Tag Archives: economy

Australia ETFs In Focus On Likely Snap Elections

While the global economy is on a recovery path with solid improvements across most countries, the development in Australia might block the mending road in the coming months. This is especially true given signs of political issues in the country with the Prime Minister Malcolm Turnbull threatening to snap elections. Turnbull has been trying to pass labor reform bills aimed at curbing union corruption in the building and construction industry, but was rejected several times by the Senate. Now, the prime minister has recalled parliament from a break for a special session on April 18 to vote on these ongoing controversial bills. The bills would re-establish the Australian Building and Construction Commission and establish the Registered Organizations Commission that is vital for the country’s economic growth. If the bills are still blocked, he will dissolve both the houses of parliament (Senate and the House of Representatives) and call for early election on July 2. The move would mark the first Australian double dissolutions since 1987, throwing all the 150 lower house seats and 76 senate seats open for vote. The news of double dissolution election came at the time when the latest Newspoll showed that Malcolm Turnbull’s approval rating as prime minister has slipped to the negative territory for the first time, though he remains by far the most preferred prime minister to manage the economy and deliver a tax reform. ETFs in Focus Given heightened political uncertainty over the snap elections, investors may want to take a closer look at the ETFs targeting this nation. iShares MSCI Australia ETF (NYSEARCA: EWA ) This fund is the most popular and liquid ETF tracking the Australian equity market with an AUM of $1.4 billion and average daily volume of more than 3 million shares. It tracks the MSCI Australia Index and holds 73 stocks in its basket with double-digit allocations to the top two firms. Other firms hold less than 6.6% share in the basket. From a sector look, financials dominates the fund’s return at 53.1% followed by materials (12.8%). It charges 47 bps in annual fees and has gained 4.6% so far in the year. It has a Zacks ETF Rank of 3 or “Hold” rating with a Medium risk outlook. iShares Currency Hedged MSCI Australia ETF (NYSEARCA: HAUD ) This ETF targets the Australian equity market without the currency risk. It follows the MSCI Australia 100% Hedged to USD Index and is basically a holding of EWA with currency hedged tacked on. The fund has accumulated $9.7 million in its asset base since its inception in June 2015 and charges 51 bps in annual fees. Volume is paltry as it exchanges less than 7,000 shares on average daily basis. It has lost 1.8% so far this year. First Trust Australia AlphaDEX ETF (NYSEARCA: FAUS ) This fund employs an AlphaDEX methodology and ranks stocks in the space by various growth and value factors, eliminating the bottom-ranked 25% of the stocks. This is easily done by tracking the NASDAQ AlphaDEX Australia Index and the approach results in a basket of 40 stocks that are widely spread out across various components with each security holding less than 4.6% of assets. Here again, financials takes the top spot at 34.2% while the consumer discretionary and materials sectors round of the next two with double-digit exposure each. FAUS is an unpopular and less liquid option with an AUM of only $2.9 million and average daily volume of around 1,000 shares. Expense ratio comes in at 0.80%. The fund has shed 0.8% in the year-to-date time frame and has a Zacks ETF Rank of 3 with a Medium risk outlook. WisdomTree Australia Dividend ETF (NYSEARCA: AUSE ) This fund follows the WisdomTree Australia Dividend Index and offers targeted exposure to high dividend-paying companies in the Australian equity market. It has been able to manage assets of $33.9 million and trades in paltry volume of 4,000 shares a day on average. Expense ratio comes in at 0.58%. Holding 65 stocks in its basket, the product is widely diversified across each component as none of these holds more than 3.43% of assets. Sector-wise, it has a definite tilt toward financials at 22.5%, followed by materials (15.3%), consumer discretionary (14.1%) and industrials (14.0%). The fund has gained 9% so far this year and has a Zacks ETF Rank of 3 with a Medium risk outlook. Original post

Want To Become A Millionaire During The Market Crash? Buy This ETF

With gold regaining its status as a safe alternative to equities, it’s about time we look at the precious metal. Gold is becoming increasingly important in this market, and the potential for large gains relates to (1) the range gold can move and (2) the possibility of a reversal with extremely high momentum: Gold’s huge sell-off since 2011 makes a comeback one of potentially great heights – a 50% upside if your price target is the previous high. We are seeing the best quarterly performance in gold in the past 30 years, signaling a possible turnaround. In this article, we will focus on the SPDR Gold Trust ETF (NYSEARCA: GLD ) instead of the physical metal or futures. While futures perhaps constitute the most profitable of the bunch for speculative trades, it is also of higher risk and outside the risk tolerance of most investors. Physical gold is the best of these three options for holding gold but is illiquid and has delivery as well as storage costs. For most investors, GLD is the best option to play gold, even though it does not entitle you to physical gold. Thus, if you’re buying gold to prepare for an economic collapse or the like, look into physical gold. For the rest of us, we will discuss GLD as an investment. Speculative? Gold is less speculative than most other commodities and is typically safer, as the biggest governments’ central banks still hold gold as a reserve asset. Those who suspect a true economic collapse typically hold gold, banking on the idea that gold will become an actual currency if fiat currencies fail. Although I am bearish on the economy and hate the current financial system, I highly doubt that non-fiat currency will ever “become a thing.” Thus, we should look at gold as an investment somewhere between the speculative investments of stocks and the inflation-defensive investments of bonds. If we place GLD on this spectrum, it is closer to a bond ETF than a stock. Indeed, like bonds and unlike stocks, most hedge funds are not apt to take strong short positions on GLD: Click to enlarge (Source: Bloomberg) The demand for GLD from hedge funds is more attributable to true hedges (most hedge funds aren’t actually for the sake of hedging) than speculative positions meant to profit from a demand for gold. That is, GLD is seen as a protection against a market crash. If this were not true, we would not see so many GLD positions in hedge funds during the 2014 gold bear market. With GLD being at a near-year high for net-long positions in hedge funds, we can only ask if the hedge funds know something we don’t. The recent economic news has been mixed. The Philly Fed report, for instance, shows a huge spike in new orders; other reports, such as imports and exports show clear declines. Gold and the Market What we have noticed in the past few months is that GLD has seemingly lost its negative correlation to the stock market. That is, when stocks surge, GLD does not drop as expected. In fact, in the past few weeks we have seen both GLD and the general market rally. I sincerely doubt this is due to a real need for gold – i.e., gold used for jewelry. No, the recent gold rally is more likely due to banks and hedge funds increasing their holdings in gold, primarily as hedges but also as speculative investments. Remember that Goldman Sachs correctly predicted the gold crash in 2013; now they are predicting a rally for 2016. The Fed also has some blame. Without clear policies for interest rates, Fed pushes banks and hedge funds toward gold. The lack of the rate raise last Wednesday has caused concern for the dollar and for future rate raises, as explained in this video: www.youtube.com/watch?v=xDBJrdksAFs It’s Not All about the US Check out this line for the new iPhone in China: Actually, I lied. That’s a line to buy gold from back in June 2013, which coincided with a 12% correction in the Chinese stock market. (Source: Caixin) Demand in Asia is also driving up the price of gold, which drives up GLD as a proxy. According to Reuters, the majority of gold demand comes from Asia. India and China alone make up 50% of the gold demand. With North America only accounting for 8% of gold demand, it’s no wonder that the US stock market and gold prices are out of alignment. In fact, to predict gold demand, you might be better off watching the Chinese stock market. On that note, we see physical gold demand at pre-2008 levels. Miners Miners affect gold price by increasing the supply. Mine production has slowed in growth and is at a nearly sideways trend. Much of the recent gold production has been from China, which has been constantly increasing its gold mining efforts despite the low price of gold. China uses gold to hedge its currency. With the Yuan taking hits in the recent years, China’s growing gold reserves have served their purposes. The Chinese demand for gold should grow as the Yuan falls. If world gold mine production continues to fall to where gold production levels out, we have a status quo situation, in which demand exceeds supply. In this situation, gold prices will rise in tandem with the current stock market bubble and debt bubble. Currency War The currency war, which is currently underway, makes future currency prices unpredictable. Japan wants a weak Yen and therefore a strong greenback. China wants a strong Yuan and therefore a weak greenback. The US, with its recent interest rate hold, has given China what it wants. But the currency wars have just begun. Most of the major currencies will see devaluation against one another. Eventually, some currencies will come out on top. But throughout this chaos, we should see gold appreciate against all other currencies, simply because gold doesn’t have a country or a central bank trying to devalue it. Thus, the simultaneous devaluation of the greenback and Yen, for example, will provide a rising gold/dollar and gold/yen phenomenon. Stock Market Crash The stock market crash or correction that we will inevitably see ( I’m predicting 2016 ) should further bolster the strength of gold. A market crash will likely lead to the printing of money for the purpose of quantitative easing, which would further devalue currencies, amplifying the currency wars. Interest rate decreases would also help stimulate the economy but hurt the bond market. Hence the final node of the vicious cycle: investors and hedge funds selling bonds and avoiding cash in favor of appreciating gold. An ounce of gold could easily break the $3,000 per ounce price range in such a situation. Holding GLD during this time could easily be your best-performing asset. If this prediction comes true, you would only need have invested $419,000 in GLD to turn that sum into a nice million. Learn More about Earnings My Exploiting Earnings premium subscription is now live, here on Seeking Alpha. In this newsletter, we will be employing both fundamental and pattern analyses to predict price movements of specific companies after specific earnings. I will also be offering specific strategies for playing those earnings reports. Our last newsletter looked at the upcoming earnings for Lululemon (NASDAQ: LULU ). Request an Article Because my articles occasionally get 500+ comments, if you have a request for an analysis on a specific stock, ETF, or commodity, please use @damon in the comments section below to leave your request. Disclosure: I am/we are long GLD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

ETF Winners And Losers As Fed Stands Pat

By Max Chen and Tom Lydon With the Federal Reserve keeping short-term interest rates unchanged, rate-sensitive exchange traded funds popped while some trades dependent on higher rates went out of favor, according to industry analyst ETF Trends . The Fed kept short-term rates unchanged at a range of between 0.25% and 0.5%, pointing to ongoing global economic and financial risks. Fed officials also suggested there will only be two more rate hikes this year, according to their projections, down from previous estimates of four hikes as policymakers grow more cautious in the wake of weakening overseas growth and volatility in financial markets. With the Fed holding off on further rate hikes, the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP ) , which tracks the price movement of the U.S. dollar against a basket of currencies, lost momentum and dipped 0.6% Wednesday. A Fed rate hike would have diminished the supply of money floating around the economy and strengthened the greenback, but without the Fed’s support, the USD’s outlook looks less certain. Additionally, the Financial Select Sector SPDR (NYSEArca: XLF ) was down 0.6% Wednesday. Without high rates to support loans, banks will continue to see squeezed margins in a low rate environment. On the other hand, yield-generating assets popped as the Fed maintains lower rates. For instance, on Wednesday, the Vanguard Dividend Appreciation ETF (NYSEArca: VIG ) rose 0.4%, Vanguard REIT ETF (NYSEArca: VNQ ) gained 0.9% and Utilities Select Sector SPDR (NYSEArca: XLU ) increased 1.0%. Dividend-generating assets were among the best performing areas of the market as a prolonged period of low interest rates typically make relatively riskier equities attractive to more conservative fixed-income assets. Additionally, the weakening dollar helped bolster commodity assets, with the broad PowerShares DB Commodity Index Tracking Fund (NYSEArca: DBC ) 1.6% higher on Wednesday. The SPDR Gold Shares (NYSEARCA: GLD ) advanced 1.5%. Gold assets would typically weaken on rate hikes since investors would shift away from non-yield-generating assets like gold, especially on a stronger dollar and lower inflation outlook. The United States Oil Fund (NYSEArca: USO ) , which tracks West Texas Intermediate crude oil futures, also pushed higher, rising 4.9% Wednesday on the weaker dollar. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.