Everyone is jumping on the ETF bandwagon as $63.6 billion flowed into the product YTD versus $144 billion outflow from equity mutual funds. Fidelity launched six new ETFs with “smart beta” and large cap filling the headlines. For smart beta fans I recommend a smart piece from James Montier (click here) who makes the case that: Smart Beta = Dumb Beta + Smart Marketing. Now … [Read more...]
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This month I’d like to touch on some of the problems that passive investing and ETFs have and their effect on the market. As we will see, the problem with ETFs is that it has become a huge business and rather than be constructed for investment purposes, it is constructed so that it can sell regardless of the foundation which it was built upon. Tim du Toit sent me the … [Read more...]
Yes, I got it wrong. For six months I was convinced that the market was going lower. And there was no way in hell that I was going to let the market take my money. So I executed the plan I had designed a few years ago. I reduced exposure via shorting overvalued hyped stocks with poor fundamentals and raised cash. I expected the return from the hyped shorts would more than … [Read more...]
Over the past month, everyone and their mother had an opinion on Brexit. Bloomberg managed to put a lot of food for thought in the image below: I suggest you check out Mauldin’s post (click here) for an excellent analysis of what has changed and the realization by the EU leaders that in order to keep things together they will have to try a new approach. We will have to … [Read more...]
“This time is different” Looking back over the last 30 years, I can proclaim that this time is different. Government and central bank intervention is at its highest. The market moves based on statements and actions by Yellen and the other CBs and not based on fundamentals. An irrational market is not something new but such manipulation is. Every time one of the “gods” … [Read more...]
After 10 consecutive weeks of higher lows, the S&P final broke its previous week low. Bulls will say it’s taking a rest, but to me it looks like its fundamentally run out of juice. The blended earnings decline for Q1 is -7.6% according to FactSet, with the next three quarters estimated at -1%, +1.6% and +7.5%. A big bet currently on Q4 and we will most likely see that … [Read more...]
Are the bears ready to surrender? One month bounce does not make a bull market. Let’s keep it simple. The market has gone nowhere for the past 1.5 years and essentially has been trading in a range from October 2014 until today. Earning season is beginning and it is estimated that earnings will drop for the fourth quarter in a row! Even if we exclude energy, earnings are … [Read more...]