Battle Of The Titans: Soros Sells Gold ETF While Paulson Buys – Who’s Right?

Ulli Gold ETFs Contact

The IB Times had this to say on the apparently opposing views of the sale and purchase of the Gold ETF (GLD) by Soros and Paulson:

The confirmation of George Soros ETF gold sale has again garnered much media comment. Soros’ $28 billion fund decreased its holdings of the SPDR Gold Trust, the exchange traded fund.

Soros had bought gold to protect against possible deflation, though his fund now believes there is a reduced chance of such a condition, the Wall Street Journal recently said, “citing people close to the matter”.

Should Soros and his fund think that inflation is now a greater risk than deflation then it is curious that they would sell all their ETF holdings. It is also curious as Soros is on record regarding having serious concerns regarding the outlook for the euro and the dollar and the dollar as reserve currency of the world.

There is of course the precedent of other hedge fund managers , such as David Einhorn, who have also sold their gold ETF holdings but bought physical bullion in allocated accounts due to a concern about counter party and systemic risk.

It is quite possible that Soros’ fund has adopted a similar strategy.

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Mutual Funds On The Cutline – Updated as of 5/16/2011

Ulli Mutual Funds On The Cutline Contact

The weakness in the markets, which was apparent in yesterday’s ETF Cutline report, has affected equity mutual funds as well; no surprise there.

The mover this past week in the equity arena was JORNX, which dropped in from a level above +20 to occupy the +19 spot. As you can see, all of its momentum numbers are negative and you already would have been stopped out with the DD% column showing -7.65%.

Here are a few more equity funds which headed south during the previous week:

Rydex Small Cap Value (RYAZX) from +10 to -7

Janus Overseas (JAOSX) from -2 to -12

T. Rowe Price Latin America (PRLAX) from -1 to -14

Fairholme fund (FAIRX) from -7 to -17

Scudder Latin America (SLANX) from -12 to -20

Some of these have already dropped below their recommended sell stops and some are close.  Remember, for volatile sector and country funds, I recommend 10% as a sell stop discipline.

While there are only a few equity funds lurking close to the cutline, none of them have positive momentum numbers across, which means they are not an automatic buy should they manage to climb above the yellow line on a sudden rebound.

Let’s take a look at the table:

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First Latin American Bond ETF Launched

Ulli Latin American Bond ETF Contact

Morningstar reports that “Van Eck Launches Latin American Bond ETF.” Let’s look at some highlights:

On Thursday, May 12, Van Eck launched the first exchange-traded fund that holds only Latin American bonds.

Market Vectors LatAM Aggregate Bond ETF (BONO), which charges a net expense ratio of 0.49%, is the ETF world’s latest foray into emerging-markets bonds. The new fund tracks a market-cap-weighted index containing external and local currency Latin American sovereign debt, along with the external debt of nonsovereign Latin American issuers that is denominated in U.S. dollars or euros.

The fund’s appeal to U.S. investors is obvious: It gives investors exposure to emerging markets, and it offers them significantly higher yields (an average coupon of almost 8% and an average yield to worst of 7.2%) than U.S. fixed-income securities. The fund tilts heaviest toward Brazilian debt, which makes up more than 36% of the fund’s holdings. Other significant country representations come from Mexico (29%) and Colombia (12%).

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ETFs On The Cutline – Updated through 5/13/2011

Ulli ETFs on the Cutline Contact

It was almost a repeat performance of the prior week as equities struggled to find some footing. There was more weakness in the international arena as compared to the domestic one, which is apparent by this latest Cutline report.

The few equity funds, within the 20 positions above the cutline (trend line), slipped and headed below the line. EWJ (Japan ETF) dropped the most and moved from +20 to -20. That was closely followed by EEB (Diversified emerging markets), which gave up its +17 position and ended up in the -19 spot. FXI (China) succumbed as well by moving from +19 to -12.

Bond ETFs held steady and EMB (Emerging Markets Bond) was the biggest gainer by moving from -7 to +3.

Let’s look at the table first, and then I’ll give you my interpretation for this week’s report.

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Market Post Mortem: ETF News And Blog Posts

Ulli Trend Tracking Contact

In case you missed it, here’s a summary of the topics that I posted to my blog during week ending on 5/15/2011.

More bobbing and weaving in the markets left the major indexes near the point of where we started 5 trading days ago.

My published Cutline tables and Model ETF Portfolios can give you an assist by indentifying weakness and strength in various market segments so that you can make a better investment decisions by avoiding overexposure in those areas that are trending down.

This week, we covered the following:

“Will Your ETFs Be Affected By The Proposed Circuit Breaker Rules?”

“Hot, And Not So Hot, ETFs – For The Week Ending 5/13/2011”

“Testing The Ivy ETF Portfolio”

“ETF/No Load Fund Tracker For Friday, May 13, 2011”

“Weekly StatSheet For The ETF/No Load Fund Tracker – Updated Through 5/12/2011”

“High Volume ETFs On The Cutline – Updated Through 5/11/2011”

“USO Underperforms Benchmark”

“6 ETF Model Portfolios You Can Use – Updated through 5/10/2011”

“ETFs And The Next ‘Flash Crash’”

“Mutual Funds On The Cutline – Updated as of 5/9/2011”

“ETF Face-Off: EEM vs. VWO”

“ETFs On The Cutline – Updated through 5/6/2011”

Will Your ETFs Be Affected By The Proposed Circuit Breaker Rules?

Ulli ETF Circuit Breaker Rules Contact

A few days ago, on its anniversary, I reviewed the flash crash of 2006, the impact it had on the investing public along with the “do’s” and “don’ts” when using sell stops.

The WSJ (subscription required) had a follow up story about the resulting proposals for a trading-halt system for stocks and ETFs. Let’s look at some highlights:

The current trading halts, known as circuit breakers, briefly pause trading in shares of certain securities that rise or fall by 10% or more in a five-minute period, guarding against rapid price swings. The system originated in the weeks following the May 6, 2010 “flash crash”–when the Dow Jones Industrial Average plunged nearly 1,000 points before quickly rebounding–and applies to securities in the Standard & Poor’s Composite Index of 500 stocks, the Russell 1000 stock index and 344 exchange-traded funds.

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