You know how if you turn a garden hose on and no one is holding it it whips around with no rhyme or reason?Well the more I read about the Vix index from Adam and Bill Luby the more I am convinced that a Vix ETF would behave like the hose that no one is holding.
Quite a few times I mentioned that it seems logical for someone to get on the stick and figure out how to ETF (or ETN) it and that I thought it could add value to a portfolio.
Yeah, well forget it. Not that it shouldn't exist and that anyone so inclined shouldn't take a stab but if it ever does come I really doubt I would have an interest. Either something has changed or I know less than I thought I did, not that I was ever an expert by any means, or perhaps some of both. Seeking out volatility management is an important component to portfolio construction but there are less complicated ways to do it.
Anyone who has stuck with this blog over the last few summers may recall that I love to watch the Tour de France, doping and politics notwithstanding I enjoy the scenery, I get a kick out of Phil and Paul's announcing and the competition, anonymous as it has become, is very exciting. Well during yesterday's coverage Paul went on a little tangent about the Aussie reaching parody with the greenback, his preference for the kiwi and for good measure Phil chimed in with a joke about needing six dollars to buy a pound.
Maybe we should listen to Paul, he owns a goldmine in Uganda (I think it's Uganda).
On a related note, on Cashin' In Jonathan Hoenig suggested the South African rand via the WisdomTree product that has ticker SZR. That one might be a bit of a watch out. The rand has some deficit and inflation problems and somehow has managed to go down YTD against the greenback by more than 10%.
On a related note to the related note when watching the Saturday Fox shows as soon as I see the young looking professor from Temple University come on I know that segment won't be about the stock market and I can blast right through on the Tivo.
The crew over at IndexUniverse reported that Claymore has a shipping ETF in the pipeline. From an investing-other-people's-money standpoint this is a tough group to buy into because of the volatility that a lot of them exhibit. I think this group lends itself to an ETF very well because unlike some other specialty segments one shipper doesn't often win at the expense of another shipper. In taking a quick peak at the prospectus, and I do mean quick, there is a good chance that some of the 30 names will be new to you (and me) and that it will not lopside into a couple of stocks but we'll see.
To be clear owning shippers may not be the right hold but I don't think owning an ETF would be a disadvantage versus a stock.
Barron's profiled Nasdaq/OMX (NDAQ). I thought it was a good read and it included an interesting comment. The author, Sandra Ward, described exchanges as being like toll booths. For quite a while I have thought of publicly traded exchanges as being part of the financial infrastructure of a country. I've mentioned this a couple of times in writing so I find it interesting to read that elsewhere for once.
One positive catalyst that was mentioned is all of the cross border investments and alliances that NDAQ has in place. No question that this gives the company the chance to benefit from anything positive that might occur in Northern Europe, the Middle East or anywhere else it plants its flag but that does not make it a proxy for any other country. Seemed like a good time to toss that in again.
One last point, back to Fox News. While I am quite certain that Tobin Smith does not read this blog he pretty much spelled out part of an argument against my belief that the current bear market will be normal. All he said was that normal bear markets last 18 months or so and go down about 30% but that there is nothing about this time that is normal.
Unfortunately that was all he said, not a knock on him, the show is structured for sound bites not real analysis. As his comments were very brief I will simply remind everyone that in every bear market the this time is different sentiment is very pervasive. If you really believe this time is different I would implore you to at least take this into account. I would also remind/disclose that I have structured the portfolio in such a way where correctly quantifying what happens means close to nothing.
3 comments:
Shouldn't you have titled this posting, "The Buck stops Here"?
The Baltic Dry Shipping Index appears to be right up their with precious metal and mining stocks for volatility. Small amounts of a shipping index bought when that index takes a dump ought to be worth investigating. That index can go up 100% in two or three months and down 50% a couple months later.
Paul
I know next to nothing about the VIX, but an article that I read recently posited that all the new short ETFs make it less reliable as a gauge of fear in the market.
i do not think there is such a thing as a normal bear market. Of course they are all different.
I think the point is that despite their differences they historically averaged 18 months in length and 30% in retreat.
Being an average bear market and a normal bear market are two differen things.
There is no reason to think that this different bear market will deviate from the historical average by a large amount.
Of course the average does not mean anything in this case. The average tempareture in Chicago year round maybe 50 degrees (guessing) but i can assure you that over 90% of the days are either above the average or below it.
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