Pactum Asset Management: Are Agricultural Commodities Overvalued?

Ulli Commodity ETFs Contact

As the US witnesses a near unprecedented drought situation, agricultural commodities have soared in the last few weeks. Is there a possibility for further upsides in the agricultural commodities space?

Simon Wainwright of Pactum Asset Management thinks there’s limited upside potential for agricultural commodities now since stock prices of many companies have jumped more 40 percent in the last 46 months.

However, fertilizer companies from Europe and the US have reported strong demand and input costs coming down significantly due to falling prices of oil and natural gas. That being said, the stocks in this segment have moved nearly 30 percent in the last two months, which makes them overvalued and it’s advisable to pick them up by the end of the year.

Agricultural commodities, however, still remain a bright spot as latest reports suggest 40 percent of the produce is extremely poor, which is unprecedented in US history. So grains like corn hold some potential for further upside though the easy money have been already been made and investor discretion is advised.

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New ETFs On The Block: Global X Superincome Preferred ETF (SPFF)

Ulli Dividend ETFs Contact

New York City-based ETF issuer Global X, famous for its focus on income and sector funds, continues to push ahead with high yield products with its latest product, the SuperIncome Preferred ETF (SPFF).

The fund seeks to replicate the S&P Enhanced North American Preferred Stock Index that includes about 50 preferred stocks and is the firm’s first venture into the highly competitive world of preferred stock ETFs.

SPFF is similar to the recently launched Van Eck ex-Financials Preferred Stock ETF (PFXF) with the difference that it’s the first fund to target specifically the highest yielding securities. Also the expense ratio is a little higher, at 58 basis points a year its closer to the upper limit even though the underlying index has returned about 7.5 percent annually historically.

The preferred stocks are selected based on certain liquidity, issuer rating, maturity and capitalization parameters while the underlying index uses a modified capitalization-weighted system to ensure no one security is overweight on the index and the overall risk-return profile of the ETF.

SPFF is highly concentrated in financials and 89 percent of total asset holding consists of financial assets. The other significant holdings are utilities, telecom and materials. Though exposure in financial stocks is high, the underlying index has outperformed similar preferred stock indexes.

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07-20-2012

Ulli Newsletter Archives Contact

ETF/No Load Fund Tracker Newsletter For Friday, July 20, 2012

ETF/No Load Fund Tracker StatSheet

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

https://theetfbully.com/2012/07/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-07192012/

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Market Commentary

Friday, July 20, 2012

US STOCKS SNAP THREE-DAY WINNING STREAK AS SPAIN MOVES ONTO THE BAILOUT MENU; VIXY LEAPS, EWP CRASHES

Domestic equities snapped its three-day winning streak to close lower Friday on reports of record high 10-year Spanish bond yields along with a mixed bag of corporate earnings numbers, which prompted jittery investors to take refuge in US safe-haven assets.

The Dow Jones Industrial Average (DJIA) tumbled 121 points, off 0.5 percent for the month but up 0.4 percent for the week. The breadth of the market remained negative as 23 of the 30 components within the Dow slumped.

The S&P 500 Index (SPX) lost 14 points, up 0.4 percent over last Friday and less than 0.1 percent higher for July.

Investors devoured safe haven assets pushing yields on Treasury five-year notes to record lows as risk sentiment soured after Spain declared the country’s recession is likely to extend into next year.

As demand spiked, the yield on US 10-year notes dropped near record lows since investors grew restless over rumors Spain’s Valencia region is preparing for central assistance from Madrid.

The 10-year benchmark Treasury yield dropped five basis points to 1.46 percent while 30-year bond yields slipped six basis points to 2.55 percent in late afternoon trading as the news of EU finance ministers approving the first tranche of €30 billion bailout-money for Spain’s struggling lenders had little effect on the markets.

ETFs in the news: 

As US markets got a jolt from Europe, market uncertainties returned and haunted investors, souring risk sentiment. The ProShares VIX Short-term Futures ETF (VIXY) was among the day’s top gainers, leaping 5.44 percent on the day.

The so-called fear-tracking CBOE Volatility Index (VIX) jumped 5.31 as risk remained off the table on a choppy trading day.

Other volatility-linked products like the Barclays iPath S&P 500 VIX Short-Term Futures ETN (VXX) also posted solid gains, adding 5.18 percent during the session.

The latest development in Spain was a stark reminder of the difficulties faced by the Iberian nation and sent stock indexes across Europe on a downward spiral. Madrid’s 10-year borrowing costs hit a record 7.28 percent Friday, an unsustainable level that may force the country to seek a full-fledged rescue package soon.

Spain’s stock index IBEX-35 crashed 5.8 percent over news that the country’s Valencia region is getting ready to seek assistance from Madrid. The iShares Spain Index Fund (EWP) emerged among the day’s top percentage losers, plunging 6.76 percent on the day.

Other European funds also got hammered with the iShares MSCI France Index Fund (EWQ) and the iShares MSCI Germany Index Fund (EWG) shedding 2.94 percent and 2.91 percent respectively.

Our Trend Tracking Indexes (TTIs) followed the market trend and ended the week as follows:

Domestic TTI: +2.73% (last week +2.56%)

International TTI: -2.44% (last week -2.73%)

Have a great week.

Ulli…

Disclosure: No holdings

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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 Chris:

Q: Ulli: I’ve been using your strategy for a few months now, and each time I reach a new milestone, I seem to find another question. Thankfully, you’ve been helpful in answering them.

My question involves the incremental buying. I own an ETF (DVY) which has grown in value by 5%. Now, I do not reinvest the dividends, but when I factor in the dividends, the actual return on my initial investment is around 7%. My question is would you buy again based on share price percentage gain, or the the total return on investment with the dividends included?

Any advice would be greatly appreciated.

A: Chris: You can go either way, because this is not an exact science. In the past, I have based my purchases strictly on appreciation, although I have taken into account large yearend distributions, especially with mutual funds.

Use your comfort level. Alternatively, if you find incremental buying too cumbersome, you may consider any of the Model ETF portfolios, which I publish every Wednesday. For example, I have preferred the use of model #2 this year and have substituted DVY for VTI for many clients with the result that, due to its lesser volatility, we still own it as opposed to the more wildly fluctuating VTI.

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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, July 20, 2012

Ulli Market Commentary Contact

ETF/No Load Fund Tracker StatSheet

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

https://theetfbully.com/2012/07/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-07192012/

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Market Commentary

Friday, July 20, 2012

US STOCKS SNAP THREE-DAY WINNING STREAK AS SPAIN MOVES ONTO THE BAILOUT MENU; VIXY LEAPS, EWP CRASHES

Domestic equities snapped its three-day winning streak to close lower Friday on reports of record high 10-year Spanish bond yields along with a mixed bag of corporate earnings numbers, which prompted jittery investors to take refuge in US safe-haven assets.

The Dow Jones Industrial Average (DJIA) tumbled 121 points, off 0.5 percent for the month but up 0.4 percent for the week. The breadth of the market remained negative as 23 of the 30 components within the Dow slumped.

The S&P 500 Index (SPX) lost 14 points, up 0.4 percent over last Friday and less than 0.1 percent higher for July.

Investors devoured safe haven assets pushing yields on Treasury five-year notes to record lows as risk sentiment soured after Spain declared the country’s recession is likely to extend into next year.

As demand spiked, the yield on US 10-year notes dropped near record lows since investors grew restless over rumors Spain’s Valencia region is preparing for central assistance from Madrid.

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Weekly StatSheet For The ETF/No Load Fund Tracker Newsletter – Updated Through 07/19/2012

Ulli Uncategorized Contact

ETF/Mutual Fund Data updated through Thursday, July 19, 2012

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 broken above its long term trend line (red) by +3.32%. A break back below it will generate a Sell signal to move out of all domestic equity positions. Be sure to tune into my blog for the latest updates.

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Upward Momentum Slows But Equities Eke Out A Gain On Tech Earnings; USO Pops, VIXY Drops

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

Equities managed to close higher for the third consecutive day as good tech earnings lifted investor mood in an otherwise murky day overshadowed by disappointing economic readings.

Investor sentiment also strengthened after Germany’s Bundestag voted in favor of a €100 billion bailout package for Spain meant to recapitalize Madrid’s stricken banks.

The Dow Jones Industrial Average (DJIA) rose 35 points with 15 of the 30 stocks in the index ending higher for the day.  The S&P 500 Index (SPX) added 4 points with tech stocks front-running the day’s gainers while telecom and financials lagged among its 10 business groups.

Treasuries retreated after data released for leading economic indicators fell short of expectations, giving rise to speculations that the Federal Reserve will initiate quantitative easing 3 very soon to prop up the sputtering economy. At least that’s how the ever hopeful crowd on Wall Street views this data.

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