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Ocean Power’s (OPTT) CEO George Kirby on Q4 2015 Results – Earnings Call Transcript

Ocean Power Technologies, Inc. (NASDAQ: OPTT ) Q4 2015 Results Earnings Conference Call July 7, 2015 10:00 AM ET Executives Shawn Severson – Managing Director, Blueshirt Group George Kirby – President and CEO Mark Featherstone – Chief Financial Officer Analysts Amit Dayal – H.C. Wainwright Operator Good day, ladies and gentlemen. And welcome to the Q4 and Fiscal Year End 2015 Ocean Power Technologies’ Earnings Conference Call. My name is Halley, and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. [Operator Instructions] As a reminder, this call is being recorded. I would like to turn the call over to Shawn Severson, Managing Director of Blueshirt Group. Please proceed, sir. Shawn Severson Thank you and good morning. Thank you for joining us on OPT’s conference call and webcast to discuss the financial results for the three and 12 months period ended April 30, 2015. On the call with me today are George Kirby, President and CEO; and Mark Featherstone, Chief Financial Officer. George will provide an update on the company’s recent developments, key activities and strategies, after which Mark will review the financial results for the fourth quarter and full fiscal year 2015. Following our prepared remarks, we will open the call for questions. This call is being webcast on our website at www.oceanpowertechnologies.com. It will also be available for replay approximately two hours following the end of this call. The replay will stay on the site for on-demand review over the next several months. Yesterday OPT issued it’s earnings press release and filed its annual report Form 10-K with the Securities and Exchange Commissions, and all our public — all of our public filings can be viewed on the SEC website at sec.gov or you may go to the OPT website oceanpowertechnologies.com. During the course of the conference call management may make projections or other forward-looking statements regarding future events or financial performance of the company within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1985, excuse me, 1995. These forward-looking statements are subject to numerous assumptions made by management regarding future circumstances of which the company may have little or no control and involve risks and uncertainties, and other factors that may cause actual results to materially different from any future results expressed or implied by such forward-looking statements. We refer you to the company’s Form 10-K and other recent filings with the SEC for a description of these and other risk factor. And with that, I’d like to turn the call over to George to begin the discussion. George Kirby Thanks, Shawn. Good morning, everyone. I’ll be — I’ll begin by reviewing our operations and provide an update on key activities and developments. After which Mark will briefly review our financial results. Mark and I will then be available to answer any questions. So let’s begin. First, I am excited to say that we are making headway and aggressively driving the deliverables that we established earlier this year. We have achieved fully permitted status for deployment of our PB40 buoy, we are in the process of deploying the mooring system and we continue to monitor for a suitable weather window for final buoy deployment off the coast of New Jersey. Second, we are about to achieve fully permitted status for deployment of our APB-350 A1 buoy, which we also expect to deploy this summer. We are in the process of factory testing the A1’s power take-off, also known as the PTO and the A1’s energy storage system prior to sea trials. We are also making significant progress towards development of our commercial generation A2 buoy. A2 is being developed with an optimized hall geometry for improved hydrodynamics and operating efficiency, as well as reduced costs associated with fabrication, transportation and deployment. Recently, the A2 program successfully completed rigorous internal preliminary design review. Third, as we highlighted in our recent press release, we’ve begun development of our PB10 PowerBuoy, which leverages a scaled-up version of the APB-350 PTO and a higher efficiency energy storage system for applications that require higher power output. The PTO design for the PB10 recently passed a stage-gate review with the U.S. Department of Energy or DOE and the detailed design review of the PTO is anticipated to occur around the end of summer 2015. Each of these activities demonstrates our progress toward commercialization of our cutting edge power solutions but our activities don’t stop there. As we share during the last earnings call, there are four key market segments which we’re targeting, offshore wind, ocean observing, defense and security, and oil and gas. To start, the offshore wind industry is very exciting for us. It requires substantial data to determine ocean environment and wind resource conditions for turbine design and layout, power generation prediction, turbine maintenance prediction and for financing purposes. A wave powered mobile monitoring system is a redeployable asset for use across multiple projects during early-stage development and can be advantageous during the entire project life cycle for continued monitoring and correlation of wind resources to project output. Our objective and future value proposition in the offshore wind market is to become the preferred integrated solution delivering 50% or more life cycle cost savings over incumbent solutions. The near-term addressable market for OPT includes multiple stakeholders across scores of sites in the U.S. and Europe over the next three years. We continue to see significant interest in our PowerBuoy throughout this market and were discussing potential applications with market participants using our APB-350 as the power solution platform. Moving on to the ocean observing industry, we see applications for our APB-350 such as power and docking systems for unmanned underwater vehicles, which could result in more frequent and reliable vehicle charging. We believe that our PowerBuoys could serve as a power platform, given the severe limitations of incumbent system power sources. We believe this could allow for consolidation of multiple sensors from individual incumbent systems and thus dramatically decreased life cycle costs. Turning to the defense and security market, we continue to identify funded applications in the U.S. and international defense markets. And we continue to seek strategic relationships with potential partners to service them. We’re currently pursuing multiple funding opportunities which if successfully secured, we hope to showcase in the coming months. Lastly, for the offshore oil and gas market, we’re seeking to further develop our technologies for applications which require higher power output through a combination of scaled-up PowerBuoy designs, enhanced mooring systems and array technologies. We continue to engage potential customers who are seeking solutions for offshore platforms, offshore communications and downhole applications. To address all of these market segments, we continue to collaborate with potential PowerBuoy users and to progress toward potential agreements for further development, demonstrations and applications. We also continue to increase our technical depth and our ability to execute by augmenting our team with outstanding engineering, operations and business development expertise through both new hires and external associates. I will now turn it over to Mark who will review our financial results for the quarter and full fiscal year 2015. Mark Featherstone Thanks, George, and good morning, everyone. I will now briefly review results for the fourth quarter and full year of fiscal 2015 before we go onto questions. For the three months ended April 30, 2015, OPT reported revenue of $0.5 million as compared to revenues of $0.4 million for the three months ended April 30, 2014. Revenue in both periods was primarily related to our project with Mitsui Engineering & Shipbuilding or MES. The MES project is currently undergoing a stage-gate review as discussed more fully in the MD&A section of our filing on Form 10-K for the fiscal year ended April 30, 2015. The net loss for both the three months ended April 30, 2015 and April 30, 2014 was $3.3 million. Compared to the prior year quarter, the current year quarter reflected an increase in gross profit due to a change in project costs related to the MES contract. In addition, SG&A expenses were $1.4 million lower than the prior year primarily due to reduced employee related expenses and the lower site development expenses related to our terminated project in Australia. This was offset in part due to increased product development as OPT continues to advance its technology and prepares for upcoming deployments. In addition, OPT received a refund related to research and development expenditures in Australia. Results in the prior year of fourth quarter reflected a favorable adjustment for a change in project loss reserve. For the full year ended April 30, 2015, OPT reported revenue of $4.1 million compared to revenue of $1.5 million in the prior year. The increase in revenue was primarily related to increased billable work for the removal of the anchor and mooring equipment from the seabed off the coast of Oregon, increased billable work under our current phase of our project with MES, and the completion of our WavePort contract with the European Union. These increases were partially offset by decreased revenue on other billable development projects. The net loss for the fiscal year ended April 30, 2015 was $13.2 million, compared to a loss of $11.2 million in the prior year. The increase in OPT’s net loss year-over-year primarily reflected an increase in estimated project costs associated with our contract with MES, increased legal fees, as well as higher consulting and patent amortization costs. These increases were partially offset by decreased product development costs due to the substantial completion of our cost-sharing contract with the DoE for our Reedsport project in Oregon, net of increased costs associated with other internally funded development. In addition, OPT experienced reduced employee related costs and site development expenses related to our terminated project in Australia, and received a refund related to research and development expenditures in Australia. Turning to the balance sheet, as of April 30, 2015, total cash, cash equivalents, and marketable securities, were $17.4 million, down from $28.4 million on April 30, 2014. At April 30, 2015 restricted cash was $0.5 million, compared to $7.3 million in the prior year. This significant decrease in restricted cash was primarily due to the return of $4.7 million in customer advance payments that we have received under our former contract with the Australian Renewable Energy Agency or ARENA. Net cash used in operating activities was $17.2 million and $6.5 million for the years ended April 30, 2015 and 2014, respectively. The increased cash used in operating activities included the return of $4.7 million to ARENA, while the prior year included the receipt of funds from ARENA. Over the last several months, we have taken a number of steps to reduce our run rate while also increasing our technical, operating, and business development resources. As a result, we currently project that our operating cash burn in fiscal 2016 will be lower than our operating cash burn in fiscal 2015, even as we deploy we believe in fiscal 2016. We have also substantially increased our proposal efforts and are actively pursuing commercial partnerships and other alliances with potential customers. As a result of these actions, we remain confident in our cash position and we expect to have sufficient cash to maintain operations through at least July 2016. With that, I’ll turn it back to George before we open up the call for questions. George Kirby Thanks, Mark. Before we move to questions, I thought I would highlight a few compelling reasons to consider OPT. Number one, we believe we are the technology leader in wave energy conversion for offshore applications. Our technology provides a critical solution for offshore distributed power generation for a number of industries discussed earlier. We have a clearly defined technology roadmap, which focuses on driving down costs, improving reliability and durability, and broadening commercial applications, and we currently have been continued to develop significant intellectual property around our technologies and applications. Number two, we are targeting a large addressable markets, including ocean-based communication and data gathering, security, defense, and offshore oil and gas. We are planning multiple upcoming PowerBuoy deployments which we believe will further advance our product validation and will serve as near-term market catalyst. And number three, we consider our staff to be world class. And we have a solid leadership team in place of both the executive management and board levels. So in summary, we’re laser focused on launching our PowerBuoys into offshore market applications, where reliable and cost effective power is critical yet currently unavailable. And we’re very excited about the progress that we’ve made in advancing our core technologies toward achieving this goal. We’re committed to meeting our business objectives, including this year’s successful deployments of the PB40 and the next generations of the APB-350 in order to validate durability and reliability, all while we aggressively seek new customers and partners as part of our commercialization efforts. We’re hopeful that we can share the news of our continued successes in the coming weeks and months. So, thank you for your time today. And operator, we’re now ready to take some questions. Question-and-Answer Session Operator [Operator Instructions] Your first question comes from the line of Amit Dayal from H.C. Wainwright. Please go ahead. You are now live in the call. Amit Dayal Thank you. Good morning, guys. In regards to the three buoys that are potentially going to be put under trials, what level of costs do we incur on a quarterly basis to have these tests undergo? Mark Featherstone Yeah. So, there is obviously initial cost for this deployment. After that the primary costs are our internal cost of monitoring those devices. So there is some initial cost to deploy and then later to take out the buoy but the ongoing monitoring costs are somewhat nominal. Amit Dayal Got it. And in terms of your commercial opportunities you spoke about potential partnerships, do you expect to announce any partnerships or initiatives to begin tests or any feasibility study et cetera with some of those types of opportunities? George Kirby Hey, Amit. It’s George. Good question. Thank you. Yeah, so like I said, we’re speaking with a number of different parties right now. And we’re looking at specific applications that we could work on together. We are hopeful that in the coming months, we can speak to you about that as well as let the market know. But right now obviously, we can’t talk about it but we are definitely in discussions with multiple parties. Amit Dayal Got it. I guess, I mean that’s all I have. Thank you. I will get back in queue. George Kirby Thank you. Operator I see we have no more questions at this time. [Operator Instructions] Sir, you have no questions at this time. [Operator Instructions] Thank you. Sir, we have no questions at this time. [Operator Instructions] Thank you. We have no more questions. I would now like to turn the call over to George Kirby. Thank you. George Kirby Thank you, Operator. We believe our offshore autonomous PowerBuoys will effectively serve several market applications where current solutions remain either inadequate, costly or they simply don’t exist. We see our PowerBuoys as platform for integrated solutions to some of offshore industry’s toughest challenges. We believe that once implemented, our PowerBuoys will become an enabling technology for new applications, which today have only been conceptual at best. The offshore environment is extremely harsh and challenging, especially where solutions such as ours are required to operate for long periods of time without human interventions. We truly believe in the value of our solutions to our customers, to shareholders and for society and it is this belief, which drives us to innovate disruptive technology such as our PowerBuoys to validate this technology more quickly such as through our Accelerated Life Testing. And to relentlessly search for ways to merger solutions with those that will benefit the most. I want to thank everyone once again for attending today’s call. If there is any further questions please don’t hesitate to contact us. Otherwise, we look forward to providing further updates next quarter. Operator Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. 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U.S. Equity Shines As The USD Struggles In The Months Ahead

Summary According to different measures, USD has been strengthening for 7 consecutive months now between 14% and 18%. This is due to several drivers of USD strength and the market has priced it in over these 7 months of unprecedented period of strength in the past 11 years. USD is expected to moderate its strength to the range of $24-$25 for UUP from February to May 2015 prior to FOMC liftoff on condition of global status quo. US equity market (as represented by SPY) has strengthened remarkably even in the period of USD strength and is expected to strengthen further during this interim period. Overview of Recent Remarkable USD Strength There is a saying that what comes up must come down. This is the same in the financial sector but there is one asset class which seems to be defying this logic with its relentless rise. That would be the United States Dollar (USD). We can look at the extent of the USD rise through the charts of the FXCM USDollar Index (USDOLLAR) below. (click to enlarge) The USDOLLAR follows the performance of the USD against a basket of the most liquid currencies in the world such as the EURUSD, USDJPY, AUDUSD and GBPUSD. This basket covers 80% of the world spot market activity. This would mean that for the past 7 months, the USD has increased in value by 14.08% against the euro (EUR), Japanese Yen (JPY), Australian Dollar (AUD) and Great Britain Pound (GBP) combined. The USDOLLAR is chosen in the form of its monthly chart to give you an impression of the parabolic nature of the USD ascent visually. The value of a currency lies in its relative value against other currencies. Perhaps, it is because the USDOLLAR only started in April 2013, this is why the effect is so much more dramatic. I will show the more established US Dollar Index later. In any case, we should note that of the countries in currencies mentioned above, only the UK refrained from adding monetary accommodation in the past few months. Europe and Japan has adopted massive Quantitative Easing (QE) to the tune of $1.14 Trillion euros and $80 Trillion yen, respectively, to fight deflation which weaken their currencies. Australia joined in the easing bandwagon when it cut its cash rates by 25 basis points to 2.25% last month to aid its faltering economy despite the threat of a potential housing bubble. The USD Index covers a much broader spectrum of currencies to match against the strength of the USD. They are the EUR, JPY, GBP, Canadian Dollar (CAD), Swiss Franc (CHF) and Swedish Krona (SEK). The USD Index shows that in the past 7 months, the USD has strengthened at a more impressive pace of 18.76% against a wider range of currencies. We can see from the chart above that in the past 11 years, we have not seen a period of sustained 7 months of consecutive advancement as seen from the recent July 2014 to January 2015 period. You can just count the monthly candles in the chart above and not to mention the scale of 18.76%. This is a wider timeframe to look at the strength of the USD which allows us to put things into perspective. This rally has already brought the USD to a 9-year high not seen since November 2005 of 92.43 and just a few points short of the September 2003 peak of 99.12. Recap of Drivers of USD Strength The drivers of the strength of the USD are well known by now, but I shall briefly recap it. The first and foremost driver of the USD strength is the divergence of monetary policy between the US (and maybe the UK to a certain extent) and the rest of the world. Simply put, the Fed is expected to lift off its interest rates in mid-2015 while the rest of the world led by Japan and Europe are expected to increase their degree of monetary accommodation. This market expectation of higher interest rates in the United States has prompted funds that fled to the markets of emerging countries in search of yield when rates were cut back in 2008, to begin the gradual process of return to the United States. Also, funds in Europe and Asia that are in search of greater yield are also attracted to enter the United States market driving up the USD. Secondly, the US has been the lone bright spot in the global economy with growth of 5% in the third quarter of 2014 at a 11-year high and advance estimate of fourth quarter GDP of 2.6%. This stands in contrast to the growth of 0.2% in Europe for the third quarter and -0.5% for Japan in the same quarter after a -1.9% growth in the second quarter. This means that Japan is officially in a recession after 2 consecutive quarters of economic contraction. Thirdly, there is more political stability in the US when compared to Europe. The European Union is facing threats to its integrity with Greece trying to wriggle out of its debt obligation as much as possible and creditors who are not willing to cede ground. This tension will weigh on the economic potential of Europe and there are the lingering concerns over its relations with its giant neighbor Russia over its proxy invasion of Ukraine. This political instability will encourage funds to enter the US in search of safety as much as to tap its economic growth potential. Consolidation of USD Strength and Status Quo All these 3 factors are the reasons behind the strength of the USD over the past 7 months. In this 7 months, the US remains the sole source of strength and stability in the world amongst major economies. However, with a 18% rise, it is clear that the market has priced in these advantages and it is already unprecedented over the experience of a decade. Hence my view is that the USD will consolidate its strength from now in February 2015 to May 2015 until we are nearer to mid-2015. The Federal Open Market Committee (FOMC) will have 2 meetings in June and July 2015. This is the crucial period where the first rate lift-off is expected to occur. The USD might then rise 1 month before that event as the Fed would have given the market more clues in its March and April meetings. We are assuming that the US economy continues on its strong path of economic growth over the next 4-6 months period which will encourage the Fed to raise rates as scheduled. If the US economy shows signs of weakening, the USD would weaken past May 2015 as the market would be less confident of a Fed liftoff. The next assumption is that the European situation will not get worse especially with Greece as it is the precedent for which other debtor nations will follow. Hence even though Greece is tiny in the absolute sense (only 0.39% of the global economy), it will receive determined treatment from the Troika to preserve the interest of creditors. The danger is that they do not push Greece too much which might result in some nasty unintended consequences. We note that although the deadline for the official negotiation is until the end of the month, the European Central Bank (ECB) which is part of the Troika has already expressed disappointment over the negotiations. It has decided that it will not accept Greek bonds as collateral for its monetary policy operations (which is to swap Greek bonds for euros). It has since relegated Greece to the secondary Emergency Liquidity Assistance (ELA) scheme. If European Union were to undo itself back into individual countries, it would be bullish on the USD even if the Fed might be forced to postpone its rate lift-off. Relative Strength of US Equity Market and USD The strength of the economy is often reflected in the strength of its stock market and this is true for the US too. As we have mentioned earlier about the strength of the US economy, we can refer to the S&P 500 SPDR (NYSEARCA: SPY ) to gauge the overall strength of the US stock market. (click to enlarge) We can see from the weekly chart of the SPY above that the overall trend has been bullish. There are ups and downs along the way but the market has always been able to make a comeback. The only time that it has crossed its 50-week moving average was in October 2014 but even that it has been able to recover swiftly. The other thing to note is that in the past few weeks, SPY has stalled and it is ranging in the $200 to $210 price level. (click to enlarge) The other way to look at the USD would be through the PowerShares DB US Dollar Index (NYSEARCA: UUP ) as seen in the chart above. The USD has risen 17.86% from the closing price of $21.39 at the week ending 30 June 2014 with the closing price of $25.21 to the week ending 20 January 2015. It should also be noted that the UUP has been heavily overbought for weeks now. The UUP is likely to range between $24-$25 in the months ahead to May 2015, if the global status quo remains. Hence given that the half the profits of large US corporations are based overseas, the interim USD weakness would have a bullish impact on their earnings during this period. One way where we can gauge how the USD affects the performance of businesses in the US is to overlay the SPY against the UUP. The effect is shown in the chart below. (click to enlarge) The SPY/UUP overlay shows us that the SPY has weakened relatively compared to its performance before July 2014 when the USD strengthened. This is not easily discernible in the SPY chart above. This also goes to show that the SPY has been performing quite resiliently in the face of USD strength. This has to do as much with the fundamental earnings of the underlying companies and the overall appeal of US equity markets as Japan and Europe struggle. With the upcoming interim weakness of the USD, it is likely that the SPY will pick up strength and this would be a good time to pick up SPY for some short-term gains. However, it will also be a good addition to your long-term portfolio as the US economic strength is expected to persist for the foreseeable future. Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

ETFs For An Ongoing Stimulus Bubble

At this moment in time, nearly every significant central bank (excluding the U.S. Federal Reserve and the Swiss National Bank) is engaging in some form of rate lowering and/or currency devaluation. Clearly, “stimulus fever” is sweeping the globe, suppressing interest rates and bolstering risk assets. The question an investor may wish to ask, however, is whether or not the efforts are doing anything beyond creating temporary “wealth effects” for the investing class. Canada, India, Turkey, Australia, China and Denmark. What do all of these countries have in common? The central bank of each nation has eased monetary policy to stimulate respective economies in 2015. What’s more, none of these actions had been anticipated; rather, the media described rate cuts as “surprising” or diminished reserve requirements as “unexpected.” In the case of Denmark, recent stimulus has been creative as well as startling. For the fourth time in less than three weeks, the Danish central bank lowered its deposit rate to keep its krone in line with the weakened euro. Maintaining the peg of the Danish krone to the severely weakened euro is a means by which Denmark can spark export-driven growth. Depositors are now being charged 0.75% (what is known as a negative deposit rate) to let money sit at a financial institution. In effect, Danish depositors are now paying for the privilege of “hoarding” the krone – a risk some might be willing to take in order to preserve capital from rapid euro depreciation. At this moment in time, nearly every significant central bank (excluding the U.S. Federal Reserve and the Swiss National Bank) is engaging in some form of rate lowering and/or currency devaluation. Perhaps ironically, even the Fed has merely telegraphed a shift towards tightening the monetary reins. In actuality, it has been more than six years of zero percent interest rate policy (ZIRP) with no specific measure taken to raise overnight lending rates. So Switzerland, which removed the franc’s cap against the euro on January 15, is the only warrior in the “currency wars” that believes a strong currency is beneficial as opposed to detrimental. U.S. and Switzerland: The Only Countries In A Tightening State Of Mind Approx YTD % CurrencyShares Swiss Franc Trust ETF (NYSEARCA: FXF ) 7.9% PowerShares DB USD Bull ETF (NYSEARCA: UUP ) 3.3% CurrencyShares Japanese Yen Trust ETF (NYSEARCA: FXY ) 1.9% CurrencyShares British Pound Sterling Trust ETF (NYSEARCA: FXB ) -1.7% CurrencyShares Australian Dollar Trust ETF (NYSEARCA: FXA ) -4.4% CurrencyShares Euro Trust ETF (NYSEARCA: FXE ) -5.2% CurrencyShares Canadian Dollar Trust ETF (NYSEARCA: FXC ) -6.2% The Swiss consumer may benefit from a stronger franc. Yet Swiss businesses have been bemoaning the fate of their exports. Additionally, investors appear more intrigued by the prospect of euro-zone asset price gains than the possibility of Swiss company success as demonstrated by the Vanguard FTSE Europe ETF (NYSEARCA: VGK ): iShares MSCI Switzerland Capped ETF (NYSEARCA: EWL ) price ratio. VGK:EWL since January 15 shows that the early money is betting on asset price reflation occurring in the euro-zone where the European Central Bank (ECB) is engaged in a large-scale electronic money printing program (a.k.a. quantitative easing) to revive the economies of member nations. Clearly, “stimulus fever” is sweeping the globe, suppressing interest rates and bolstering risk assets. The question an investor may wish to ask, however, is whether or not the efforts are doing anything beyond creating temporary “wealth effects” for the investing class. In other words, is Switzerland onto something by refusing to play the game, or is the U.S. blueprint for economic revival worthy of imitation? Until the global investment community gives up on the notion that any stimulus is good stimulus – that any financial engineering designed to inspire risk taking will reward risk takers – expect the uptrends in respective stock markets to continue moving higher. I prefer removing the currency aspect from the equation with funds like the iShares Currency Hedged MSCI Germany ETF (NYSEARCA: HEWG ), the WisdomTree Europe Hedged Equity ETF (NYSEARCA: HEDJ ) and/or the Deutsche X-trackers MSCI Asia Pacific ex Japan Hedged Equity ETF (NYSEARCA: DBAP ). Yet I am equally convinced of the necessity to hedge against a monumental shift in central bank sentiment. There’s a reason that negative yields on sovereign bonds in Europe – Netherlands, Austria, Germany, Finland and Switzerland are becoming increasingly common. For one thing, negative yields can become even more negative, extending price gains for buyers of the debt. For another, there’s a remarkable demand for safe storage. Government bonds, even with negative yields, might be considered safer than cash deposits, particularly when those cash deposits are substantial. (Think Cyprus!) I am by no means recommending that an investor rush out to purchase negative -yielding sovereign debt; rather, I anticipate the U.S. bond rally to stay the course on relative value . If the U.S. 10-year yields 1.82%, but German 10-year’s offer 0.3% and Swiss 10-year offers a negative yield, is there any reason to suspect that a fund like the iShares 10-20 Year Treasury Bond ETF (NYSEARCA: TLH ) will fail to find buyers? Consider incremental purchases of an exchange-traded fund like TLH when it revisits its 50-day moving average. Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.