Last Week In Review: ETF News And Blog Posts To 1/27/2013

Ulli Market Review Contact

In case you missed it, here’s a summary of the ETF topics and market reviews I posted to my blog during the week ending on 1/27/2013.

The relentless march of the major market indexes into the nosebleed section continued, as the S&P 500 took out its milestone 1,500 level on the second try by closing the week at 1,503.

It’s simply amazing what the Fed’s monthly monetary pump fest of $85 billion can do as there seemingly is no end in sight as to how high we can go. Some analysts pegged the next level at the 1,560 area, which would represent a new high for this benchmark index. We may get there, but when this run ends, it will end badly in a hurry most likely caused by some black swan event.

Obviously, there is no rationale behind this move as the economy continues to chug along totally disconnected from current market levels. Nevertheless, the trend is towards higher prices until the music stops, at which point anything is possible. This is exactly the type of environment where you can get burned financially if you do not have your exit strategy in place.

Should the trend reverse, be sure to execute your sell stops. If you’re new to the sell stop idea, you can download my free e-Book on the topic here.

Over past week, we covered the following:

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One Man’s Opinion: Will US Equities Rise As The Budget Deficit Shrinks?

Ulli Market Commentary Contact

The Federal Reserve balance sheet has nearly tripled in size to $3 trillion over the last few years, which is a cause for concern, says David Kelly, chief market strategist at JP Morgan Funds.

The US Fed has loaded up their balance sheet with a pile of very bad assets, i.e. very low yielding bonds, and eventually they have to pay realistic rates on reserves. Few years from now, markets will wonder if the Federal Reserve can make any income at all and it might run this at a net loss, he noted. The Federal Reserve is not helping the economy a lot right now, but it is creating itself a problem for the future by building this balance sheet, David added.

Asked to explain how central banks like the US Fed manage to build balance sheets as large as $3 trillion, David said central banks are special banks since they can print money. All they need to do is print fresh notes and use them to buy sovereign bonds. The bonds are the assets (since they generate income) and the newly printed notes are part of liabilities.

The central banks can, in theory, build balance sheets of any size, he mentioned. But as Milton Friedman had noted that there are consequences to everything, there will be consequences for the Federal Reserve as well for this extraordinarily aggressive policy of building its balance sheet.

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New ETFs On The Block: iShares New Core ETFs (ISTB, IXUS, IEMG, IEFA)

Ulli ETF News Contact

iShares, the San Francisco-based largest ETF company by total assets, launched four new “Core” funds in October, targeting investors who wish to build long-term, buy-and-hold portfolios. The four new ETFs include three international stock funds and a short-term Treasury ETF.

The four new ETFs are mostly based on broader indexes and hence are pure indexing tools. The funds include iShares Core MSCI Total International Stock ETF (IXUS), iShares Core MSCI EAFE ETF (IEFA), iShares Core MSCI Emerging Markets ETF (IEMG) and iShares Core Short-Term US Bond ETF (ISTB).

iShares Core Short-Term US Bond ETF (ISTB):  ISTB tracks the Barclays US Government/Credit 1-5 Year Bond Index and seeks exposure in short-term US/non-US investment grade bonds. The index measures the performance of US dollar-denominated US Treasury bonds, government related bonds (US and non-US agencies, sovereign, quasi-sovereign, supranational and local authority debt) and investment-grade US corporate bonds that have a remaining maturity of less than five years but greater or equal to one year and have $250 million or more of outstanding value. In terms of country-wise holding, US top the chart with 89.42 percent of total assets. Canada, Germany, UK and France are the other top holdings. The fund has an expense ratio of 0.12 percent.

iShares Core MSCI Emerging Markets ETF (IEMG): The fund follows the performance of the MSCI Emerging Markets Investable Market Index, a equity benchmark designed to measure large-, mid- and small-cap equity market performance for emerging markets. MSCI reviews the index quarterly and the component companies are adjusted for available float to ensure they meet the objective criteria for inclusion to the benchmark. The index was comprised of 2,622 constituents from 21 emerging market countries as of Sep 30, 2012. Components primarily include financials, information technology, energy and materials companies.

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01-25-2013

Ulli Newsletter Archives Contact

ETF/No Load Fund Tracker Newsletter For Friday, January 25, 2013

ETF/No Load Fund Tracker StatSheet

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THE LINK TO OUR CURRENT ETF/MUTUAL FUND STATSHEET IS:

https://theetfbully.com/2013/01/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-01242013/

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Market Commentary

Friday, January 25, 2013

US EQUITY ETFs FINISH WEEK ON A HIGH; EUROPE RISES ON GERMAN CONFIDENCE

US equities rose Friday, lifting the S&P 500 index above the 1,500 mark for the first time since late 2007, as investors welcomed a batch of better-than-expected corporate results and German business confidence topped estimates.

Stocks edged higher today as German business confidence took an unexpected strong jump in January. The Munich-based Ifo Institute’s business climate index rose to 104.2 from 102.4, adding to signs that Europe’s largest economy may be recovering from a widely-suspected fourth-quarter contraction.

Investors also tracked comments from ECB President Mario Draghi as the European Central Bank boss spoke at the World Economic Forum in Davos. Draghi said a recovery is possible in the second half of the year as economic activity in the region was stabilizing.

Separately, the ECB said banks will repay EUR 137.2 billion of the more than EUR 1 trillion of its emergency three-year loans, known as long-term refinance operations or LTRO, in another sign the euro region’s debt crisis is allegedly abating.

Shares moved off intraday highs briefly Friday after the Commerce Department reported sales of new US homes fell 7.3 percent to an annual clip of 369,000 in December.

The Dow Jones Industrial Average (DJIA) rose 71 points to 13,896, up 1.8 percent for the week. The S&P 500 Index (SPX) rose 8 points to 1503 with consumer discretionary and energy companies advancing the most. All the 10 business groups within the index gained as the benchmark closed over 1,500 for the first time since December 2007. The index has gained for eight consecutive days, the longest string of advances since the nine-day run in early 2004.

Treasury prices fell the most since September after data showed European banks plan to repay more of the ECB’s three-year LTRO loans than economists had forecast, damping demand for safer assets.

US government securities were not helped after the Commerce Department said new-home sales fell more than anticipated, but continued to rise on an annual basis, bolstering sentiment that the housing sector is on the mend.

The euro surged to a 11-month high against the dollar Friday after a ECB report showed European banks plan to repay larger-than-anticipated chunk of cheap three-year loans provided by the central bank.

Economists, however, believe this is bad news for the economic region as it increases the divergence between the euro and the underlying economy, which is in bad shape.

Meanwhile, across the Atlantic, European stocks rose for a third day after upbeat German business data and encouraging comments from the European Central Bank boosted investor sentiment.

Trend wise, our Trend Tracking Indexes (TTIs) followed the markets into the nosebleed section and ended the week as follows:

Domestic TTI: +3.12% (last week +3.10%)

International TTI: +11.21% (last week +10.45%)

How high can you go remains the question for which there is no answer. The best way is to “ride the trend until it ends when it bends;” at that point you need to pay attention to your trailing stops and execute them as they get triggered.

Have a great week.

Ulli…

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READER Q & A FOR THE WEEK

All Reader Q & A’s are listed at our web site!
Check it out at:

http://www.successful-investment.com/q&a.php

A note from reader Brad:

Q: Ulli: I’m not sure I understand your models. Why are the funds chosen not the highest rated funds (by M-index or your other measurements)? Would it not be possible to find higher rated funds that essentially are in the same categories and hence have the same asset allocations but better funds?

A: Brad: Of course, you can piece your own portfolio together using the information I provide in the StatSheet. However, many investors prefer not living too much on the edge and prefer using a ready-made portfolio designed not on maximizing gains but achieving a balance within various asset classes in order to better deal with market volatility.

It’s all about risk tolerance, and if you can stomach it, you can select only the high performers.

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WOULD YOU LIKE TO HAVE YOUR INVESTMENTS PROFESSIONALLY MANAGED?

Do you have the time to follow our investment plans yourself? If you are a busy professional who would like to have his portfolio managed using our methodology, please contact me directly or get more details at:

https://theetfbully.com/personal-investment-management/

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Back issues of the ETF/No Load Fund Tracker are available on the web at:

https://theetfbully.com/newsletter-archives/

ETF/No Load Fund Tracker Newsletter For Friday, January 25, 2013

Ulli ETF Tracker Contact

ETF/No Load Fund Tracker StatSheet

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THE LINK TO OUR CURRENT ETF/MUTUAL FUND STATSHEET IS:

https://theetfbully.com/2013/01/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-01242013/

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Market Commentary

Friday, January 25, 2013

US EQUITY ETFs FINISH WEEK ON A HIGH; EUROPE RISES ON GERMAN CONFIDENCE

US equities rose Friday, lifting the S&P 500 index above the 1,500 mark for the first time since late 2007, as investors welcomed a batch of better-than-expected corporate results and German business confidence topped estimates.

Stocks edged higher today as German business confidence took an unexpected strong jump in January. The Munich-based Ifo Institute’s business climate index rose to 104.2 from 102.4, adding to signs that Europe’s largest economy may be recovering from a widely-suspected fourth-quarter contraction.

Investors also tracked comments from ECB President Mario Draghi as the European Central Bank boss spoke at the World Economic Forum in Davos. Draghi said a recovery is possible in the second half of the year as economic activity in the region was stabilizing.

Separately, the ECB said banks will repay EUR 137.2 billion of the more than EUR 1 trillion of its emergency three-year loans, known as long-term refinance operations or LTRO, in another sign the euro region’s debt crisis is allegedly abating.

Shares moved off intra-day highs briefly Friday after the Commerce Department reported sales of new US homes fell 7.3 percent to an annual clip of 369,000 in December.

The Dow Jones Industrial Average (DJIA) rose 71 points to 13,896, up 1.8 percent for the week. The S&P 500 Index (SPX) rose 8 points to 1503 with consumer discretionary and energy companies advancing the most. All the 10 business groups within the index gained as the benchmark closed over 1,500 for the first time since December 2007. The index has gained for eight consecutive days, the longest string of advances since the nine-day run in early 2004.

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Weekly StatSheet For The ETF/No Load Fund Tracker Newsletter – Updated Through 01/24/2013

Ulli ETF StatSheet Contact

ETF/Mutual Fund Data updated through Thursday, January 24, 2013

If you are not familiar with some of the terminology used, please see the Glossary of Terms.

 

1. DOMESTIC EQUITY MUTUAL FUNDS/ETFs: BUY — since 10/25/2011

The domestic TTI broke through its long-term trend line generating a Sell for this area effective 8/9/2011. Over the recent past, we’ve seen the TTI hovering slightly below and above this dividing line between bullish and bearish territory. The clear break to the upside occurred on 10/24/11 and, effective 10/25/11, a new Buy signal for domestic equities went into effect.

As of today, our Trend Tracking Index (TTI—green line in above chart) has bounced off its long term trend line (red) by +3.20% as part of the post election rebound.

To avoid a potential whip-saw, a Sell signal to move out of all domestic equity positions will be generated once we have clearly pierced the line to the downside. Be sure to tune into my blog for the latest updates.

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