The Big Picture for the Week of May 1, 2011

Right at the open yesterday Brian Shactman made an interesting comment while reporting on Caterpillar’s (client holdings) earnings. He noted that CAT was up 64% in the last year versus 16% for the Dow (I think those were the numbers he cited) and then asked rhetorically “what does that say about the indexers out there.” That he would take a shot at any group of investors like that is pretty funny but I’m not sure if I am laughing at him or with him. More seriously there are all sorts of fallacies and behavioral nuggets embedded in the comment. The result of an index will obviously be a mix of components that do better than the index and that do worse than the index. Using the existence of a stock that has ourperformed the index as a reason not to be an indexer is pretty thin. I am obviously not a big fan of indexing for quite a few reasons but that does not make it invalid. It can work for what some people need. To me this is no different than how I think about daytrading; it would be naive to think it can’t work for other people but not for me. One of the repeat ideas I try to convey here is taking little bits of process from various sources to create your own process. Whatever you prefer; indexing, buy and hold, stock picking, some form of very active trading or some combo of any and all it would be a mistake to believe that something other than what you think is best can’t work. People have...

The Big Picture for the Week of May 1, 2011

Right at the open yesterday Brian Shactman made an interesting comment while reporting on Caterpillar’s (client holdings) earnings. He noted that CAT was up 64% in the last year versus 16% for the Dow (I think those were the numbers he cited) and then asked rhetorically “what does that say about the indexers out there.” That he would take a shot at any group of investors like that is pretty funny but I’m not sure if I am laughing at him or with him. More seriously there are all sorts of fallacies and behavioral nuggets embedded in the comment. The result of an index will obviously be a mix of components that do better than the index and that do worse than the index. Using the existence of a stock that has ourperformed the index as a reason not to be an indexer is pretty thin. I am obviously not a big fan of indexing for quite a few reasons but that does not make it invalid. It can work for what some people need. To me this is no different than how I think about daytrading; it would be naive to think it can’t work for other people but not for me. One of the repeat ideas I try to convey here is taking little bits of process from various sources to create your own process. Whatever you prefer; indexing, buy and hold, stock picking, some form of very active trading or some combo of any and all it would be a mistake to believe that something other than what you think is best can’t work. People have...

Uranium and Fish

Doug Casey sat for an interview with a site called The Energy Report that was rerun on Seeking Alpha. They interview covered a lot of ground and I wanted to hit a couple of the highlights as they could be thought provoking. Based on the interview (I am not terribly familiar with Casey) the top investment themes seem to be uranium and food that wealthy people want to eat by which he meant beef and fish although with fish there was no mention of fishery companies. About fish he said “if I could buy long-term contracts on caviar and good eating fish, I’d do it.” I have to believe he knows about things like the Norwegian fisheries that are publicly traded but either way, no mention. I have mentioned many times that Global X has filed for a fishing ETF but I have no idea when or if it will ever list. He also mentioned being “quite involved in the cattle business in Argentina and I think cattle actually will go much higher for a lot of fundamental reasons.” If I read this correctly he lives in Argentina. Another point he made was the need (as he sees it) to be “geographically and politically diversified.” The precise use of these words were not clear to me but based on this interview he said that people should invest outside the US and he then devoted more commentary to the need (as he sees it) to live outside the US. There is of course something intellectually appealing about moving to another country (this is something I’ve blogged about before) but more...

Uranium and Fish

Doug Casey sat for an interview with a site called The Energy Report that was rerun on Seeking Alpha. They interview covered a lot of ground and I wanted to hit a couple of the highlights as they could be thought provoking. Based on the interview (I am not terribly familiar with Casey) the top investment themes seem to be uranium and food that wealthy people want to eat by which he meant beef and fish although with fish there was no mention of fishery companies. About fish he said “if I could buy long-term contracts on caviar and good eating fish, I’d do it.” I have to believe he knows about things like the Norwegian fisheries that are publicly traded but either way, no mention. I have mentioned many times that Global X has filed for a fishing ETF but I have no idea when or if it will ever list. He also mentioned being “quite involved in the cattle business in Argentina and I think cattle actually will go much higher for a lot of fundamental reasons.” If I read this correctly he lives in Argentina. Another point he made was the need (as he sees it) to be “geographically and politically diversified.” The precise use of these words were not clear to me but based on this interview he said that people should invest outside the US and he then devoted more commentary to the need (as he sees it) to live outside the US. There is of course something intellectually appealing about moving to another country (this is something I’ve blogged about before) but more...

FactorShares ETFs Might Actually Be Working

About a month ago FactorShares listed five spread ETFs. Each one tracks the spread between two asset classes and levers the result times two targeting a daily result. I wrote about them for theStreet.com when they first came out with a sort of I don’t know what to make of them conclusion. FactorShares is presenting them as a potential low vol, low correlation, absolute return sort of a thing. The volume on them is very low which either means that the market does not know what to do with them either or the people who actually want to trade the long crude/short SPX spread are continuing to do so in the same manner they did before the FactorShares came out. The results of the five vary but FOL is up 20% in the month (through Tuesday) and FSU is up 13.9% versus 3.1% for the S&P 500 and I would note the other three are slightly positive. FOL is long crude/short SPX and FSU is long SPX/short USD and again both are 2X. Strategically there are several moving parts here. There can be no certainty that the dynamics between oil and stocks that lead to FOL going up 20% will persist. In fact it is more likely that the relationship between the two will change all the time. The long stock/short treasury fund which is symbol FSE could be on the verge of doing something meaningful based on how people have couched the Fed’s press conference. Likewise the long gold/short SPX fund. Further complicating this is that no matter the correlation right now between any of these funds and...