opportunities worth considering. After all, some of the biggest health care companies in the world are not U.S. firms.

France’s Sanofi (NYSE: SNY) and Israel’s Teva Pharmaceuticals (NASDAQ: TEVA) stand as just two examples.

Here is a look at some international developed market health care ETFs to see if going global with this sector is a better idea than staying domestic.

Read more: http://www.benzinga.com/trading-ideas/long-ideas/13/02/3357973/are-global-health-care-etfs-worth-prescribing#ixzz2LfCheYiO


Benzinga Asks: Is This ETF Home to Buffett’s Next Target?

benzinga-logoCourtesy of the ETF Professor at Benzinga.com

The $28 billion purchase of ketchup king H.J. Heinz (NYSE: HNZ) by Warren Buffett’s Berkshire Hathaway (NYSE: BRK-A) and Brazilian financier Jorge Paulo Lemann has had a predictable result. Traders and investors want to know who is next; what company will be Buffett’s next elephant?

Buffett has an enviable problem: Berkshire’s cash hoard. Even after committing $12.1 billion for Heinz, Berkshire still has $15 billion left to go shopping with, and that number grows by the month according to Bloomberg.

By his own admission, Buffett’s thirst for big deals, or “elephants” as he calls them, is not quenched. That likely means traders and investors are already trying to figure out what company could be next on Berkshire’s shopping list.

As has been previously noted, ETFs ranging from the Market Vectors Coal ETF (NYSE: KOL) to the Industrial Select Sector SPDR (NYSE: XLI) are home to some potential Berkshire targets.

Following the Heinz deal, another ETF has jumped to the forefront of the Berkshire deal speculation conversation. That ETF is the PowerShares Dynamic Food & Beverage Portfolio (NYSE: PBJ). Shares of PBJ, which is home to almost $111 million in assets under management, have jumped 2.2 percent in the past week and are now trading at an all-time high.

The ETF’s recent bullishness is due in large part to the Heinz deal because that stock is is PBJ’s largest holding, accounting for 5.7 percent of the fund’s weight. To be fair, some of PBJ’s recent upside has come by way of Constellation Brands (NYSE: STZ), another top-10 holding in the ETF, making a deal with AnheuserBusch InBev (NYSE: BUD) that gives the former rights to sell Corona and other Grupo Modelo beer labels in the U.S.

Still, near-term ebullience pertaining to PBJ is likely to be fueled by speculation that the ETF is home to another Buffett acquisition candidate. Including Heinz, PBJ is home to 30 stocks. Of the remaining 29 stocks, eliminating unlikely Berkshire targets is not difficult.

Read more: http://www.benzinga.com/trading-ideas/long-ideas/13/02/3345461/is-this-etf-home-to-buffetts-next-target##ixzz2LNs9azVR

Russian Equities, ETFs: Cheap And Getting Cheaper

Just because something is cheap does not mean it is a good bargain. Such is life for Russian equities and the relevant U.S.-listed ETFs. Amid slumping energy shares, the “R” in the BRIC acronym saw its benchmark Micex Index slip to a three-month low on Tuesday. The slide comes just a couple of weeks after some analysts and traders started calling attention to attractive valuations among Russian stocks.

In late October, the Market Vectors Russia ETF (NYSE: RSX [FREE Stock Trend Analysis]), the oldest and largest Russia ETF, was spotted trading at its widest discount to the iShares MSCI Emerging Markets Index Fund (NYSE: EEM) in nearly three months.

Since October 29, RSX has slipped almost 5.1 percent as prices have continued tumbling. The Russian government earns about half its revenue from the sale of crude and natural gas, according to Bloomberg.

RSX allocated 41.6 percent of its weight to energy stocks as of October 31, according to Market Vectors data. That would normally be viewed as an excessive weight to just one sector for any ETF, but the iShares MSCI Russia Capped Index Fund (NYSE: ERUS) allocates almost 56 of its weight to energy names. Continue reading

Gambling ETF (BJK) Jumped On NFL Ref News-Benzinga

Courtesy of Benzinga.com ETF Professor

It might just be a coincidence, but one ETF benefited this week from the maelstrom over the NFL’s replacement referees and subsequent return to work by the league’s regular officials. That fund is the Market Vectors Gaming ETF (BJK: 34.01, -0.10, -0.29%).

To say the replacement officials affected football wagers is an understatement. An estimated $300 million changed hands worldwide Monday following a controversial call at the end of the Green Bay Packers/Seattle Seahawks game that saw the latter emerge the winner, according to The Associated Press.

That call worked in favor of sports books because the vast majority of bettors who had action on the game were on Green Bay, the favorite. The problem is too much controversy and incompetence at the hands of the replacement refs is not good for sports books.

And that is not good for big casino operators that run sports books such as Las Vegas Sands (LVS: 46.37, -0.40, -0.86%), Wynn Resorts (WYNN: 115.44, +0.01, +0.01%) and MGM International (MGM: 10.75, -0.13, -1.19%). That trio combines for over 19 percent of BJK’s weight.

So it probably was not surprising to see BJK rise on Tuesday, the first trading day after the Monday Night Football flap. Perhaps BJK rose on speculation the Monday Night Football debacle would force NFL Commissioner Roger Goodell’s hand to get the regular officials back to work as soon as possible.

Read more: http://www.foxbusiness.com/news/2012/09/28/gambling-etf-jumped-on-nfl-ref-news/#ixzz27s3IgfXD

#Apple Makes The Move to All-ETF Retirement Plans: Benzinga.com




Whoaaa!…EDITOR NOTE RE: story below–re-distributed June 6 by this platform ONLY AFTER numerous ‘highly-accredited’ news outlets did the same earlier that day, has since been overtly challenged for its accuracy/veracity by IndexUniverse  . 

In hindsight, IU’s challenging multiple media outlets that regurgitated this story for a failure on the part of mainstream journalism in general is harsh, but not unwarranted when considering the overall decline of reporting. This is double-edged sword of an all-web world that enables and demands a 24/7 news cycle, which is powered by emotion and a lust for breaking stories–as opposed to well-researched reporting.

Without anyone having the benefit of actually being able to speak with any AAPL HR/Benefits execs to confirm or deny the elements of the story first written by  SourceMedia Inc.’s  Employee Benefit News, we respectfully caveat that EBN ‘s senior editor (who is the by-line author) either failed to do any fact-checking, or perhaps the story she attempted to write is that Apple Inc.’s HR/Benefits team plans on introducing yet another investment opportunity, within a presumably long list of funds that large company employees can invest their 401k money into.  To our valued audience, we–as well as Benzinga’s reporter are contrite for any role we might have inadvertently played in reporting what might end up being an inaccurate or erroneous report from SourceMedia’s Employee Benefit News.

All of that aside, the concept of offering an ETF-specific investment program within a list of options for employees of large and or small companies makes perfect sense. Charles Schwab has certainly acknowledged that it is working on such an investment program, albeit it is apparently still in development.


By Benzinga.com

Apple AAPL +1.53% , the largest U.S. company by market value, is once again setting a standard for innovation, but this time the innovation isn’t coming by way of the iPhone, iPad or Apple TV. Rather the company is making the move to an ETF-only retirement plan for its employees.

While the exchange-traded products has grown by leaps and bounds in recent to almost 1,470 total products with over $1.13 trillion in assets under management at the end of May, ETFs still are not prominently used in in company-sponsored retirement plans such as 401(k) plans. That market is still largely dominated by mutual funds.

At the end of 2010, ETF assets in 401(k) plans were scant at just $5 billion, or 0.2% of total assets, compared to $1.8 trillion, or 58% of 401(k) assets, according to Cerulli Associates. However, some firms are pushing the ETF/401(k) issue. For example, ExpertPlan announced that it will add more than 900 ETFs, including those offered by Barclays, Claymore, First Trust, iShares, Rydex and Wisdomtree, according to ETF Trends.

Charles Schwab SCHW +2.27% , the eleventh-largest U.S. ETF sponsor, has been working on an ETF-only 401(k) plan that would use index-based ETFs. Capital One’s COF +0.68% ING Direct offers index ETFs in its Sharebuilder 401(k) plan, and T.D. Ameritrade AMTD +2.41% also includes ETF options in its 401(k) plan, ETF Trends noted earlier this year.

But the move by Apple, not only the largest, but the most innovative U.S. company in the eyes of many, to all-ETF retirement plans stands as the strongest endorsement to date of the utility of ETFs when it comes to retirement planning. Continue reading

Does Size Really Matter? (with ETF Returns)

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

Better Take a Peak at China’s PEK..Premium Merchandise

Courtesy of the ETF Professor at Benzinga.com

Following the March 22 debacle concerning the VelocityShares Daily 2x VIX Short-Term ETN (NYSE: TVIX  that saw the now infamous ETN tumble 30% in that one trading day, traders and investors predictably wondered what exchange-traded product could be next to fall victim to a similar scenario.

That scenario being an ETF or ETN trading at an elevated premium to its net asset or indicative value. One fund that has been noticed trading at elevated premium’s to its NAV is the Market Vectors China ETF (NYSE: PEK [6]) and this has been the case since the ETF debuted in October 2010.

What some investors may not understand is the reason why the Market Vectors China ETF has previously traded at premiums to its NAV that have been as high as 12%, sometimes a tad more. PEK is the only U.S.-listed ETF that offers investors exposure to China’s A shares market, but since foreign investors are limited in owning Chinese A shares directly, PEK uses swaps and derivatives instruments to accomplish its objectives.

Noteworthy is the fact that PEK’s premium has started to shrink, coinciding with news announced earlier this month that the China Securities Regulatory Commission boosted the quotas for qualified foreign institutional investors to $80 billion from $30 billion.

Chris Hempstead, head of ETF trading for New York-based execution firm WallachBeth Capital, talked about the implications increased access to China’s A shares for foreign investors may have on PEK in an exclusive interview with Benzinga on Friday.

Chris Hempstead, WallachBeth Capital

“PEK trading an elevated premium to its NAV in the past was not a function of it not being able to create and redeem shares as was the case with TVIX,” Hempstead said. “There are completely separate reasons why PEK’s NAV has been elevated compared to TVIX and some of the other products.”

Hempstead explained that it is the process by which PEK accesses China’s A shares market that has led to the high premium to its NAV in the past. Continue reading