Commentary and analysis on matters related to beta including indexing, exchange traded funds (”ETFs”), derivatives, their application in the portfolio management process and their effect on the investment industry.

Latest Posts

The Value of Timing

Sometime in early June 2006, I took up an offer by David Jackson at Seeking Alpha to write down some of my ideas on the use of ETFs and publish them on his site.  Truly, it was easy to think of topics and start typing away as my life at that time involved managing portfolios consisting predominately of indexed instruments (and a bit of DFA funds but they don't want to be called index funds).  At times, I stepped away from discussions on just ETFs and entered the areas of hedge funds, alpha-beta separation, general risk management as applied to the process of portfolio construction and even some forecasts/outlooks although I never felt very good about going in that last direction. So it's now about two and a half years later.  If you've followed my writing, you can see I've gone from as many as two to three blogs a week ...

Dealing With Tragedy: Despair Versus Denial

Just read something from a TD Asset Management letter where one of their US based fund managers said the following:   “A major step towards resolution occurred with the formal insolvency of Lehman Brothers and the potential of Merrill Lynch. While being rumoured for some time, these events are still sad and shocking for anyone in the investment business. But in relation to the markets, despair is a healthier phase than denial. For much of the past 18 months, we had been concerned that most financial companies and federal officials were acting as if the problem of too much debt could be solved with more debt which meant that loans just needed to be restructured so everyone could hold onto the assets they could not afford or accurately value. While we do not believe the credit crisis is over – given that there may be more global write-offs – we ...

The US and China: How Similar Are They?

That's a broad title that can lead in so many directions. The world today looks like we're heading towards another two super-power situation.  Consider economic and political influence, voting on the UN security council, acquisition of oil, the space race, and even the medal count at the coming Olympics ... there are a lot of themes that demonstrate the power of China, even relative to the US, and perhaps that's one of several reasons why China is attracting plenty of foreign investment. Before I get into a rant that leans in a fairly anti-US bias, I first want to preface this with the fact that I honestly believe that Zakaria's comments on "the rise of the others" versus the decline of the US seems spot on.  The creativity and innovation of the US, and of course the developed world, will slowly have to compete with those from the emerging world.  But it ...

Short Discussion on VIX

A few quick points here: 1.  I'm not as excited as I once was to post something about me on TV or video. 2.  I could say it's simply lost its appeal but frankly I feel like whatever I say is surely going to be irrelevant by the next day. 3.  If you're reading this post and today's date is past July 16th, 2008, the video I refer to below is no longer available for viewing.  Sucks to be you cause you would have made a mint no matter what I said in point 2 above.  I know you trade on what you just heard from the Boo-Yaa guy on CNBC.  You think I don't know?  Joke stops here but when you consider the amount of trading software commercials on that channel, you have to stop and wonder. So anyway I was invited to speak on BNN on Wednesday.  BNN's our version of CNBC ...

Uranium Exposure: With or Without ETFs?

In May 2007 I put up two posts on this blog related to uranium.  The first was "Uranium Mania" which discussed the astronomical price chart for uranium prices.  One of the easiest ways to gain exposure to the commodity price, as opposed to the producers, is via Uranium Participation Corp (U).  Interesting how that post was written very close to the peak of uranium prices. At that time, my thinking was that any exposure to uranium would best be accomplished with a combination of U plus Cameco.  Here's the chart for Cameco over the past three years: Very different performance patterns between the commodity and one of its major producers.  But it wasn't until mid-August of last year that Van Eck came out with the first nuclear energy related ETF, the Market Vectors Nuclear Energy ETF (NLR). For some reason, BGI with its newly listed iShares Global Nuclear Energy ETF (NUCL), must feel ...

Beta Confusion

The EDHEC Business School in Nice, France and its EDHEC Risk and Asset Management Research Centre produce a lot of great material on their site with free access to all.  The research centre's focus on asset management hits me the right way with writing grouped into areas such as "Indexes", "Alternative Investments" and "Asset Allocation" to name a few. Via an EDHEC-Risk email, I received a complimentary copy of Investment Management Review and found an interesting article on beta.  After receiving permission I now provide the text in its entirety.  No comments from me ... just the content as it is. Ok, just one comment.  Note Anson's introduction of a continuum from classic beta to pure alpha.  Very similar to my alpha/beta spectrum but with well defined zones along the line.  I can spend a lot of time thinking about this and how it will apply to future product/service offerings in the ...

The Debate On Levered/Inverse ETFs

A down market would do this.  That is, bring out a debate on the benefits of hedge fund-like investing.  With indexing and ETFs, one would think it's all about gaining exposure to markets (hopefully on the upside) and reducing or eliminating exposure when required as a defensive measure.  You can call that effectively tweaking the asset mix or full out market timing. However, today's ETF industry is one that has evolved.  With inverse ETFs, any investor can now literally "build their own hedge fund".  Shorting and the use of options requires a margin account which is not a big deal but now as long as one can open a trading account of the most basic kind, there's not much to it to gain short exposure. So this brings me to an email I received today care of Google Alerts which is a pretty amazing service.  You can basically tell Google to email ...

Podcast: Comments on Energy, the US Dollar … And More

A couple of weeks ago I was invited by the guys at "The Market Traders" to join in on their weekly roundtable podcast as one of three guest panelists.  If you check out their site, you'll see that they're big on commodities.  Possibly a bit more of a speculative bent to their site with ads that make me think that it's a place where stock pickers come to congregate.  However, I was surprised to find that I wasn't the only one commenting on ETFs and my fellow panelists didn't really spend a lot of time discussing specific stocks although a few ETFs were mentioned (not just by me). We basically comment three times:  Once on energy, the second time on the US dollar and finally with thoughts on areas of the market that we like.  Some who have followed my writings and have become accustomed to the way I do things ...

Contagion and the Domino Effect

I'm surprised that it's only now that we're starting to hear the term "contagion" used more often in the financial press about the current predicament seen globally and especially in the US. Over the past couple of years, I've mentioned in passing to different people my concerns regarding the economic outlook of the US. The way I see it, the typical American consumer ("super consumer" may be more appropriate) who is feeling the noose tighten from their mortgage obligations could soon make decisions that would have an effect on other forms of credit. Car payments are one area. We've seen GM trim operations yet again and with good reason ... why would any sane person by a Hummer? I doubt that the typical buyer of an H2 has child seats in the back row and strollers folded behind them. That large demographic of young families ...

Commodities and Dubai

Just got back from yet another conference and no surprise it covered the current hot topic: commodities. Speaking of hot, this event was in Dubai. I've experienced some hot and humid conditions in my life in places like Manila, Seoul, Singapore and Hong Kong. But this was by far the hottest climate I've ever experienced. It was a dry, baking heat. When outdoors, finding shade helped and certainly the buildings had great air conditioning. But, for example, I had my cousin who lives in the city take me around the gold (souk) market. Getting out of the car into the sun was incredible. It felt just like a dry sauna. And they say it's just the beginning of the hot season! Luckily, the hotels, office buildings and shopping centres are all so luxurious that climate does not have to be a concern. ...

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Recent Miscellaneous

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    • michel — I think gold as a long way to go, probably to 2,500$, which would not be mu...
    • Richard Kang — CPCohen: I'm looking through some of the past comments posted on the blog ...
    • Richard Kang — RB: Yes, that makes sense and I've mentioned in various forums (this blog,...
    • RBuck — For an income portfolio, do closed end mutual funds deserve consideratuion ...
    • DanH — Richard, Have been reading your comments on ETF Investor for some time n...
    • cpcohen — 1. I am old enough to remember when the number of mutual funds (in the US)...
    • Graham White — This is a test comment....