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George Soros investments

noreply@blogger.com (Vlada, Czech Republic) — Sat, 31 Jul 2010 14:39:00 +0000

Last time we provided insight in current Jim Rogers portfolio and investing strategy. Today let's review where another investment guru, George Soros, sees big potentials.

George Soros is completing negotiations to buy4% stake in Mumbai Stock Exchange (Bombay Stock Exchange). George, as well known believer in long-term growth of the Indian market, might have wanted more, but the rules prohibited him from having more than 5% share.

Soros Fund Management Company offers $ 40 million, making the whole of Asia's oldest stock exchange valued at equal to one billion. The trade is the latest in a series of investments in Indian stock and derivative markets.

Indian stock market is, unlike for example the U.S., only now opening arms to new technologies, which should attract additional liquidity, such as through the HFT (high-frequency trading).

In June, the fund Temasek from Singapore acquired 5% share in the competitive National Stock Exchange of India for about 145 million USD. In the first half of Caldwell Financial, or by Argonaut Private Equity bought shares in the Bombay Stock Exchange. Also Deutsche Börse is among shareholders since 2007.

In India, therefore, is and will be very lively. Bet on the Indian market seems to be more interesting.

Investing like Jim Rogers.

noreply@blogger.com (Vlada, Czech Republic) — Sun, 18 Jul 2010 09:02:00 +0000

Here are few notes on current Jim Roger's investment strategy.

- Jim is still bullish with gold. He predicts that gold gets above $2000 within 10 years.

- Also he considers other precious metals as an attractive investments. While gold is reaching all time high, silver is 70%, palladium 50-60%, platinum 30% below that level.

- Short positions in financial institutions.

- Regionally he still favors Chinese stocks and Chinese currency.

How to invest in Chinese Yuan?

noreply@blogger.com (Vlada, Czech Republic) — Sat, 05 Jun 2010 09:02:00 +0000

There are not some many safe heavens for investing with current fears about European debts, still sluggish US labour market, political tensions in Korean peninsula and between Turkey and Israel. Is the right time for placing your money in Chinese yuan? How to invest in Chinese currency?

We can see declining different assets classes across the board. Only safe peers are gold and US dollar. But what about Chinese yuan? Even with government actions against overheating growth Chinese economy is one of the fastest growing. Based on latest estimates Yuan is undervalued by 20-40%.

US suffers a huge trade deficit, which is formed predominantly by artificially weak yuan, is pegged to the dollar since July 2008. At that time, China pegged it to support its export policy. There is growing pressure also directly from China itself. It is only a matter of time to strengthen Chinese currency against US dollar.

Here are few tips for investors willing to invest money to Chinese currency.

Currency ETFs

Market Vectors Chinese Renminbi/USD ETN (CNY). This is actually exchange traded notes which provides exposure to exchange rates of foreign currencies.

WisdomTree Dreyfus Chinese yuan (CYB). This ETF follows money market rates in China and changes in value against US dollar.

Country ETFs

Another way how to benefit from strengthening yuan is investing in Chinese or Hong Kong stocks. These stocks (especially consumer goods stocks) should be increasing in parallel with stronger Chinese currency. Here are major regional ETFs.

iShares MSCI Hong Kong Index (EWH)
iShares FTSE/Xinhua China 25 Index (FXI)

Best investment for 2010

noreply@blogger.com (Vlada, Czech Republic) — Sun, 03 Jan 2010 17:30:00 +0000

Thank you for taking part in poll at StockWeb, The best investment in year 2010. What do StockWeb readers consider as a best assets class for this year. Here are the results:

international stocks 50%
energy commodities 35%
precious metals 35%
US stocks 28%
soft commodities 17%
bonds 14%

From the survey it is obvious that most of you believe in returning economic growth and continuing stock /commodity rally. International stocks seems to be the best choice for new year.

January effect in stock markets

noreply@blogger.com (Vlada, Czech Republic) — Sun, 03 Jan 2010 17:12:00 +0000

The first month of the year are in mature markets traditionally profitable. The definition talks of so-called "January effect".

Behind the January effect is a simple historical fact that investors in the United States sell equities at the end of the year for tax purposes. In January they buy back into their portfolios, thus helping to stronger growth in the major stock indexes.

Pragmatic view of the January effect, however, speaks of the traditional large influx of new money in mutual and hedge funds which are reflected in new stock purchases.

There is another relation connected with January effect. History says that when January ends in the black (note the positive value) is nearly 75% chance that the whole year ends up with positive return.

The picture above shows average return for each month during the period from 1927 till 2001. It is an indicator for some seasonal trading strategies. As you can see January is undoubtedly the best month of the year. But for example last two years didn't confirm the seasonality. Two years ago it was just beginning of the bear market and year ago continuing selling pressure in global recession.

3 investment analysis: NASDAQ, Gold, Dollar

noreply@blogger.com (Vlada, Czech Republic) — Sun, 20 Dec 2009 17:52:00 +0000

We have entered the Christmas season which is usually typical by light trading activities and volumes. We have more time now for our analysis and also it is the the time for creating or adjusting your investing strategies and setting targets for the year 2010.

Today I have 3 interesting video analysis produced by Adam Hewison. Unbeatable NASDAQ, trading volatility with Gold and investing in US dollar.

1. Unlike Dow Jones Industrial Average and S&P 500, NASDAQ continues to reach all time highs every week. This video analysis for NASDAQ show if there is still support for such a growth and where we are heading.

2. Second analysis provides insight in gold price and outlook for coming months. We have experienced parabolic growth and deep fall from highs.

3. Greenback is back. US dollar sharply strengthens against major currencies after better macroeconomic readings in last months. How to invest in US dollar now?

Investments and market trends for 2010

noreply@blogger.com (Vlada, Czech Republic) — Sun, 13 Dec 2009 17:32:00 +0000

Stock markets around the world have experienced 9 months unprecedented growth. Only in the United States it is just over 60 percent. What about the year 2010? Retaining stock markets growth or correction? As usual, end of year period is the time for outlook, predictions for investments and market trends.

U.S. stocks are still well below its peak from 2007. This does not automatically mean that they can still be considered cheap. P/E ratio of S&P 500 is already 20 percent above the long-term average.

source: R. J. Schiller. Links for fundamental historical data.

But still there is a space for further growth but in slower pace. On average estimated revenue growth in 2010 is 27%. The growth supported by improving mood in global markets and ever weakening U.S. dollar, which makes U.S. goods cheaper.

Stocks

With coming economic recovery it is best to invest money in high-quality companies. Particularly those that have big cash and continue to make high profits. It is important also to think globally. Next year is expected that companies will overtake consumers in spending. Especially in Europe and Asia.

Bonds

Is also pragmatic in 2010 to invest in bonds of shorter maturity and focus mainly on quality. You will protect yourself against raising interest rates.

Reasonable option is to mix a high-yield bonds and government bonds. Investors should also not ignore the threat of inflation and thus it is appropriate to invest part of your money in bonds which are protected against inflation, known as TIPS - Treasury Inflation Protected Securities.

High dividend yield stocks in S&P500

noreply@blogger.com (Vlada, Czech Republic) — Wed, 09 Dec 2009 10:59:00 +0000

For those who like dividend stocks I have run my screener for all 500 companies in index S&P 500 with dividend yield 5 or higher. Currently 37 companies matching this criteria.

On top of the rank is time Time Warner Cable (TWC) with incredible yield of 72%. The number doesn't describe the real picture after separation and dividend spin-off with Time Warner Inc (TWX). More information at Time Warner homepage.

Other two positions come from Financial sector. American International group (AIG) and MBIA Inc (MBI) with 56% yield respectively 37% yield. For this extremely high yields you take risks of dividend cuts and high volatility of shares. On the other hand both companies faced in short-term significant pullback and are traded near short-term lows.

First company with "normal" dividend yield is traditionally from Telco, Frontier Communications Corporation (FTR), with 12%.

Eastman Kodak (EK) is last company with yield above 10%. Current dividend yield ratio is 11%.

Investing in gold with ETF.

noreply@blogger.com (Vlada, Czech Republic) — Sat, 05 Dec 2009 14:42:00 +0000

Recently I posted article about investing in physical gold like buying coins, ingots or bricks. This time I would like to cover the other side of gold investing which is investing without keeping or owing physical gold.

One of the most common investment product that act as alternatives for those who want to invest in gold is ETF, or exchange traded funds (sometimes translated as index shares). It is a form of collective investment funds with low costs, greater flexibility and transparency, and accurate monitoring of the underlying asset (index, commodity, etc.).

ETF gold are due to its properties as an ideal alternative to physical gold. Emerged as a tool for investors who want to own physical gold, but do not have it stored at home and want to have it for cheaper money. Management fee is usually less than half a percent, but to be added charges for trading broker, which may not be the cheapest.

In 2004, the WGC, in cooperation with State Street Global Advisors launched gold ETF on the New York Stock Exchange under the name of streetTRACKS Gold Shares, now called Tracks SPDR Gold (GLD). Today, this product is also traded on stock exchanges in Singapore (GLD 10US $), Tokyo (1326) and Hong Kong (2640). At present it is the most popular investment tool for investing in gold and indirectly holds more than the custody of 1 127 tonnes of gold.

Other well-known ETF are iShares COMEX Gold Trust, which determines the price based on the price of futures contracts on the COMEX commodity exchange. Traded on the New York Stock Exchange (IAU) and the Toronto Stock Exchange (IGT). The Fund currently holds 80.72 tons of gold, but in this case, there are criticisms and doubts about the quantity of gold which backed securities. The Depositary is The Bank of Nova Scotia, Canada.

Among the investors are very popular Canadian ETF Central Fund of Canada (CEF) and Central Gold Trust (GTU) traded on the New York Stock Exchange and the Toronto Stock Exchange. According to some experts are safer investment in gold than GLD. In addition to the long history of funds it is also mainly due to the simplicity and clarity of the investment strategies and fund structures as well as the need to hold all the gold at Depositary without the opportunities to lend it to third parties (at least 85% of funds must be kept in precious metals).
First appointed but also invest in silver. Currently, the ratio of the two metals is 55:42 in favor of gold and the rest is in cash. Central Gold Trust holds 396.8 thousand ounces of gold, which is 97% of its portfolio.

Here is full list of Gold ETFs with their specifications.

How to invest physically in gold

noreply@blogger.com (Vlada, Czech Republic) — Sun, 29 Nov 2009 14:07:00 +0000

Every week gold price is reaching new highs but for many investors the peak is still well ahead. For those who believe in the long term potential of gold as inflation protection investments, is an ideal way to buy gold ingots, respectively. bricks, or investment coins. It is virtually the purest form of investment in gold, in which the investor has the physical security of tenure of the yellow metal with all advantages and disadvantages.

Purchase of ingots and bricks is a relatively simple matter, just contact the selected dealer and buy gold. There are plenty of traders offering the possibility of investing in gold ingots. Choosing the merchant will actually be the most difficult task. You get bricks or ingots from reputable manufacturers with a certificate bearing the manufacturer, punch, weight and serial number.

A good trader is also a guarantee of liquidity, as well as ensure the redemption of investment in gold. Sometimes, when redemption of gold company offers you a lower price for ingots, which are purchased from another dealer (from another manufacturer). Thus preventing speculation in prices because the difference in prices between different dealers can be significant.

Investment alternative may also be investment gold coins, which also reflect the real price of gold (plus dealer charges) and have no problem with liquidity. On the market there are several different types of issuers and are commonly available in various weights one tenth of an ounce to an ounce. Some may even be a collectible article.

Probably the most famous investment coins are South African Krugerrand, which emits since 1967. It's bigger and heavier, because it has only 22 carats, but the amount of gold is the same as for other coins. In the U.S. there are two investment coins that is American Buffalo with a 0.9999 and American Eagle which has a purity 22 carat (0.9167) like the Krugerrand. The British Britannia has content that only 22 carat gold and is the most heavy investment coin (34.05 g in one ounce version). Australian Nugget (Kangaroo respectively) and the Chinese Panda are interesting in that its appearance changes every year and are so popular among collectors. Most investment coins are issued also in the design proof and also in silver version.

Outlook for interest rates

noreply@blogger.com (Vlada, Czech Republic) — Sun, 22 Nov 2009 10:32:00 +0000

Zero interest rates currently works as a relatively strong attraction for investors who are borrowing cheap dollars and turning into purchases of shares and commodities.

What happens on the next FED meeting nobody knows but general expectation is unchanged interest rates until summer 2010. The Federal Reserve may start raising interest rates on June. This comes from the results of the Fed Funds futures. Currently traders give 54% chance to increase the minimum rates by 0.50 basis points. The increase is estimated could take place at the regular meeting, scheduled for 23 June 2010.

The increase in interest rate markets are generally perceived as a strongly negative element, but this time it could be consider differently. That would mean that the Fed feels confident about the economy, as well as the financial system is strong enough to withstand higher interest rates. It would be a positive for equity markets. Australia has recently experienced something similar. Local central bank after a long pause decided to increase the lowest interest rate for the past 49 years from 3% to 3.25%. Australian S & P / ASX 200 responded by the increase of 1.8%.

Energy stocks for bull market

noreply@blogger.com (Vlada, Czech Republic) — Mon, 16 Nov 2009 16:27:00 +0000

One thing is for economic recovery the same as ever. Demand for energy during growth simply must grow. And for those who believe in recovery here are some of energy stocks.

Chesapeake Energy (CHK) mines natural gas. While the price of gas is pushed down by the economic downturn and new technologies which allow to isolate the material from clay. But the recovery will come only with the end of the recession, but at the expense of coal, which generates more pollution. Estimated profit for 2010 is over U.S. $ 2.4 per share. So it is possible to buy those shares for about 12 multiples of expected profits.

Devon Energy (OK) is one of the producers of natural gas and oil (which constitute 86 percent of its sales). At estimated profit of USD 6.2 shares are very attractive to buy that provides 11 multiples of expected profits.

Oil giant ConocoPhillips (COP), among other things, owns 20 percent of Russia's Lukoil. From their lows around 35 USD has bounced up to $52, but still have long way to highs (just slightly below $100). ConocoPhillips is at around 9 multiples earnings per share which is currently one of the cheapest stocks in energy sector.

American Electric Power (AEP) generates electricity. 73 percent of production is from coal-fired power plants, which is not in vogue, but the shares are still nearly 40 percent cheaper than that at its peak in 2007.

The best investments for year 2010

noreply@blogger.com (Vlada, Czech Republic) — Sun, 15 Nov 2009 16:50:00 +0000

Today I publish similar poll which I usually do before the year-end. What is the best investments for the next year. Which investments do you consider as the best for the year 2010. Please participate in our survey. You can choose among US stocks, international stocks, bonds, soft commodities, energy commodities and precious metals.

The poll will be active until the last day of this year. And you can find it in the left sidebar at StockWeb site.

I also try to post opinions for the best investments of the top investment gurus. For example you can see already in March 2009 Warren Buffett was increasing share in Burlington Northern (BNI).

Warren Buffett investment strategy

noreply@blogger.com (Vlada, Czech Republic) — Sun, 15 Nov 2009 15:55:00 +0000

Warrenn Buffett is a real investment guru who earned his enormous assets by investing in capital markets and with strict adherence to certain rules which every investor knows but few respects. In fact Warren Buffett investing strategy may have for ordinary investors more negatives than positives and ultimately may lead to the desired profit.

One of the reasons is the size of transactions and volume of funds which most investors have only dreamed of. Buffett can afford to invest billions of dollars, which his company Berkshire Hathaway has which allows him to buy his interest for shares in companies. At the same time it provides a better bargaining position when entering into the company for an interesting price.

Another related significant difference compared with the ordinary investor is that Buffett often buy shares to own that company (or at least significant part). As an example can be Coca Cola (KO), Wells Fargo (WFC), Procter and Gamble (PG), and last but not least mentioned Burlington Northern Santa Fe Corp. (BNI), which make up the majority of its entire portfolio. He often buy preferred stocks selected companies that give quite an interesting advantage over ordinary investors.

It also reflects the basic principles of long-term investment horizon (and its strict compliance), buying stocks of well-established companies whose functioning well understood by the investor at a low price and limited diversification (with Berkshire Hathaway Buffett owns more than 40 titles from various sectors such as consumer goods, finance, energy, industry, health, etc.).

In recent years, the Buffett and his investment company quite significantly deviates from the established rules which brought him his fortune. The first problem is the purchase of shares of companies in terms of fundamental analysis do not meet his criteria of values and eventually some of them had to quickly get rid of. Examples can be expensive buying shares in recent years, like Anheuser Busch (BUD), Wrigley (WWY.BA), Conoco Philips COP) or two Irish banks, which recorded big losses.

Perhaps the biggest disappointment for many investors seeking to invest on the basis Buffett's rules is a relatively large amount of funds that are kept in derivative instruments. Buffett has always been known for his very negative attitude to derivatives. Even though he sold options with a value of 4 billion U.S. dollars. It is also a fairly risky naked put options.

Investing in gold or platinum

noreply@blogger.com (Vlada, Czech Republic) — Tue, 10 Nov 2009 13:30:00 +0000

Gold is a special and fascinating commodity - a store of value, which is no debt. It cannot be printed and does not have any objective value. As a safeguard against deflationary downturn and inflationary spiral is the ideal protection against the financial meltdown.

Many people think that the recent rally in the price of gold is different than the previous. Escape to the safe harbor sent already several times the gold over 1 000 dollars per ounce. Traders highlight the unwillingness of the price fall below $1000 and large volumes of speculative options to purchase gold at a price of 1100 - 1200 dollars per ounce.

Price of gold continues to rise even in a situation where it should fall according to history. Price of gold usually increases with inflation. But inflationary pressures and inflation expectations has been eased nowadays. Economic recovery eliminating also second assumption that investors use gold to ensure the growing insolvency or deflation.

Let's have a look to Fed Fund rate - Fed's basic interest rate. Despite the growing economic activity, the interest rate are unchanged because FED does not want to risk of economic recovery. Rates will remain low long enough and excess bank reserves are key fuel for the inflation, which will gradually emerge.

Fed chairman, Ben Bernanke, spent a life studying the causes of the Great Depression. He will not want to do the same mistake. Historically, the Fed began to raise rates nearly 19 months after the unemployment rate reached a peak. At the current growth in unemployment appears to increase rates as a very distant future. Cheap money again stoking the economy.

Government debt

Governments have no other viable alternative. Next debt could trigger bankruptcy. The only honest system are tax increases and expenditure cuts - which is neither fiscally nor politically acceptable. Required expenditure restraint is even more unlikely. So long printing money appears to be the only viable solution.

By the way central banks have very little gold - China and Japan hold only a fraction of its reserves in gold. If the change only 10% of their reserves into gold, it would represent almost four times the quantity of gold reserves currently held by all the ETFs (exchange traded funds).

Shares of gold mines are traded at the same multiples of profits as in 2003, while the gold price is three times higher. Although gold is now at historic highs in nominal terms, after adjusting for inflation, is still 40% below its historical peak, reached twenty years ago.

Alternative to gold may be also platinum. A rare metal, has many similar characteristics and also may be supported by global demand for catalysts, which have been drastically reduced by the problems with the crisis. For easy investment in gold here is the list of gold ETFs and similar list of platinum ETNs.

Consider platinum ETFs (ETNs) and producers

noreply@blogger.com (Vlada, Czech Republic) — Mon, 09 Nov 2009 15:33:00 +0000

Platinum is a good alternative for investing in precious metals. However it is not so popular like in investment in gold or silver.

Platinum is used as a consumer and industrial products. It is well known jewelry but more important is usage in industrial production. Most of the platinum is used in automotive industry in production of catalytic converters. Therefore, compared to investing in gold, it can be bet on the rebound in auto industry. Platinum is more volatile than gold is. Generally speaking platinum and silver are better investments during economic strength than gold. And on the other hand gold is safer play in turmoils and uncertainties.

Here is the list of platinum funds. Because of the small size of the platinum market there is no possibility to create physically backed ETF. And because of this all 3 funds are actually exchange traded notes. Major difference is than ETNs are debts issues.

iPath Dow Jones-UBS Platinum Subindex Total Return ETN (PGM)
UBS E-TRACS CMCI Long Platinum Total Return ETN (PTM)
E-TRACS CMCI Short Platinum Excess Return ETN (PTD)

Another possible way how to get exposure from this precious metal is investment in platinum producers. Two biggest producers are Anglo Platinum (AGPPY) and Impala (IMPUY).

Short-term outlook for crude oil prices

noreply@blogger.com (Vlada, Czech Republic) — Sat, 07 Nov 2009 12:50:00 +0000

In last week crude oil prices has been traded more or less sideways and finished the week on unchanged mark. But short-term picture shows interesting development because on Friday price closed below $77,7. This level has been formed since summer this year and was support for technical pattern flag formation. The breakout didn't support bullish trend anymore and short-term outlook is more bearish now.

I agree with Adam Hewison's long term-term outlook for crude oil which stays bullish. Adam also mentions flag formation which brings "bullish breakout" but this has been reversed on Friday as a false signal.

Jim Rogers about commodities, China and others.

noreply@blogger.com (Vlada, Czech Republic) — Sun, 25 Oct 2009 13:26:00 +0000

Why is China booming? Are these prices for commodities still safe to buy and what about U.S. dollar? All these questions and outlook for the rest of 2009 and 2010 from Jim Rogers.
21st century for China

We must not forget the rest of Asia which is growing as fast as China. The reasons are many, but according to Jim Rogers is particularly important to note the following:

1.) The Chinese want to live as a people living in the west
2.) They are eager to work
3.) They have better morale, in terms of savings
4.) There are about one and a half billion people in China (all Asia population reaches three billion). Western countries are mostly in the role of borrowers.

"Of course, that in emerging Asian economies will be some slowdown, but there are many investment opportunities. And if you already see on a slowdown in Asian markets, pick up the phone and get involved in trading. I think that our children should learn Chinese, "says Rogers.

The road to global economic domination of China was started in 1978 with Deng Xiaping capitalist program. Jim Rogers sees China's dominant position in markets like an unstoppable wave of growth, except for one small flaw - problems with water. In China there are many places without drinking water. And where there is no water, they can not be even people. That is why China has come up with aggressive and maybe a bit drastic solution to the problem and therefore can no longer see the future water shortages, as obstacle to sustainable development.

US dollar outlook

Depreciation of the dollar may result in U.S. currency collapse as a reserve currency. It is seen in the market, where many people sell the dollar, because of its steep decline.

"just sitting on a chair and waiting for rally development in stock markets. I want to be ready to leave the market at any time, and I think that it may soon become. Development of the dollar just confirms. I confess that if that happens, I will sell like everybody else, "adds Rogers.

Jim Rogers is frightened by all the steps that the U.S. government took a particularly Ben Bernanke himself. Strategy of the United States will have a detrimental effect by Rogers on the dollar. The devaluation of U.S. currency is called terrible policy. Rogers believes that this policy helps the U.S. economy in the short term, but medium and long term outlook is dire.

Jim Rogers about commodities

As already noted, Asia is around 3 billion people and it seems everyone is ready to live out his "Asian - American Dream". It is clear that it is all about consumption. We like things - buy them, wear them, eat them, etc. It is therefore a lot of power, and it seems (as economic indicators suggests), consumption is growing. However, if you look at commodities, according to Rogers over the last decade, are far from being exhausted of their growth capacities.

Regarding oil, Rogers highlights the fact that, for example Saudi Arabia has made no new discovery of oil fields. Last 20 years only claims that its reserves are 260 billion barrels.

Rogers adds "The ideal time to invest in commodities, which are still in a bull phase, is 18 to 20 years. I think that now we are in the eleventh year. "Yes, this development may end soon, but it seems that the increased demand retain commodities still at the top for some years.

How to invest in gold now.

noreply@blogger.com (Vlada, Czech Republic) — Sun, 18 Oct 2009 19:47:00 +0000

After gold prices crossed above psychological level of $1000, target price for gold became very popular topic on the markets. Jim Rogers predicts gold prices to go even to $2000. In today's article I sum up some of latest analysis from Adam Hewison about gold.

In the first video Adam provides some mid and long term analysis for US dollar, S&P 500 and gold.

In next analysis you can check his outlook for gold alternative investments like ETF. If you want to avoid big volatility in gold market but still benefit from great upside potential than you should start thinking to add some gold funds positions into your holdings.

You can have a look also to other analysis for selected stocks or commodities here.

ETF correlation

noreply@blogger.com (Vlada, Czech Republic) — Wed, 07 Oct 2009 09:19:00 +0000

I already posted some articles focused on assets classes correlation like the one about correlation between commodities and equities. It shows correlation coefficient for precious metals commodities (gold, silver,platinum), crude oil and major US equity indices (S&P 500, DJIA).

Correlation analysis is key factor for successful portfolio diversification. Positive correlation means that the prices of shares or ETFs move up or down together. They will probably be impacted in similar way.

If the prices of shares or ETFs move in different directions we call it negative correlation. In this case we achieve high degree of diversification.

There is one useful website where you can do analysis asset correlations by using ETF. It has matrix for countries, sectors or bonds. Another interesting function is correlation over time where you can check the development of correlation coefficient for two tickers.

Treasury inflation protected securities ETF

noreply@blogger.com (Vlada, Czech Republic) — Sun, 04 Oct 2009 10:28:00 +0000

Right now we are globally in period of low interest rates and low inflation rate. In some economies even with deflation. What should we do when inflation will start to rise again? How to invest money when inflation is inching up?

The best investments against inflation are investing in gold, index linked bonds, national savings index linked certificates, shares and property.

I will focus more on less risky inflation protected securities like TIPS (Treasury inflation protected securities) or "linkers" (inflation indexed bonds/gilts). Coupon payments reflect rising inflation and/or interest rates. TIPS are generally one of the safest investments. It should be a part of retirement or standard portfolio for better diversification.

There are already some ETFs following TIPS indexes like iShares Barclays TIPS Bond (TIP) or SPDR Barclays Capital TIPS (IPE). Recently PIMCO launched their exchange traded funds for inflation hedging PIMCO BROAD U.S. TIP (TIPZ) and PIMCO 15+ Yr. US TIPS Index Fund (LTPZ) and PIMCO 1-5 Year US TIPS Index Fund (STPZ).

These funds protect against US inflation. International exposure provides fund SPDR DB Intl Govt Infl-Protected Bond (WIP) which access inflation protected securities in 18 countries. Around 70 % of its portfolio come from foreign developed countries and 30 % from emerging markets. Regionally holdings include securities from France, UK, Canada, Japan, Brazil, Turkey or South Africa. Contrary to US TIPS this fund offers another diversification against weakening US dollar as international bonds are in 15 different currencies.

Hedge funds portfolios

noreply@blogger.com (Vlada, Czech Republic) — Mon, 28 Sep 2009 12:39:00 +0000

Hedge funds raised their bets on further strengthening of stock markets to the level before last year's collapse of Lehman Brothers. Analysts Goldman Sachs have reviewed portfolios of 687 large hedge funds and discovered that there is 498 billion for growth and 346 billion for decline.

A large part of the short positions (speculation on the fall) had been closed at the end of the second quarter and have turned their bets in favor of speculation on growth. The current net long exposure is at 31 percent, the highest since June 2008. Note: most of short-covering was made at the end of July and August.

Speculations on the growth of have been opened after the stock market stabilized and improved macroeconomic data. Hedge funds also pulled out the majority of speculation on the decline in financial institutions.

For hedge funds are becoming more important so-called "bottom-up" analysis. Therefore they give priority to selecting individual stocks.

The biggest hedge funds holdings:

source: Goldman Sachs

The most favorite sectors are information technology, consumer goods producers and banks.

Gold and silver prices

noreply@blogger.com (Vlada, Czech Republic) — Mon, 21 Sep 2009 19:05:00 +0000

In order to determine relative value of gold and silver we can put both commodities in ratio . It was the lowest in the last century at 14, compared to current levels around 70. This would suggest that gold is currently overvalued.

Since 1980, the ratio of the price of gold silver ranged between 30 and 100 and average was 65. Last time it reached 100 in 1991 after Iraq's invasion in Kuwait which raised concerns about rising oil prices that could lead to rising inflation. Gold will serve as financial security.

The current massive pumping of money into the economy by central banks and government spending could lead to similar concerns about the price level. In next few years this could support the prices of both precious metals.

In the short term both gold and silver prices may drop slightly, as investors move to riskier assets such as shares, due to expected economic growth and industrial production.

If indeed there is a revival of the economy, the price of silver will not be so much affected because it is used in industries such as electrical engineering, aerospace and defense industries. . The value of gold will suffer more than silver.

It is expected that industrial demand for silver will constitute about 65 percent of the total world supply, estimated at 895 tons. While industrial and medical uses of gold is estimated at 11 percent of total supply (3880 tons).

* * *

For easy investment into both precious metal commodities there are already several exchange traded funds.

Gold ETF
streetTRACKS Gold Shares (GLD)
PowerShares DB Gold (DGL)
Market Vectors Gold Miners ETF (GDX)
iShares COMEX Gold Trust (IAU)

Silver ETF
PowerShares DB Silver (DBS)
iShares Silver Trust (SLV)

For all above mentioned ETF you can get free analysis here. You simply type ticker and that's it. Or you can follow video trading analysis for gold.

Insider trading is more bearish.

noreply@blogger.com (Vlada, Czech Republic) — Sun, 13 Sep 2009 17:36:00 +0000

Directors, owners and top managers, in other words, insiders, have turned to be more bearish. In recent months there is a growing volume of sold shares from insiders. In August, U.S. sales by insiders more than 30 times exceeded the volume of insider purchases (historical average is around 7:1). This ratio is the highest since 2004 and many investors may signal that if their companies do not believe their majority owners and management is probably something wrong.

High proportion of sales by insiders is not itself a clear signal to investors to start selling shares. There are several reasons, such as corporate programs in which the owners could sell large blocks of shares of its securities only in defined time intervals. Another reason may be grounds for a private investors which simply need more money in cash. This year may be the reason also profit taking after many insiders noticed a significant loss in last year.

For this reason, many investors do not take the increasing volumes of insider sales as a relevant reason to start reducing their positions in the markets. Among the experts is much more popular the opposite situation, where shopping is dominated by insiders over the sale, which is generally considered as a very strong signal for buying. This happens very rarely, because insiders receive a majority of the shares as a form of remuneration or the incentive programs.

Natural Gas price

noreply@blogger.com (Vlada, Czech Republic) — Mon, 31 Aug 2009 12:01:00 +0000

Natural gas is a cyclical commodity. Unlike the oil market the adaptation of natural gas prices is much longer. There is no organization that would maintain the quota extraction or had an interest in the price level. Adaptation takes place through the market and it takes longer.

Natural gas futures price is subject of many discussion right now. Henry hub contracts went all the way down from $13,5 to $3. September contract finished even below the level $3 at 2,84.

The main reason why natural gas is traded at lows is high level of storage. We are 18% above the 5 years average and also 18% above the level year ago (based on EIA statistics in weekly report).

Another reason is weather. Cold summer in US which has impacted lower consumption of natural gas.

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Reference indicator, which tells how the market works on the production, the number of active wells in the U.S. Currently there are 675, the lowest number in past seven years. While the oil market has released the taps, the gas is still waiting.

There are some other arguments for price growth. If economic conditions will not worsen, it will not cause long-term decline in demand for energy commodities. Another aspect that has or may play a role in the demand for natural gas is that natural gas is a substitute for oil and it has higher reserves.

Natural gas prices follow with some delay crude oil prices. The gap between these two commodities is increasing. On average crude oil is 10 times more expensive than natural gas but right now the ratio is 24.

Last but not least is natural gas seasonality. Usually second half of the year is stronger for natural gas prices.