Indexor

International Bond ETFs' Correlation to Equities

Here's a thought:

Take each of the four foreign bond ETFs you mentioned - BWZ, BWX, JGT and WIP - and compare each one to UUP (PowerShares US Dollar Bullish) on a charting service, such as stockcharts.com. You will find each of the foreign bond ETFs have a strong negative correlation to UUP.

While we are always looking for issues that provide additional diversification through negative correlation, do you find that foreign bonds are simply a good diversifier because of their currency "effect?" In other words, as long as the dollar continues to weaken, foreign bonds should provide both diversification and alpha. But if the US dollar begins to strengthen, won't foreign bonds prove to be much less of a diversifier and produce negative alpha just when global stocks are also entering a downward trend?

Tuesday Outlook: Commodities, Global Markets

Dave:

I always appreciate your work. In your chart of WIP you noted: "Are WIPs better than TIPs? Some must think so." There is a big tax difference between the two. Phantom income.

The drawback to holding TIPs in a taxable account is that they generate "phanton income." The principal value is adjusted annually to reflect inflation, and you're forced to pay taxes on the increase - even though you don't actually receive the money until you sell the bond or it matures. iShares will send you a 1099 that calculates your phantom income each year but TIP remains best for QUALIFIED ACCOUNTS only.

WIPs are somewhat different. The monthly distributions made by WIP include the coupon interest accrual and the CPI adjustment on the principal. The fund is able to pay this out by selling a very small
portion of the portfolio every month that there is a positive CPI
adjustment. Since the CPI adjustment is paid out every month, from a tax standpoint, there is no "phantom income" realized by the shareholder.

Hope this helps.

Just 5 ETFs and You're Set? Buy-n-Hold Silliness Still Carries On

Gary:

Consider your sources: John Bogle? Motley Fool?? Money Magazine???

It might be time to broaden your information horizons.

Analyzing Grantham’s Asset Class Outlooks

auto44:

You're missing the point of the article. If you just want Grantham's projections, go to the link provided. If you would like to compare a software program that produces very similar outcomes, "...THE QPP JIBERISH THAT CONFUSES SIMPLE SOULS LIKE ME..." might be worth investigating more fully.

Testing Forward Looking Asset Allocation

Geoff:

He's b-a-a-a-a-c-c-c-k-k-k.

I must say, Smart ETF's comments are extremely interesting. If you two have taken this private, as he suggested, we'll all miss out on a tremendous education. Could you provide us with a Cliff's Notes version?

Checking In on the All-ETF Portfolio

Geoff:

You're web site is not working.

Risk Management in Trending Markets

Exceptional article! Thank you for sharing your work. I look forward to reading your articles in the future.

Why Emerging Markets Can Be So Volatile

Wow! What a three-putt

700 ETFs and Counting: A Bird's-eye View

As someone who began using iShare ETFs back in 1996 when they were known as WEBS, and was finally able to drop all open-end mutual funds and closed-end funds last year in order to build 100% ETF portfolios, I applaud your article for providing a good macro view of the landscape.

After BGI rebranded WEBS to iShares with a focus on US stock ETFs in 2000, it wasn't very long ago that it seemed to take absolutely forever to get SHY, ICF and EFA through the approval process of the SEC in 2001. More government bonds appeared in 2002 followed by EEM, TIP and AGG in '03, GLD in '04, MicroCap and EAFE Growth and Value in '05, Commodities and Short/Leveraged ETFs in '06 and finally Currencies and the missing bond categories of High Yield, Muni and Internationals in '07.

As Actively Managed ETFs hit the market in '08, it is logical to believe that many more open-end mutual fund companies will stop feeling threatened and join the movement as Vanguard and Van Eck have already done. Lower expense ratios (look at the market share Vanguard is taking), real transparency (as opposed to quarterly window dressing), intra-day trading (no more bashing of market timing or additional fees for selling whenever you want) and better tax treatment which can be managed as opposed to the ridiculous IRS-forced capital gain distributions at year end.

Good article.

Thursday Outlook: Commodities, Emerging Markets

David:
As they say "A picture is worth a thoasand words" and your posts always prove this point in spades. In my opinion, you provide the most entertaining views on this site. Thank you.

Foreign and Domestic Stocks: Evolving Correlations and Portfolio Management

There is a growing amount of "junk" investment advice being published every day on the web, cloaked in the respectability of a known or respected web site. The result only serves to tarnish the reputation of sites such as Seeking Alpha. Obviously nobody is editing or even reading these articles before they appear.