Value vs. Momentum Chart of the Day [View article]
There is a paper out studying a similar concept where the hypothesis is that investors initially under-react to change and then have delayed over-reaction. This consistent aspect to psychology creates abnormal returns for those focused on the 1 to 12-month timeframes.
We did a web app for money managers for this -- try it out for yourself on ETFs. ETFs don't have long histories -- but they do represent many different kinds of markets so you can decide for yourself.
Evaluating Economic Forecasts: Lessons From Michael Lewis's 'The Big Short' [View article]
I thought this was at least equal to Micheal Lewis' best books.
My favorite lesson/line to always remember is Page 9:
"Any business where you can sell a product and make money without having to worry how the product performs is going to attract sleazy people."
AIG employees got rich selling insurance for pennies on the dollar of products that imploded.
Goldman Sachs put its name on and profited from some deals which had massive defaults within months of issuing the deal.
Obviously, there are the sleazy firms that loaned the money and earning commissions on products that were disasters (QuickLoans, Countrywide, Long Beach Financial etc....)
Given my personal experience at some large financial institutions, the companies I worked for had managers above me that said no to situations that we could have earned fee income through some cross-selling agreements that were at best 'aggressive' and more likely just 'bad business.' Managers that actually did their job with ethics. I always thought this was a standard throughout the industry. This is apparently what Alan Greenspan assumed --- that companies knew enough not to be so greedy on short-turn incentives as to blow themselves up? Well, it turns out that regulation was needed at AIG and Lehman Brothers and Bear Stearns and the entire Consumer Finance industry. What a dark chapter for capitalism.
In Defense of Alan Greenspan: 'The Age of Turbulence' Revisited, Part 2 [View article]
I think the financial services company executives are most to blame for the crisis and Greenspan is on the list but not at the top.
the core issue that our best and brightest couldn't figure out was that no-doc mortgages were rated AAA simply because they were pools and therefore had enough diversification benefit that they couldn't all default at the same time?? Wait --- no money down, no docs? How is this even a part of banking? It's not. That is just a fundamental aspect to the industry -- that the buyer have some skin in the game that they lose first and that the lender have some ethics. This failure by orporate executives in the industry is just completely disgusting.
Wells Fargo figured it out and they had salesmen that wanted bonuses just like everyone else so you can't just blame it on the incentive structure. Where were the adults at all these other institutions? Missing.
Bonds vs. Stocks: Allocating 100% of Assets to Alpha Opportunities [View article]
Veryan,
In a past article you said "I focus on robust mathematical models and geographic facts, not economic theories."
I wanted to ask if you could elaborate on 'geographic facts' -- can you give some examples of geographic facts that drove you to country selection?
I have no idea on how far back your paired picks go that you are referring --- but lets sanity-check the numbers here - the trailing 6/12 month performance to Friday of long Indonesia/short India in a 50/50 weight has returns that are close to a 100% investment in most bond index funds.
I like the detailed emerging market focus you provide -- would like to hear more about the emerging/frontier market investment process.
SPY: Taking Shareholder Money via Dividend Float [View article]
An interesting nuance, thanks. What is the ETF provider stated reason for this delay?
Of course, the bottom line result of the increased tracking error in this case depends on if the market appreciates or depreciates during the delay. If the market falls, SPY investors that re-invest later would be better off than immediate re-investment assumption of the underlying index.
One issie is that these stocks -- and for that matter non-Timber REITS' -- have all shown extremely high correlation to the major indexes in last few years. Will correlations revert to very long-term? Financial data series are subject to regime change -- so assuming they will may be an aggressive assumption. Thoughts?
I greatly enjoyed the article so this isn't a negative comment -- I would just like to get some dialogue going on correlations and nuances of timber vs other investable assets.
BulletShares Corporate Bond ETFs: Navigating an Increasingly Complex Fixed-Income Landscape [View article]
the fee as stated is 0.24% excluding the agreement between claymore and Accretive Asset Management. I couldn't readily find the amount that Accretive gets. if someone else knows, that would be helpful.
in my opinion, this product is for very conservative investors who want to earn a spread vs treasuries and know that they will need the money at the time of maturity for something else.
while its positioned as a negative in the article, LQD intentionally does not hold securities to maturity for a reason -- because bonds convert to extremely low yields as they near maturity. I view this as outsourcing the process of keeping your duration UP to iShares.
While I recognize that this product can fulfill a specific need for people that know they will need the money and need to be immunized - and don't want security specific risk --- I think 'most' investors don't necessarily need perfect immunization to a specific maturity date and would WANT to keep their duration higher than the low yields in very short-term securities. the volatility incurred for stepping out the yield curve a bit is trivial relative to an overall portfolio. (not saying WAY out, just to intermediate from short).
I just wonder how products like this could possibly be profitable to the provider since the product will mature and end before assets ever really build to critical mass to support the expenses. but I am no expert on that aspect -- perhaps someone on the operational side could comment.
what fund manager worth his salt wants to run an ETF for 30 basis points of fees? if you are a good manager -- why not stay with a mutual fund and charge 150 basis points -- or go to a hedge fund and charge 2% + a performance fee.
Value vs. Momentum Chart of the Day [View article]
There is a paper out studying a similar concept where the hypothesis is that investors initially under-react to change and then have delayed over-reaction. This consistent aspect to psychology creates abnormal returns for those focused on the 1 to 12-month timeframes.
We did a web app for money managers for this -- try it out for yourself on ETFs. ETFs don't have long histories -- but they do represent many different kinds of markets so you can decide for yourself.
tinyurl.com/239zt89
Evaluating Economic Forecasts: Lessons From Michael Lewis's 'The Big Short' [View article]
My favorite lesson/line to always remember is Page 9:
"Any business where you can sell a product and make money without having to worry how the product performs is going to attract sleazy people."
AIG employees got rich selling insurance for pennies on the dollar of products that imploded.
Goldman Sachs put its name on and profited from some deals which had massive defaults within months of issuing the deal.
Obviously, there are the sleazy firms that loaned the money and earning commissions on products that were disasters (QuickLoans, Countrywide, Long Beach Financial etc....)
Given my personal experience at some large financial institutions, the companies I worked for had managers above me that said no to situations that we could have earned fee income through some cross-selling agreements that were at best 'aggressive' and more likely just 'bad business.' Managers that actually did their job with ethics. I always thought this was a standard throughout the industry. This is apparently what Alan Greenspan assumed --- that companies knew enough not to be so greedy on short-turn incentives as to blow themselves up? Well, it turns out that regulation was needed at AIG and Lehman Brothers and Bear Stearns and the entire Consumer Finance industry. What a dark chapter for capitalism.
In Defense of Alan Greenspan: 'The Age of Turbulence' Revisited, Part 2 [View article]
I think the financial services company executives are most to blame for the crisis and Greenspan is on the list but not at the top.
the core issue that our best and brightest couldn't figure out was that no-doc mortgages were rated AAA simply because they were pools and therefore had enough diversification benefit that they couldn't all default at the same time?? Wait --- no money down, no docs? How is this even a part of banking? It's not. That is just a fundamental aspect to the industry -- that the buyer have some skin in the game that they lose first and that the lender have some ethics. This failure by orporate executives in the industry is just completely disgusting.
Wells Fargo figured it out and they had salesmen that wanted bonuses just like everyone else so you can't just blame it on the incentive structure. Where were the adults at all these other institutions? Missing.
Bonds vs. Stocks: Allocating 100% of Assets to Alpha Opportunities [View article]
In a past article you said "I focus on robust mathematical models and geographic facts, not economic theories."
I wanted to ask if you could elaborate on 'geographic facts' -- can you give some examples of geographic facts that drove you to country selection?
I have no idea on how far back your paired picks go that you are referring --- but lets sanity-check the numbers here - the trailing 6/12 month performance to Friday of long Indonesia/short India in a 50/50 weight has returns that are close to a 100% investment in most bond index funds.
I like the detailed emerging market focus you provide -- would like to hear more about the emerging/frontier market investment process.
XXV: Barclays Abandons iPath Brand Inexplicably With Inverse VIX ETN Launch [View article]
Evaluating Hedge Funds [View article]
Yes - a couple of tactical bond market moves a year gets less risk and yet with total transparency and you pay maybe 15 basis pts in fees per year.
Income in a Zero-Rate World - Revisited [View article]
New 2x Leveraged E-Tracs ETN: Juicing the Yield to 12.9% [View article]
To the extent the ETF provider can obtain low-cost financing, it is an interesting 'carry-trade' experiment. Borrow short and lend to MLP.
Its financial engineering -- but at least its creative and not yet another Large Cap Core ETF with 0.98 correlation to 200 other ETFs.
New 2x Leveraged E-Tracs ETN: Juicing the Yield to 12.9% [View article]
SPY: Taking Shareholder Money via Dividend Float [View article]
Of course, the bottom line result of the increased tracking error in this case depends on if the market appreciates or depreciates during the delay. If the market falls, SPY investors that re-invest later would be better off than immediate re-investment assumption of the underlying index.
Timber: How to Play It and Why [View article]
Thanks for article.
One issie is that these stocks -- and for that matter non-Timber REITS' -- have all shown extremely high correlation to the major indexes in last few years. Will correlations revert to very long-term? Financial data series are subject to regime change -- so assuming they will may be an aggressive assumption. Thoughts?
I greatly enjoyed the article so this isn't a negative comment -- I would just like to get some dialogue going on correlations and nuances of timber vs other investable assets.
Month-End Moving Averages: Showing Preliminary Sell Signals? [View article]
fyi, we have added the 'monthly' moving average option now which automates the report for ~400 ETFs.
www.etfreplay.com/back...
Longer-Term Bond Indexes: What's a 'Normal' Correction? [View article]
tinyurl.com/28jru9l
BulletShares Corporate Bond ETFs: Navigating an Increasingly Complex Fixed-Income Landscape [View article]
in my opinion, this product is for very conservative investors who want to earn a spread vs treasuries and know that they will need the money at the time of maturity for something else.
while its positioned as a negative in the article, LQD intentionally does not hold securities to maturity for a reason -- because bonds convert to extremely low yields as they near maturity. I view this as outsourcing the process of keeping your duration UP to iShares.
While I recognize that this product can fulfill a specific need for people that know they will need the money and need to be immunized - and don't want security specific risk --- I think 'most' investors don't necessarily need perfect immunization to a specific maturity date and would WANT to keep their duration higher than the low yields in very short-term securities. the volatility incurred for stepping out the yield curve a bit is trivial relative to an overall portfolio. (not saying WAY out, just to intermediate from short).
I just wonder how products like this could possibly be profitable to the provider since the product will mature and end before assets ever really build to critical mass to support the expenses. but I am no expert on that aspect -- perhaps someone on the operational side could comment.
3 Arguments Against Active ETFs [View article]
what fund manager worth his salt wants to run an ETF for 30 basis points of fees? if you are a good manager -- why not stay with a mutual fund and charge 150 basis points -- or go to a hedge fund and charge 2% + a performance fee.