Tag Archives: alt-investing

India Small-Cap ETFs: Best Of Emerging Markets Now?

After witnessing two months of lull, the Indian stock market finally belied cynics in July as it easily combated global issues like the bursting of the Chinese stock market bubble, nagging Greek debt deal negotiations, looming Fed rate hike and the strength in the greenback. Investors also rushed to capitalize on this grit and poured Rs. 5,300 crore (net) in Indian equities last month. Reduced worries over monsoon deficiency, a timely correction in the stock market and rising domestic investment led the key Indian bourse to bounce back from late June. Earlier, investors were unnerved by apprehensions of lower rains this monsoon which would take a toll on the all-important agricultural sector and push up inflation. The fear was not baseless either as RBI cut India’s growth forecast for fiscal 2015-16 from 7.8% to 7.6%. However, contrary to this apprehension, rain deficiency has not been as severe as predicted. The Indian market surged over 30% last year. While most of the gains were wiped out this year on Fed rate hike concerns and a spate of downbeat economic indicators including weak corporate earnings and political gridlock causing hindrance in intended reforms, the correction opened the door to further expansion. This was truer given the extremely muted levels of energy and gold prices. This was because India imports more than 75% of its oil requirements and accounts for about 25% of the global gold demand. This makes the country highly susceptible to these commodities’ prices. India’s foreign-exchange reserves are close to a staggering $355 billion, which gives the economy the power to fight the expected volatility post Fed tightening, per Bloomberg . Unlike taper tantrums in 2013, Indian rupee remains largely stable and shed only 0.6% in the last one month (as of August 5, 2015) relative to the U.S. dollar. In fact, the uproar in global markets, mainly in Greece and China, brightened India’s appeal as a safer bet in the high-risk emerging market (EM) pack. The economy expanded 7.3% in 2014-15 versus 6.9% in 2013-14, indicating that the Indian economy is taking root. Of course, it has its set of issues like political gridlock, inflation woes, and a still-muted investment backdrop, but the economy appears much more stable than other emerging markets. A Look at Other Emerging Giants At this point of time, India scores higher than its other EM cousins like China, Brazil, Russia and South Africa. Chinese stocks are now infamous for extreme volatility having experienced recurrent market crashes since June. The country’s economy has also been displaying offhand economic data for long, leaving expectations for further monetary easing as the only hope in the China Investing theme. Popular Chinese equity ETF FXI was 7.8% down in the last one month. Coming to Brazil , the condition is more worrisome. As much as a 7.4% fall in the Brazilian real in the last one month (as of August 5, 2015) against the U.S. dollar, a commodity market slump, spiraling inflation and raise in rates (presently as high as 14.25% , almost double that of India’s) have crippled the Brazilian economy. Analysts have raised the 2015 inflation outlook for Brazil from 9.23% to 9.25% while its GDP is expected to shrink by 1.8% from the prior forecast of 1.76% contraction. The largest Brazilian ETF EWZ was down about 13% in the last one month. Russia is yet another emerging market which turned a bear from once-a-bull country. An unbelievably prolonged and steep fall in oil prices, Western bans and an 11.7% one-month slide in the Russian currency clearly explain the pains for this oil-rich nation. The IMF now expects the Russian economy to skid into ” deep recession ” (down 3.4%) in 2015. The most popular Russian ETF RSX lost 4.7% in the last one month. The Indonesian currency was almost resilient to dollar gains but weak corporate earnings and a spate of soft economic data weighed heavily on investors’ sentiments. Dollar gained just 1.2% in the last one month against Indonesian Rupiah. The World Bank also slashed its projection for Indonesia’s 2015 economic growth from 5.2% to 4.7%. Indonesia ETF EIDO was off 3% in the last one month. South Africa’s currency shed about 3.3% in strength in the last one month (as of August 5, 2015) and growth prospects remain bleak. This is also a commodity-rich nation and will likely the bear the brunt of the commodity market crash. South African ETF EZA retreated 2.2% in the last one month. Turkish lira also slipped 3.3% last month (as of August 5, 2015). Along with this, political upheaval and still-subdued growth in the EM pack led the Turkey ETF TUR to shed about 9% in the past 30 days. Reasons to Cheer for Indian Small Caps Since small caps better reflect an economy’s strength and are largely unruffled by global shocks, Indian small caps should be the best-positioned EM options right now. Investors are advised to take a peek into our top-ranked ETFs, India Small Cap ETF (NYSEARCA: SCIN ), India Small-Cap Index ETF (NYSEARCA: SCIF ) and iShares MSCI India Small Cap Index Fund (BATS: SMIN ). Each carries a Zacks ETF Rank #2 (Buy). SCIN, SCIF and SMIN added 9.2%, 9.7% and 6.8%, respectively, in the last one-month period while in the past one-week frame, the trio advanced 5.5%, 4.7% and 4.8% (as of August 5, 2015). Original Post

UWTI: Forget About Growth

Originally published on August 6, 2015 VelocityShares 3X Long Crude ETN (NYSEARCA: UWTI ) is set to close down strongly on Thursday morning as oil traders worry that the market is far from a takeoff. An Oppenheimer report on the market suggested that the cut in supplies by producers won’t be enough to save them from the glut in the market, and much pain ahead. Fadel Gheit, who wrote the report for the research house, said that recent reports from the oil firms were a sign of shifting market outlook. “The priority now is to discontinue budget spending. The priority is to live within your means. Forget about growth. They are now in survival mode.” Oil pumpers slash budgets Mr. Gheit was commenting the recent changes to outlook seen in the earnings report of some of the biggest oil firms in the world. Chesapeake has cancelled its payouts to shareholders , Exxon Mobil (NYSE: XOM ) has slashed its capital spending and Royal Dutch Shell (NYSE: RDS.A ) (NYSE: RDS.B ) has cut more than 6,000 jobs . At the root of the trouble is OPEC . The global oil cartel has decided to keep its supply high despite the price of Brent falling below $50. Shell CEO told investors that his firm is “planning for a prolonged downturn.” Those betting on the VelocityShares 3X Long Crude ETN may want to do the same. Mr. Gheit said that major oil firms were “still not willing to abandon their rosy forecasts,” but, “at least they are addressing the near-term situation that we have to do something now and not wait for oil prices to recover.” Supply of oil is set to fall over the coming years because of lower investment from firms across the world, but it’s still not going to be enough to allow oil makers, or the price of the black liquid, to grow by a huge margin. VelocityShares 3X Long Crude ETN gets crushed After open this morning the VelocityShares 3X Long Crude ETN was trading for $1.28, down 4.1 percent for the day so far. Those who have been trading the ETF in the hope of a surprise oil spike have been hit hard in recent weeks as Iran’s coming entry into the global market keeps pushing prices lower. In the last month the ETN has lost more than 40 percent of its value. It has lost more than 70 percent since the year began. Rumors that VelocityShares 3X Long Crude ETN will be forced into a reverse split have not yet been met with any facts to back them up, but if prices keep crashing there may be no other option. Leveraged ETFs are not for the faint of heart and 3X oil, much like its gold cousins, has been a very difficult market to make money in in 2015. That trend may continue through the second half of the year and those that don’t know what they’re doing should reduce their exposure and stop trying to time a market that’s controlled by a cartel thousands of miles away. Original Post

Invest Like Henry Kissinger

By Carlton Delfeld “I’ve always acted alone. Americans like that immensely.” – Henry Kissinger Have you seen Henry Kissinger lately? At 92, he’s as fluent as ever on foreign affairs. It makes you wonder whether, even at this advanced stage of life, he could do a better job managing American foreign policy than our current leaders. This brings me to Ukraine, Russia, and China. They look like a beautiful mess right now – but within a reasonable period, American foreign policy will gravitate back to a Kissinger dictum: America can only afford one big power adversary at a time. At this time, the one adversary is clearly China. In short, the whole Ukraine-Crimea-Russia fiasco could’ve and should’ve been avoided. Unfortunately, Ukraine is a prisoner of geography and history. It’s a bridge between East and West – a classic buffer state. The country will always need to balance closer ties to Europe with good relations with Russia, and this practical consideration should be reflected in American diplomacy. Pushing Russia closer to China is certainly not in American interests. Lord Palmerston once said, “Nations have no permanent friends or allies – they only have permanent interests.” Thus, the probability is on the side of U.S.-Russia relations improving in the long run. The stakes are simply too large and the logic of some sort of rapprochement too clear and convincing. In fact, while headlines have created a perception of a crisis in U.S.-Russia relations, the reality is that diplomats on both sides are working hard on “alliance management.” As an emerging bond trader active in Russia put it to me, “A lot of this is elaborate political theatre.” I believe that the gap between perception and reality is where fortunes are made, and Russia is the perfect example. Despite the country’s reputation as being a non-competitive, monopolistic economy, there were over 21,300 foreign capital enterprises operating in Russia by the end of the second quarter. And American companies invested $1.18 billion in Russia in 2014, nearly double the $667.2 million recorded in 2013. What’s more, Russia’s stock market is trading at astoundingly cheap valuation multiples right now. We know the reasons: economic sanctions imposed by Western democracies, falling energy prices, and, finally, the falling ruble, which is down sharply against the dollar this year. The stocks in the Market Vectors Russia ETF (NYSEARCA: RSX ) are trading at an 80% discount to the S&P 500 Index and at less than 65% of break-up value. Howard Marks of Oaktree Capital puts price and value at the center of his book, The Most Important Thing: For a value investor, price has to be the starting point. It has been demonstrated time and time again that no asset is so good that it can’t become a bad investment if bought at too high a price. And there are few assets so bad that they can’t be a good investment when bought cheap enough. Plus, we don’t need a miracle to profit from the situation, either. An American hedge fund trader active in Russian markets put it to me this way: “Things don’t have to turn around in Russia for me to make money. They just have to get a little bit better.” This is the key. If energy prices stabilize or rise, if the situation in Ukraine improves, if the ruble bounces back – any one of these catalysts could spark a sharp rally. RSX is down 32% over the past year and has pulled back 16% from its recent peak in mid-May. So it’s a good time to get ready to pull the trigger on one of the largest oil and gas companies in the world, Lukoil ( OTCPK:LUKOY ). Lukoil exceeds even Exxon Mobil (NYSE: XOM ) in total proven oil reserves. Even more impressive, the company has remained free cash flow positive during the entire past decade. The company also has a very low risk of government intervention, with a professional board and management at the helm. Despite this, Lukoil is trading at 37% of break-up value and 4.4 times trailing earnings. Right now, I’d nibble on a position and take a more sizable stake when a clear uptrend develops in the stock. Like Kissinger, don’t fear acting alone. Investing in undervalued – even hated – stocks when they turn is the most consistent way to build substantial wealth. Original Post Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.