News and Articles

• Silver and Gold Continue to Recover While Crude Oil Is in Short Term Downtrend

  02/12/2011

  Last week, precious metals (GLD, SLV, DBP) continued their recovery: Silver (SLV) again was the strongest, rising 2.85% for the week. Gold (GLD) had a somewhat anemic gain.
  
  Agriculture commodity (DBA) was again in a steady uptrend, gaining 1.49%. As what we pointed out previously, world food prices have been rising and investing in agriculture commodity fits very well to this fundamental.
  
  Crude oil (USO) and natural gas (UNG) were again losers: losing 3.45% and 9.47% respectively. For more information, refer to here.
  
  The following table shows the trend scores for various commodity ETFs.

  Assets Class	Symbols	02/11 Trend Score	02/04 Trend Score	Direction
  Silver	SLV	35.79%	32.25%	^
  Agriculture	DBA	19.98%	18.89%	^
  Commodity	DBC	13.58%	13.51%	^
  Base Metals	DBB	11.63%	13.6%	v
  Precious Metals	DBP	11.42%	10.72%	^
  Energy	DBE	10.06%	10.25%	v
  Gold	GLD	6.85%	6.73%	^
  US Oil	USO	-1.2%	1.37%	v
  Natural Gas	UNG	-19.93%	-12.75%	v

  The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).
  
  The energy ETF (DBE) tracks an index that is a rules-based index composed of futures contracts on some of the most heavily traded energy commodities in the worldâ??Light Sweet Crude Oil (WTI), Heating Oil, Brent Crude Oil, RBOB gasoline and Natural Gas. It is interesting to note that there have been substantial performance divergence between USO, UNG and DBE. For example, for the last week, DBE only lost 0.53%, compared with the big loss cited above for USO and UNG.
  
  It is thus important for investors to beware of the divergence among energy commodity ETFs. We will have a follow up article for more detailed analysis. 

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• Currency ETFs Show Mixed Directions as Egypt's Influence Fades

  02/11/2011

  MyPlanIQ uses ETFs to track key market data. This article reports on key currency ETFs.

  Description	Symbol	1 Week	4 Weeks	13 Weeks	26 Weeks	52 Weeks	Trend Score
  G10 Carry Trade	DBV	0.54%	1.22%	0.46%	5.81%	5.16%	2.64%
  US Dollar Bearish	UDN	-0.61%	3.07%	0.58%	6.41%	2.72%	2.43%
  Australia Dollar	FXA	0.41%	1.95%	0.85%	13.98%	17.72%	6.98%
  British Pound	FXB	-0.54%	2.11%	-0.13%	2.56%	3.06%	1.41%
  Canadian Dollar	FXC	-0.58%	-0.72%	0.62%	5.16%	6.76%	2.25%
  Euro	FXE	-0.55%	4.6%	-0.33%	6.53%	-0.19%	2.01%
  Swiss Franc	FXF	-1.83%	0.91%	1.35%	10.3%	11.15%	4.38%
  Swedish Krona	FXS	-0.32%	5.17%	4.76%	14.44%	13.63%	7.54%
  Japanese Yen	FXY	-1.01%	0.71%	-0.18%	3.44%	8.82%	2.35%
  Mexican Peso	FXM	-0.02%	0.42%	1.49%	6.63%	9.68%	3.64%
  Chinese Yuan	CYB	0.12%	-0.2%	-0.51%	1.68%	0.51%	0.32%
  Brazilian Real	BZF	0.83%	1.44%	-6.71%	-1.72%	7.02%	0.17%

  
  
  This is the complete table that gives you the current results. We then sort them and track their direction.

  Assets Class	Symbols	02/09 Trend Score	02/02 Trend Score	Direction
  Swedish Krona	FXS	7.54%	6.88%	^
  Australia Dollar	FXA	6.98%	6.14%	^
  Swiss Franc	FXF	4.38%	6.02%	v
  Mexican Peso	FXM	3.64%	3.25%	^
  G10 Carry Trade	DBV	2.64%	1.4%	^
  US Dollar Bearish	UDN	2.43%	2.52%	v
  Japanese Yen	FXY	2.35%	3.83%	v
  Canadian Dollar	FXC	2.25%	2.75%	v
  Euro	FXE	2.01%	1.53%	^
  British Pound	FXB	1.41%	2.0%	v
  Chinese Yuan	CYB	0.32%	0.27%	^
  Brazilian Real	BZF	0.17%	-0.96%	^

  
  The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).
  This is a mixed bag of results as the crisis in Egypt continues but is not as much in the front of investors mind. Still the safe haven currencies are in favor and the rest have a mild downward movement.
  
  

  
   
  The Swedish Krona dropped a little this week as risk aversion abated. It is still looking a strong with the government willing to let the currency increase in value as they don't believe this will hurt the economy.
  
  The Aussie Dollar was slightly down for the week with its relative safety battled with some poor employment data raising concerns that the recovery is not as strong as first thought leading to the worry that the currency is over valued.
  
  Similarly the Swiss Franc is a natural haven in times of stress but unexpectedly bad Consumer Price index numbers knocked it back

   
  The Real jumped this week as the government stepped in to reduce spending to try and cool growth. The fundamental strength will drive the currency up once the underlying mechanics have been addressed and this is one key step.
  
  There was not much news on the Yuan which drifts higher being away from north Africa but still beset with trade imbalance and currency value concerns.
  
  The British pound is under pressure from high debt and shrinking GDP which will be a drag for a while to come.

  Disclosure:

  MyPlanIQ does not have any business relationship with the company or companies providing the ETFs mentioned in this article.

   

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• Rising Energy Costs: Casting a Cloud over Energy-Dependent Sector ETFs

  01/15/2011

  The relative performance among sector ETFs remained largely unchanged last week, with energy (XLE) retaining its top spot. However, we saw a broad-based drop in trend scores across sectors. Marking a shift in sentiment, consumer discretionary (XLY) dropped to the fourth spot from being second a week ago. By examining the following table, one can gain critical insights into how to build portfolios at the sector level:

  Assets Class	Symbols	01/12 Trend Score	01/05 Trend Score	Direction
  Energy	XLE	16.21%	14.72%	^
  Materials	XLB	13.6%	14.24%	v
  Industrials	XLI	12.87%	14.01%	v
  Consumer Discretionary	XLY	12.11%	14.32%	v
  Technology	XLK	9.71%	10.35%	v
  Telecom	IYZ	8.74%	13.08%	v
  Financial	XLF	8.08%	9.88%	v
  Consumer Staples	XLP	5.21%	6.52%	v
  Healthcare	XLV	4.68%	5.18%	v
  Utilities	XLU	3.25%	3.65%	v

  Fundamentals are improving the in the financial sector (XLF), with industry bellwether J.P. Morgan Chase reporting record-breaking profits on Friday. As credit condition has improved, delinquencies have dropped and lending activities are picking up. The industry is still facing headwinds. Litigations centered on mortgage buyback and still weak housing markets will post pressure on the margins.
  
  Energy (XLE) was lifted by rising oil prices. Along with the sharp rise in demand for heating oil and naturals gas driven by the severe winter conditions in the Northeast, the closure of the Trans-Alaska pipeline has helped push oil past $91. One may ask the question of whether rising energy costs would post a thread to the economic recovery and how this would affect the dynamics in sectors (e.g. industrials (XLI), consumer (XLY)) that are exposed to the volatile oil market and that require large energy input.
  
  Some economists have suggested as the U.S. economy becomes more service oriented, with energy costs accounting for less in the overall cost structure of the economy, rising oil prices would have little effect on the overall economy. That said, it’s crucial to recognize that rising energy costs would certainly affect consumer behavior and business spending at least in the short run. Therefore, identifying sectors that would be negatively affected in an event of oil shock is critically important when building a portfolio at the sector level.

  For more detailed total return performance, please see here.
  
  

  
   

   

  labels:investment,

  Symbols:XLY,IYZ,XLI,XLB,XLK,XLE,XLF,XLP,XLU,XLV,SPY,QQQQ,IWM,MDY,EFA,VEU,EEM,VWO,IYR,ICF,VNQ,GSG,DBC,DBA,USO,LQD,CSJ,CIU,HYG,JNK,PHB,TLT,IEF,SHY,SHV,BND,AGG,MUB,MBB,

   

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• U.S. dividend stocks are strong while international dividend ETFs lag

  01/15/2011

  The world is entering into a divergent environment: recently, U.S. dividend ETFs have outperformed their international developed country and emerging market counterparts. There has been a consistent pattern that U.S. equities have been strong while stocks in other parts of the world have exhibited lackluster performance. 
  
  The performance of both equity and fixed income markets largely reflects the underlying economic development: U.S. economy, while still being bogged down by its debt and high unemployment numbers, has recovered slowly. Meanwhile, euro zone economy is ladened with peripheral countries' debts and fiscal difficulties. Emerging markets, with global trade imbalance being adjusted through currency manipulation and trade restriction, have to deal with rising inflation and higher cost of living. As the largest consumer of goods in the world, U.S. is using its monetary policy to influence the rest of world. This is the start of a long period of adjustment. 
  
  For the first time in the past ten years, we are seeing 'decoupling' in a reversal fashion: the export driven economies need to slow down while the consumption driven countries need to catch up. In such a period, dividend ETFs are good vehicles in two folds: as equities, they are directly related to economic recovery while being dividend rich, they will provide cushion to the upcoming bumpy ride. 

   

  Assets Class	Symbols	01/12 Trend Score	01/05 Trend Score	Direction
  SPDR DJ Wilshire Intl Real Estate	RWX	9.4%	10.69%	v
  SPDR S&P 500	SPY	9.39%	10.32%	v
  iShares Dow Jones US Real Estate	IYR	8.76%	10.4%	v
  iShares MSCI Emerging Markets Index	EEM	8.2%	9.0%	v
  Vanguard High Dividend Yield Indx	VYM	7.89%	9.04%	v
  Vanguard Dividend Appreciation	VIG	7.58%	8.2%	v
  PowerShares HighYield Dividend Achievers	PEY	7.25%	9.46%	v
  iShares Dow Jones Select Dividend Index	DVY	6.56%	8.17%	v
  PowerShares Intl Dividend Achievers	PID	6.32%	7.18%	v
  First Trust Value Line Dividend Index	FVD	6.15%	6.76%	v
  SPDR S&P Dividend	SDY	5.86%	7.07%	v
  iShares Dow Jones Intl Select Div Idx	IDV	4.9%	5.19%	v
  iShares MSCI EAFE Index	EFA	4.87%	4.89%	v
  iShares S&P U.S. Preferred Stock Index	PFF	3.16%	3.77%	v

   

  From the table above, international REITs (RWX) trend has slowed down a bit. U.S. stocks (SPY, VYM, VIG, DVY) and REITs (IYR, ICF) have caught up and now they have very similar trend scores. International dividend stocks (IDV, EFA) are now placed close to the bottom. 
  
  Among U.S dividend ETFs, those that overweight in consumer staples (SDY, IDV) continued to lag behind those that overweight in more cyclical stocks such as financials (PEY, VYG, VIG). For more detailed performance, refer here. 
  

  

   
  labels:investmentSymbols,DVY,EEM,EFA,FVD,ICF,IDV,IWM,PEY,PFF,PID,RWX,SDY,SPY,VIG,VYM,

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• JPMorgan Chase -- Top Tier Company -- Second Tier Retirement Plan

  01/15/2011

  We have examined the retirement plans of two of the major players in shipping and logistics. UPS  has a four asset class plan and Fedex has a three asset class plan.
  
  We now compare them side by side and see how the different attributes of the plans lead to different results.
  
  The funds line up
  
  
  

  Asset Class	UPS	Fedex
  Balanced Fund	10	14
  REITs	1
  Fixed Income	4	2
  Commodity	0
  Sector Fund	0
  Foreign Equity	1	2
  Emerging Market Equity	0
  US Equity	3	5
  Other	3
  Total	22	23

  
  Both companies offer a large number of balanced funds that include target date funds. UPS has a better selection of fixed income but FEDEX has more choices in international and US Equities.
  
  In general, both would do better to have more choices in each of their funds. One choice in REIT and foreign equity for UPS is low.
  

  Rating Attribute	UPS	Fedex
  Diversification	84%	15%
  Fund Quality	24%	43%
  Portfolio Building	73%	40%
  Overall Rating	62%	33%

   
  We note that UPS gets much higher marks for having the extra asset class. UPS has an emerging market bond fund which provides additional exposure in bonds which further boosts its rating. Fedex does not score highly.
  
  Fedex does beat out UPs in fund quality but with a better choice of funds, UPS gives a better portfolio mix.
  
  The result is that the UPS plan scores more highly than the FEDEX plan.
  
  We now line up returns performance for the last five years and see how this plays out.

  
  Performance chart (as of Jan 11, 2011)

  

  Performance table (as of Jan 11, 2011)

  Portfolio Name	1Yr AR	1Yr Sharpe	3Yr AR	3Yr Sharpe	5Yr AR	5Yr Sharpe
  UPS Savings Plan Tactical Asset Allocation Moderate	15%	105%	9%	93%	10%	91%
  UPS Savings Plan Strategic Asset Allocation Moderate	8%	64%	1%	5%	3%	7%
  Federal Express (FedEx) 401K Plan for Pilots Tactical Asset Allocation Moderate	6%	51%	6%	68%	7%	65%
  Federal Express (FedEx) 401K Plan for Pilots Strategic Asset Allocation Moderate	9%	91%	4%	25%	5%	36%

  Currently US Equity, Commodities and Real Estate are doing well. US Equity and Real Estate available to UPS Savings Plan participants whereas only US Equity is available to the Fedex participants,
  
  We note the behavior of the FEDEX plan is consistent with the majority of plans we have analyzed: The one year returns for SAA beat out the TAA performance. The strong US and other equity markets created a bull market and SAA will usually outperform in those circumstances. Over the longer term where there are a mix of favorable and unfavorable conditions, TAA limits losses which compensates for the reduced upside.
  
  The UPS plan, with its larger number of asset classes should, in theory, give better returns -- which it does in TAA but not in SAA and this is worth some explanation.
  
  For the one year returns

  • The tactical asset allocation was able to provide better returns by virtue of having a range of bond and balanced funds which provided some upside to the rather dismal bond behavior
  • TAA was able to take advantage of moving in and out of US equities when they fell back in the middle of the year
  • TAA didn't have positions in international equity until late in the year
  • The SAA had to take the US and international equities hit and had nothing to offset the gain
  • Real estate was a constant factor for both 
  
  When we look over the longer term horizon, we note that while the four asset TAA strategy is at the top, the four asset class SAA comes below the three asset class SAA.
  
  The reason for this is that the real estate asset class was hammered over the last five years and has significantly hampered performance. The TAA strategy avoided much of the loss by moving out of equities all together.
  
  The Fedex plan, while suffering the drop in US and international equities, did not have the real estate asset class and so was hit slightly less.
  
  In the longer term, as real estate continues to recover and uncorrelated asset classes return to more normal behavior, we expect the standard patter to re-emerge. However, it is caveat emptor -- let the buyer be informed!
  
  
  Takeaway
  
  • 2007 to date has given us unprecedented financial markets that have challenged conventional wisdom and stressed assumptions for investment plans
  • There are special cases where strategies perform in a counter-intuitive manner
  • It's critical not to be caught up in the  exuberance of the last year and especially the last quarter and forget the gut wrenching days that so quickly fade
  • It is critical to understand your asset class choices and the risk and reward they offer.
  
  

  labels; investment
  Symbols:UPS,FDX,SPY,VTI,EFA,VEU,EEM,VWO,AGG,BND,HYG,JNK,PHB,AOM,CIU,BIV,MTK,PTF,RYT,ROM,GWL,PFA,IVE,IWW,JKF,VTV,PWV,RPV,SCHV,EFV,PID,DWM,IVV,IYY,IWV,VV,DLN,RSP,SCHX,IVW,IWZ,JKE,VUG,QQQQ,RPG,SCHG,IJJ,IWS,JKI,VOE,PWP,RFV,UVU,IJH,IWR,JKG,VO,MDY,EMM,PJG,DON,EZM,MVV,

  
  

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• Fedex and UPS 401Ks Shine Light on the Pros and Cons of Asset Class Diversification

  01/15/2011

• Mixed Bag of World Currencies

  01/14/2011

• Asset Allocation: Focus Risk on Long Duration Bonds

  01/14/2011

• Does an ETF ESIB Outperform the SIB in Tactical Asset Allocation Strategies

  01/14/2011

• Does an ETF ESIB Outperform the SIB in Buy and Hold Strategies?

  01/14/2011

• 'Buffett Ratio' for Stock Market Valuation Up 7% Since November

  01/14/2011

• Country ETFs Flat or Modestly Down While Spain Flounders

  01/12/2011

• Junk Bonds: Sector to Shine on Rising Interest Rates

  01/12/2011

• You Can Do Better Than Your Pension Funds

  01/12/2011

• Does a Four Asset ETF Portfolio beat a Three Asset ESIB Portfolio

  01/11/2011

• EXtended SIBs -- A Better ETF Benchmark for Tactical Asset Allocation

  01/11/2011

• United Parcels Service Delivers a Solid Retirement Plan

  01/11/2011

• Commodities Trends: Food Prices Rose More Than Normal CPIs

  01/10/2011

• Risk Chase Slows Down: A Good Time to Review Your Portfolios

  01/10/2011

• A Pivotal Point for Energy and Materials Sector ETFs

  01/09/2011