Finding Long-Term Themes: Take Two

Roger Nusbaum submits: My post yesterday referring to a few big themes drew some comments with other ideas for big themes. India? I can't even find it on a map. Advances in medicine? Who needs them?

Humor attempts.

There were comments left noting India and advances in medicine as big themes. Those are of course valid. While we are at it, what about Russia, Turkey, or maybe uranium? The ones left by readers or these other ones might all end up being better places to be than the ones I mentioned.

I would not put too much into the three I mentioned. To me they are the biggies, but the point of the post was for you to think about what really big themes you believe in for your portfolio, if you even think in those terms. I do.

I can promise you that one of the long-term themes you believe in will test your conviction at some point. Taking a 30,000 foot view every now and then is a good idea.

A reader asked me to expand on what I meant by water as a theme. Last December PowerShares came out with PowerShares Water Resources ETF (PHO) an ETF that focuses on companies in the water business. I wrote about the fund for TheStreet.com when it came out, and have mentioned in numerous times on the blog. There are some potentially gloomy demographic issues with water, globally speaking. Growth in consumption is growing at about twice the rate of the population. There is a lot of evidence that says there will be a shortage of drinking water. This is something I buy into; I have owned the ETF personally and for clients since the second or third day after it started trading.

A reader asked me to compare the Gateway Fund [GATEX] to the BXD which is a buywrite index for the Dow 30. I'm not sure why this person is interested in the narrower Dow 30, be that as it may. According to PortfolioScience.com GATEX and BXD have a correlation of 0.869.

The reader said he had a hard time charting the two. I also found a distortion on BigCharts, Yahoo had no chart, and StockCharts did not know one of the symbols.

I was able to find this chart on Morningstar, the fund is red and the S&P 500 is in green. It kind of looks like the chart of the Merger Fund from over the weekend.

The fund is one of several OEFs that sells options for extra income. The fund owns a lot of mega cap stocks, and for a call writing fund I would expect a higher yield. According to Morningstar it yields 2.15% which surprises me. As an OEF there is no leverage so it won't yield anywhere close to a CEF, but 2.15%? The SPX yields 1.7%. I don't think it is crazy the fund could generate more yield, but maybe the 0.95% expense ratio is too big of a bogey?

Either way, in the context of things that will not fully keep up with the market, but come close over long periods of time, with very little volatility, it looks like it belongs in the discussion; its standard deviation is only 5.11, about half of the S&P 500.

Lastly a reader, who said he can't own OEFs (must live in another country?) asked if there are any long/short CEFs. I am aware of one, the Old Mutual Claymore Long Short Fund (OLA). I wrote a negative piece about it for RealMoney in July but haven't looked at it since.

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