Tuesday, November 18, 2014

Skyscrapers Predict Real and Financial Markets

 
A Spurt of Gross High-Rises
Marks an Asset Bubble 
and Portends a Market Crash


A breakout of soaring skyscrapers can presage a crash of the stock market and a recession in the real economy. That is, a bubble in real estate by way of oversize buildings heralds the end of a boom and the onset of a bust. In this way, a rash of record-busting construction serves as a portent of doom during the long-lived cycles in the property market as well as the financial forum.

In the modern era, real estate and financial assets form the bulk of wealth for the population at large. For this and other reasons, the tangible and virtual markets are closely intertwined. In the larger scheme of things, the fortunes of both types of assets depend on the health of the economy at large. In that case, it makes sense for the real and financial markets to display a heap of correlation and even a glob of causality with each other.

In their own way, skyscrapers can serve as beacons for investment planning by spotlighting bouts of excess in the property sector as well as other domains such as the stock market. All too often, an upcast of buildings that set fresh records for height is a glaring sign of froth in the real economy and the financial system. For this reason, the sober investor should pay heed to high-rise projects that make little or no sense from a pragmatic stance. To wit, a spate of record-breaking buildings is a cue for the canny player to rejigger their portfolio and prepare for a blowout in the real and financial markets.


NOTE: The full report is a document in PDF form under the title of “Skyscrapers Predict Real and Financial Markets”. The briefing may be viewed or downloaded here.

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Tuesday, September 9, 2014

Top 3 Index Funds for Technology – FDN, PNQI and SOXX

 
Triumph of Internet Stocks


A performance review of the top index funds for the technology sector paves the way for investing in a lively branch of the stock market. For this purpose, a robust and convenient vehicle for the earnest investor takes the form of an exchange traded fund (ETF).

In sizing up the performance of the pools, a lengthy timespan provides a wealth of data for a thorough survey. On the other hand, the turnout in recent years is likely to be a better guide to the prospects going forward than the results of the distant past. Given this backdrop, a window of three years seems like a fitting compromise between the contrasting concerns of ample data versus high relevance.

Based on the capital gains over the course of three years, the best index funds in the technology patch go by the ticker symbols of FDN, PNQI and SOXX. Among these vehicles, the first two entries outpaced by a huge margin the chief benchmark of the stock market in the form of SPY. By contrast, SOXX turned in a lackluster showing.

From a different angle, a graphic display of the price history can provide an intuitive grasp of the entrants in the race. The mindful investor has to consider the volatility of the vehicles during the appraisal window as well as the payoff over the entire stretch.

In order to obtain a balanced view of performance, the window of evaluation should cover a spell in which the market has witnessed a boom as well as a bust. For this purpose, a choice timespan is a window of 5 years ending in the late summer of 2014. This interval straddles the crash of the bourse in 2011 as well as the upswell and bounceback of the market that lie on either side of the smashup.

From the longer perspective of half a decade, the standard bearer in the world of index funds – namely, SPY – turned in a capital gain of 92.68%. Another touchstone lay in XLK, the primo within the technology sector, which chalked up a payoff of 97.78%.

Meanwhile the outturn was roughly similar for SOXX, whose return came out to 97.69%. In these ways, the semiconductor fund as well as the technology benchmark managed to edge out SPY by a small margin.

By contrast, FDN bagged a capital gain of nearly 192% over the entire stretch of half a decade. Better yet, PNQI won the derby by snagging a windfall of some 226% over the same period.


NOTE: The full report is a document in PDF form under the title of “Top 3 Index Funds for Technology”. The briefing may be viewed or downloaded here.


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Saturday, July 26, 2014

Myths versus Mistakes in Investing


Riot of
Passive Muffs and Active Goofs
in Financial Markets


The financial markets abound with beguiling myths and wanton mistakes. The two kinds of muffs – namely, fables and bungles – happen to be distinct as well as jumbled. Together the stumpers trip up all manner of players ranging from rank amateurs to badged professionals.

A myth is a false view of the marketplace while a mistake is a bum move that whops the investor. The former is a passive flub while the latter is an active goof.

The two kinds of spoilers can play out their roles in isolation or combination. As an example, a tall tale may bedevil an investor without giving rise to a costly mistake. By the same token, a bad move could arise in the absence of a sly myth. In other cases, the two modes of bungling work in concert to thwart the heedless actor, thus fouling their agenda even to the point of ruin.

From a larger stance, the immense complexity of the financial forum and the real economy crimps any effort to drum up a cogent program of investment. The players stuck in the mire run the gamut from wide-eyed greenhorns puttering around in their spare time to wizen veterans plying their trade the whole day long.

Whatever the scope of experience in the field, the bulk of participants fall prey to both types of muck-ups. As a countermove, the first task of the shrewd gamer is to recognize the plethora of stumbling blocks along with the nasty wounds they inflict. In breaking free of the minefield, a solid grasp of the myths and mistakes paves the way for building up a trenchant program of investment.


NOTE: The full article is available as a document in PDF form. The write-up may be viewed or downloaded here.

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Saturday, May 17, 2014

Top 5 Markets for ETF Investing in Europe – Ireland, Switzerland, Belgium, Britain and Nordics

 
Index Fund Performance
for
EIRL, EWL, EWK, EWU and GXF


A performance review of the top markets in Europe sets the stage for investing in a diverse region that includes budding countries as well as mature economies. For this purpose, a robust and convenient vehicle for the worldly investor lies in an exchange traded fund (ETF).

In sizing up the field of index funds, a straightforward tack is to begin with a list of the high flyers. Then other traits such as volatility and liquidity can be brought to bear on the subject in addition to the capital gains.

In order to obtain a balanced view of performance, the window of evaluation should cover a period in which the market has encountered a boom as well as a bust. On one hand, a longish timespan provides a wealth of data for a thorough survey of performance. On the other hand, the turnout in recent years is likely to be a better guide to the prospects going forward than the record of the remote past.

The vale of exchange traded funds has seen explosive growth around the turn of the millennium. Given the welter of saplings, an investor who insists on a long history will thereby rule out a raft of candidates. In this setting, a track record of three years seems like a fitting compromise in trading off the opposing factors of ample data versus plentiful candidates.

With these points in mind, the chosen window spans three years ending in spring 2014. From this standpoint, the front-runners take the form of index funds dealing with Ireland, Switzerland, Belgium, Britain and the Nordic region.

In addition to the return on investment over the entire stretch, a crucial issue concerns the volatility of each vehicle along the way. In gauging the extent of turbulence, a handy aid lies in a concurrent plot of the index funds. For this purpose, a suitable scheme involves a visual display spanning a stretch of 5 years ending in spring 2014.

Based on the capital gains over the past three years, the best vessels sport the ticker symbols of EIRL, EWL, EWK, EWU and GXF. Over this stretch, the index fund for Ireland (EIRL) outpaced the chief benchmark of the stock market – namely, SPY – by a solid margin. On the other hand, the other four vehicles lagged the latter beacon by varying degrees.

Meanwhile, over the longer span of half a decade, the Irish fund beat out SPY by a modest amount. During this period, the turnout for Switzerland (EWL) was comparable to the flagship benchmark of the stock market. By contrast, the remaining three contenders turned in worse results. In particular, Britain (EWU) brought up the rear amongst the top names in the European theater.


NOTE: The full briefing is a document in PDF form. The publication, titled “Top Markets for ETF Investing in Europe”, may be viewed or downloaded here.

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Tuesday, March 18, 2014

Top Index Funds for Biotech – IBB, PJP and XBI


Performance Review
of the Best 3 Index Funds


A performance review of the top index funds for the biotech industry paves the way for investing in one of the most dynamic branches of the stock market. For this purpose, a robust and convenient vehicle for investment lies in an exchange traded fund (ETF).

In order to obtain a balanced view of performance, the window of evaluation should cover a period in which the market has encountered a boom as well as a bust. On one hand, a longish span provides a wealth of data for a thorough survey of performance. On the other hand, the turnout in recent years is likely to be a better guide to the prospects going forward than the experience of the distant past. Given this backdrop, a window of three years seems like a fitting compromise between the contrasting issues of ample data versus high relevance.

From a different angle, a graphic display of the price history can provide an intuitive grasp of the index funds under consideration. The earnest investor has to consider the volatility of the vehicles during the window of evaluation in tandem with the overall payoff over the entire stretch.

Based on the capital gains over the course of three years, the best index funds in the biotech patch go by the ticker symbols of IBB, PJP and XBI. Each of these vehicles trounced the chief benchmark of the stock market – namely, SPY – by a huge margin.


NOTE: The full report is a document in PDF form under the title of “Top 3 Index Funds for Biotech”. The briefing may be viewed or downloaded here.

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Monday, January 20, 2014

Forecast of Top Index Funds for Equities – 2014 and Beyond


ETF Review and Outlook
for
DIA, SPY and QQQ


A review of the top index funds sets the stage for a cogent approach to forecasting and investing in the stock market. For this purpose, the prime vehicles lie in the exchange traded funds for the leading benchmarks: the Dow Jones Industrial Average, the S&P 500 index, and the Nasdaq 100 yardstick. The tracking vehicles for these beacons are found in DIA, SPY and QQQ respectively.

By contrast to popular perception, the real and financial markets are intertwined not only in the future but also the present which in turn springs from the past. Given this backdrop, the adept investor examines the landmarks in the backward direction as well as the conditions in the current environment.

Moreover the outlook over the months to come depends not only on the currents in motion right now but also the contours of the landscape downstream. For this reason the survey at hand draws partly on, and fleshes out, the prospects for this year and beyond.

From a practical stance, the companies listed in the stock market earn their living within the economy at large. That much is true even in the case of virtual firms such as online retailers and brokerage houses. For this reason, the aggregate level of economic output plays a vital role in corporate earnings and thus the price action on the bourse.

In the real economy, the conditions have not changed a great deal over the past few years. On the downside, the politicians of the West have gone out of their way to solidify the distortions in the housing sector in the aftermath of the financial crisis of 2008.

Another boondoggle lay in the prop-up of some of the biggest and most unproductive firms in the economy. In this light, trillions of dollars were wasted in the form of bailouts for a gaggle of gutted banks.

To make matters worse, the struts put in place have prevented the property market from shedding the mountain of blubber it had piled up during the manic bubble in real estate in the run-up to the financial flap. For this reason, the growth rate for the entire economy is destined to be measly well into the 2020s.

In particular, the prospects for the industrial nations are lackluster at best. For this reason, the emerging markets of the world will have to plod along in spite of the general weakness in the wealthy regions.

On a positive note, though, the slowdown in the budding markets has run its course for now. A case in point is China, which will contribute more to the growth of the world economy in 2014 than it did over the past couple of years.

In short, the outlook for the real economy has improved somewhat since the same time last year. On one hand, we can expect the rich nations of the world to putter along and make way by about 2.0 percent after adjusting for the squeeze of inflation based on the official figures bandied about by government agencies.

Meanwhile the emerging regions as a group will contribute the lion’s share of the upturn in global output thanks to an upsurge of 5.6%. As a result, the world economy is slated to expand by some 3.0% over the course of 2014.

Thanks to the patchy but improving conditions in the tangible economy, the stock market is poised to climb higher as well. The cheery outlook shows up in the upward slant of the top index funds over the course of the year.

As an example, the first milestone for DIA – also known as the Diamonds – lies at a price of $140.71. This landmark is likely to be reached by the middle of the year. The milepost in sight lies a modest $13.83 beyond the initial figure of $164.39 chalked up by DIA at the beginning of January. In other words, the Diamonds are slated to rise but not get very far during the first half of the year.

Sadly, the outlook is not much better for the second half. For one thing, the market will likely struggle as usual over the course of the summer. For a second thing, the bourse will enter its weakest stretch of the year as September rolls around.

To add to the damper, the central bank in the U.S. will likely wrap up the latest round of quantitative easing around that time. As the spree of money creation winds down, the torrent of fresh cash flooding into the marketplace will no longer be monstrous but merely massive.

As a result, the bourse is apt to suffer a breakdown of middling size. The slump will likely amount to a halfway trip to the threshold of 15% that marks the low end of a full-blown crash in the U.S. In that case, the setback will result in a knockdown in the ballpark of 7 or 8 percent.

Given the specters on the horizon, the summer and autumn will be a good time for the cautious investor to stay clear of the stock market. On the other hand, the bourse should regain its footing and tramp upward once more during the last quarter of the year.

On a negative note, though, the U.S. bourse is unlikely to rise much beyond its prior peak set earlier in the year. In other words, DIA will struggle to regain its initial milestone in the $178 zone. By way of comparison, the Diamonds closed out 2013 at a price of $165.47. In that case, a high of $178 amounts to a modest increase of 7.6%. Not a great result.

From a different angle, suppose that the trend line over the past couple of years manages to hold up. In that case, the ramp-up over the year is a hike of 21.6% which in turn implies a milepost at $190.91. This second and last marker for 2014 represents a gain of some 15.4% over the price of $165.47 recorded at the end of last year.

The actual figure at the close of this year will of course depend on a slew of factors. A case in point is the amount of money conjured out of thin air by the central bank.

Another sample involves an uptick in the appetite for risk amongst the investing public. Given the huge run-up of the U.S. bourse last year, a horde of investors will pile into the arena. At the same time, the players at the head of the pack will begin to turn their gaze toward far-flung shores in search of greener pastures.

In that case, the lagging markets round the world should turn in a much better performance than they did last year. Examples in this vein run the gamut from from Britain to Korea.

In the financial forum, the leading benchmarks of the bourse tend to move in unison, as in the case of a peak or a trough that crops up at the same time. On the other hand, the magnitude of the moves tends to differ somewhat. More precisely, SPY is prone to head in the same direction as DIA but advance a tad more in relative terms.

The story is similar for QQQ, a tracking fund which also goes by the nickname of Qubes. The main difference lies in the tendency of the latter to display even larger swings in price than its major rivals.

For these reasons, a forecast for SPY – alias the Spyders or Spiders – is largely redundant when a projection is already available for the Diamonds. And likewise for the Qubes.

As the year wears on, the second and last landmark for DIA lies around 15.4% beyond its closing value of $165.47 in 2013. Based on the recent patterns in the marketplace, we can multiply the latter percentage by a stretch factor of 1.107 for the Spyders. The result is an upturn of some 17.0%. That is, the final milestone for SPY in 2014 should lie around 17 percent higher than its closing value at the end of last year.

We can obtain a similar estimate for the Qubes. The product of 15.4% for DIA and a scaling factor of 1.286 for the index fund comes out to 19.8%. As a backdrop, QQQ closed out the year at a price of $87.96. Based on the latter two figures, the last milestone for the tracking fund stands at $105.38.

In comparison to the stunted advance of DIA and SPY, we can also foresee a brighter future for QQQ for a different reason. On one hand, the Spyders and Diamonds have already passed their all-time peaks and are now plowing into unknown terrain. By contrast, the Qubes have ample room to advance before they regain their historic peak notched at the height of the Internet craze.

At the end of 2013, the Nasdaq fund wrapped up the year at a price of $87.96. The latter figure is a far cry from the zenith of $232.88 touched in March 2000. As a counterpoint, though, the latter price has to be halved due to a 2-for-1 stock split in the second half of March 2000. In that case, the corresponding price today turns out to be $116.44.

The latter figure lies within a stone’s throw of the last milestone of $105.38 projected for 2014. In view of the historical record, the mass of investors will do their darnedest to shove the Qubes up to their all-time high. And if the central bank prints up enough money out of the ether in the interim, the madding crowd may well succeed.

As a rule, we can expect the bourses in the budding regions to advance by roughly twice as much as the Diamonds or Spyders. For instance, a gain of 15% for DIA should result in an uplift of 30% or so for the emerging markets.

To sum up, the trio of index funds for the U.S. bourse will tramp onward and upward through a series of zigzags as usual. The story will unfold in a similar fashion for the other stock markets round the globe.

Although there are plenty of exceptions, the bourses in the budding regions often advance roughly twice as much as the Diamonds or Spyders. In that case, an upturn in DIA should result in a healthy gain for the emerging markets.

On a negative note, the feisty markets also tend to be the most volatile. Meanwhile the mass of investors remain somewhat skittish. As a result, the international crowd may hold back on moving in earnest into the sprouting markets until the last quarter of the year.


NOTE: The full report is a document in PDF form under the title of “Forecast of Top Index Funds for Investing in the Stock Market”. The updated version may be viewed or downloaded here.


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