Equity markets continued their slump in Thursday trading, as all the major indexes fell by roughly 0.6% on the day. Oil also fell as fears over global growth resumed and send the commodity down 2.8% on the day. Surprisingly, T-bills sold off a bit despite the exodus from equities as the 10-year and two-year notes both saw yields rise. Investors seemingly avoided the low yielding government securities for precious metals, which all had a banner day. Gold and platinum both rose by roughly 1.4% while silver gained by a more modest 0.9% as investors embraced the safe havens on worrying reports from Cisco and poor unemployment numbers. The weekly number of people filing for first time unemployment benefits rose by 2,000 to 484,000, disappointing analysts who had predicted a slight decrease. In terms of earnings reports, Cisco disappointed with its revenue and outlook numbers sending shares plunging by almost 10% on the day. [click to continue…]
While most investors are relatively familiar with metals such as gold and copper, few know anything about an increasingly vital group of resources known as “rare earths.” As the name suggests, these metals are very scarce, but are needed for a variety of modern technologies ranging from alternative fuels to consumer electronics to defense and security systems. As demand for these modern goods has surged in recent years, it has put a strain on existing rare earth supplies. Historically, the chief supplier of rare earth metals to the U.S. was China, but that arrangement has been called into question as the Asian superpower continues to expand and Beijing has decided to keep more home grown resources within the confines of the Great Wall. [click to continue…]
Equity markets finished relatively flat on Monday, as most investors waited for earnings season to begin after the bell with aluminum giant Alcoa and railroad company CSX kicking things off. The Dow finished ahead by 18 points while the Nasdaq and S&P 500 both traded up by less than 2 points each. In commodity markets, oil and gold slumped back with oil falling more than 1.5% and gold dropping back below the $1,200/oz. mark. Many are expecting a strong earnings season with profits likely to far outpace numbers from the second quarter of last year when the economy was at its lowest point. “It has been one of the strongest profits recoveries ever,” said David S. Bianco, chief United States equity strategist for Bank of America Merrill Lynch. “You have got to go back to the Depression to find a profits recovery that outpaces this one.”
Recent weeks have highlighted the “new normal” in the investing world, as concerns of a debt crisis in Europe have rippled throughout the global economy. On Wall Street, developments in the streets of Athens and the German Bundestag have trumped more local economic indicators, as U.S. markets have taken their cues from across the pond in recent weeks. The extent to which global equity markets are now interconnected has frustrated investors who have watched a wave of general risk aversion pummel assets not related to the recent turmoil in Europe (see Six ETFs To Watch As The Greek Drama Unfolds).
ETFs were originally embraced by buy-and-hold investors as an optimal, low-cost vehicle for inclusion in a long-term retirement portfolio. But in recent years they have become popular among more active traders who value their liquidity and efficiency in providing exposure to various asset classes. Once used primarily by beta grazers, ETFs have become a favorite tool of alpha hunters looking to generate excess return (see Five ETFs With Surprising Turnover).
After a stellar performance out of Intel to kick off earnings season last week, several other bellwethers have reported impressive results, leading some investors to believe that the market recovery is the real deal (see all the early winners and losers from the start of earnings season). Looking to add to recent recent gains will be technology ETFs, which are watching a slew of crucial earnings reports this week. Today, all eyes were on Apple and Yahoo! after the bell as two of the most eagerly anticipated reports came out after the markets closed. These reports are likely to impact today’s after-hours session as well as Wednesday morning trading, and will likely help to set the tone for technology ETFs as the second quarter ramps up.
As global equity markets plummeted in the final quarter of 2008 and first two months of 2009, many investors watched in horror as gains that were accrued over several years slipped away in a matter of months. With many major benchmarks falling by 50% or more, countless investors began to recalibrate retirement plans and risk tolerance while wondering what went wrong. Many wondered if their portfolios would ever come close to levels touched before the terms like “subprime mortgage” and “credit-default swaps” entered the American lexicon.
The ETF industry continues to demonstrate impressive growth, both in assets and number of products. Already in 2010 more than 60 new ETFs have hit the market, putting this year on pace to shatter last year’s product development record. This surge in product offerings has led some to lament that the industry has reached (or even blown past) a saturation point, pointing to the increasingly granular and esoteric funds that have popped up in recent years. Some degree of contraction in the ETF industry in 2010 is likely–in fact it’s begun already–but there are still a lot of good ideas coming out of ETF issuers. The VIX ETNs from iPath are a great example (they have aggregate assets of more than $1.5 billion), as are several of the ETFs to launch over the last year (see the Most Successful New ETFs of 2009).
The much anticipated Apple iPad tablet computer was released today across the country. The device, which has been hailed as revolutionary by many and useless by a few, could have a huge impact on the technology and consumer electronics sectors. If successful, the product could open up a whole new market for content producers who have been struggling to increase sales in recent years. Many firms have already jumped onto the iPad bandwagon, including Electronic Arts (which will offer five games for the iPad’s release) and the New York Times (which will offer an app to readers in order to view its content on the device). Regardless of the product’s effect on content producers, the product will unquestionably put significant pressure on Barnes and Noble and their nook device as well as Amazon’s Kindle which is cost competitive with the new Apple product.
Two months into 2010, hopes for a smooth, steady year for equity markets have already been dashed. After stumbling out of the gates as worries about the euro zone and the sustainability of China’s impressive growth, most equity markets bounced back in February, as rounds of solid economic data sparked renewed optimism in the U.S. recovery effort.
The reasons for the rise of the ETF industry are numerous: intraday liquidity, (potentially) superior tax efficiency, and enhanced transparency relative to traditional actively-managed mutual funds have all contributed to the billions of dollars of inflows that these funds have seen in recent years. But the real attraction for most ETF investors is the reduced expenses these products offer, often only a fraction of the fees charged by mutual funds.
As the stock market continues to rise, seemingly running ahead of fundamentals, more and more investors are becoming concerned that the stocks are becoming overvalued, and that a downward correction may be just around the corner. While safe haven investments such as the U.S. dollar and gold are popular picks for investors looking to profit from a decline in asset prices, the inverse correlation between these investments and equities is far from perfect.
A growing number of investors are beginning to utilize inverse ETFs to accomplish a wide range of investment goals, ranging from establishing hedges in their portfolios to speculating on a pullback in prices. If used correctly, these products can be very powerful, but they can be complex and come with a number of risks that should be carefully considered.
