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Best ETF Strategies For 2015

Stocks are on their way to close this year on a strong note–with the S&P 500 index up 15% year to date-the third consecutive year of double-digit growth for the index. With the economy growing at the fastest clip in more than a decade, stocks are expected to continue their upward move, as companies will be able to boost their profits. Plunging energy prices and low interest rates will further benefit stocks. At the same time, after a bull run of almost six years, stocks are not cheap. And with the Fed expected to start raising rates sometime next year, many wonder how long the stock market party can go on. As we head into 2015, it may be a good time to look at the investment landscape and reposition your investment portfolio for the new year. Can the Bull Run Continue in 2015? U.S. stocks are still more attractive compared to most other asset classes and investors should continue to favor them in coming months as well. The Fed has gone out of its way in assuring investors that it will be “patient” in raising rates. Some may argue that rising rates will kill the stock market rally, but history tells us that the initial phase of rate increase is almost always accompanied by higher stock prices. And the reasons are clear-the increase in rates reflects an improving economy and lower risk of deflation-which are positive for stocks. Thus, stocks are the place to be in next year. Top Sectors for 2015 My favorite sectors for 2015 are Technology, Retail and Financial. Many U.S. corporates have accumulated huge piles of cash on their balance sheets and as the economy gathers steam, they should be more inclined to increase spending on R&D and Capex, benefiting tech firms. Low oil prices and slowly rising wages are good for U.S. consumers. Strong holiday sales suggest that consumer spending will grow as plunging oil prices increase disposable incomes. Financials have come a long way since the great recession with much healthier balance sheets and improved risk management systems in place. With improving economy, the sector has been able to grow earnings and increase dividend payouts. The Vanguard Technology ETF (NYSEARCA: VGT ), SPDR Retail ETF (NYSEARCA: XRT ) and SPDR Financials ETF (NYSEARCA: XLF ) are worth considering. Many energy stocks and ETFs look enticingly cheap now but I think it would be better to wait till we see some signs of oil prices bottoming out, unless you can stomach high volatility in anticipation of gains over much longer period. What to Expect from the Bond Market? Robust economic growth in the U.S. in the face of soft economic conditions in many other parts of the world, coupled with accommodative monetary policy worked great for bonds. In fact, the unexpected rally in the Treasury bond market this year surprised most. Treasury bonds-in particular longer term– may continue to benefit from heavy buying by foreign investors, as long as interest rates remain ultra-low in Europe and Japan, the U.S. dollar continues to strengthen and long term inflation expectations remain benign. Shorter term yields however may rise in anticipation of fed funds rate hike and thus the trend of yield curve flattening may continue next year. Municipal bonds were also big winners this year as investors poured $23.9 billion into municipal debt funds due to their tax benefits and relatively “safe” status. With flat supply expected in 2015 , municipal bonds may continue to outperform. Emerging Markets-Winners and Losers? With the plunge in oil prices, emerging markets landscape has undergone a significant change. Countries like China and India are among the biggest beneficiaries of cheap oil. China is the second largest importer of oil in the world and each $1 decline in oil price saves the country $2.1 billion annually. India relies on imports for 75% of its energy needs and oil accounts for about a third of its imports. Further, the government spends a lot on fuel subsidies. Declining oil prices will not only help the country narrow down its trade and budget deficit but also bring down inflation. With easing inflation, the central bank will be able to lower interest rates, boosting economic growth. Take a look at WisdomTree India Earnings ETF (NYSEARCA: EPI ). Indonesia and Thailand are also set to gain from the precipitous decline in oil prices. On the other hand, Russia and Venezuela in particular are likely to experience further pain next year. Prepare for Higher Volatility Markets saw some bouts of high volatility this year but in general the indexes maintained their positive momentum. Investors should however prepare themselves for more twists and turns in 2015 as the Fed moves closer to normalization of monetary policy. Geopolitical risks may further add to the uncertainty. Consider adding some low volatility ETFs-like SPDR S&P Low Volatility ETF (NYSEARCA: SPLV ) and iShares MSCI Minimum Volatility ETF (NYSEARCA: USMV ) to the portfolio. These not only shine during highly volatile market environments but also deliver superior risk adjusted returns over longer term.

Parkit Enterprise Inc.: Pay Discount On Parking Assets, Get Asset Management With Significant Multi-Bagger Potential For Free

Summary Parkit is a rare opportunity to own a start-up asset manager that is likely to raise significant capital in 2015 to execute on their strategy. Parkit and ProPark combine to create a competitive advantage and have a track record of success which shall help raise capital. Management is extremely bullish and CEO has been buying on the open market extremely consistently at prices higher than today. Shares trade at a significant discount to NAV and investors get the asset management business for free. We see multi bagger potential. (Note: Parkit is also traded on the Canadian TSX Venture Exchange under the ticker PKT.V. Volume on the Canadian exchange is greater than on the OTCQB shares.) We are continuously looking for a business with quality economics run by incentivized managers and where the market is getting the risk/reward ratio very wrong. Strong downside protection is absolutely paramount as the upside will take care of itself with upcoming catalysts. To find such an opportunity in a frothy market such as today one must be willing to search through some obscure places. For 2015, we will be closely following a small parking garage owner based in Canada called Parkit Enterprise Inc. (OTCQX: PKTEF ). The company owns equity in two US off-airport parking garages and has been working on transitioning to becoming a fund manager that aggregates high quality income producing parking assets via a private equity platform. We think the market is serving up a very attractive opportunity as it is extremely rare for the investing public to have the ability to invest in an emerging asset manager. Most often those opportunities are only available to employees or private equity investors. Even rarer is that Parkit already has a track record, has operating assets and is cash flow positive. Currently trading at a discount to NAV on the company’s current owned parking assets, we think the low US$0.40s (mid CAD $0.40s) is a very cheap price to pay for Parkit and does not at all account for the upside potential as a fund manager of quality parking lots. We will be watching Parkit very closely as capital is raised for their first fund over the next few quarters. Management has significantly raised their guidance on funds they will be able to raise and if properly executed, this company is worth many multiples today’s price. History and Fund Manager A Long Time Coming In years past, Parkit was originally called Greenspace and previous management before 2012 did not have a coherent strategy. They helped greenfield the construction of the Canopy parking garage located right outside Denver International airport (completed in 2010), but they ran a bloated cost structure which ultimately almost led to the company going broke even as Canopy performed well. To help transition the company into a leading parking industry company, they brought on Rick Baxter as CEO, some other talented managers and a board of directors with the private equity experience to turn the ship around and execute on an asset manager strategy. Since 2012 when management changes occurred, the company has paid down debt, set the platform for the company’s new fund management strategy and did this while management did not pay themselves for a year and a half. Management decided to take the compensation that accrued to them and roll that over as equity into the company. Unwarranted Recent Price Dive You would expect the market to be reacting positively to Parkit’s turnaround and future prospects, which it did to some degree in April after the announcement of the Expresso acquisition; however, shares have been falling from a high of $0.70 in both the Canadian and US listed shares since October. We think that the market is overreacting to the combination of the oil sell off and the recent resignation of John LaGourgue, VP of Corporate Communications, who was extremely bullish on the company’s long-term prospects. We think that the oil price drop does not change the investment thesis and actually could increase drivers’ interest to travel and park in parking lots. Also, LaGourgue left for personal reasons and as a sign of interest in the company’s long-term prospects he continues to keep 85-90% of the shares and options in Parkit. Keep in mind, many of his shares were purchased on the open market and that he likely sold some shares to diversify his investments. Business Current And Going Forward (click to enlarge) (Source: Parkit Presentation) Parkit has been operating in the past and currently under the model to the left. Parkit owns an equity stake in the Canopy and Expresso garages alongside ProPark America and a few other outside investors. Parkit does not operate these assets, ProPark America provides those services as that is within their circle of competence. Previously Parkit did not bring too much to the relationship other than the capital to invest into Canopy, but that is changing drastically as the new strategy emerges. Parkit’s new strategy is to, to put it simply, set up and run a parking garage private equity fund not too different from an asset manager in structure. As seen in the chart above and to the right, Parkit has already set up a fund with ProPark to act as a platform to raise institutional money to then be used to aggregate parking assets that both Parkit and ProPark manage. Parkit and ProPark both are General Partners (50:50 split) and will receive hedge fund like management fees (0.5-1% of AUM), acquisition fees ( Additional disclosure: This article is meant for instructional purposes and not meant as a recommendation to buy or sell. We are human and can be wrong, especially with our forecasts, so it is extremely important to do your own homework. The only kind of intelligent investing is through your own due diligence. We own both PKTEF and PKT.V.

More Pain In Store For Greek Equities As Syriza Party Holds Firm On Anti-Austerity

Summary The Syriza party seems poised to win the general election scheduled for January 25th. Party leader Alexis Tsipras will not back away from seeking relief in austerity measures previously accepted. Should the country seek to leave the euro currency, it may be made an example for others that might follow. Expect to see the Global X FTSE Greek 20 ETF shares succumb to further pressure. In May of 2010, Greece accepted a bailout package. Then Finance Minister George Papaconstantinou described the deal as including, “tough austerity measures.” The Greek people understood why the deal had to be done, though. The country was on the precipice of Armageddon, with many bankers using the phrase “difficult but necessary.” Mr. Papaconstantinou would go on to say that Greece had a choice between destruction or saving the country and that, “we have chosen of course to save the country.” Today, the same warnings are being launched from all directions. Only this time, the people aren’t listening. Or, if they are, no longer believe them. The Greeks can now vote from experience, having lived for nearly five years with the austerity measures that Syriza, the political party currently leading in the polls, vehemently opposes. For them, more than enough time to discover they don’t care much for the taste of austerity; so much so that the country appears to be ready to explore what life is like outside of the euro. And if voters are anything like Anastasis Chrisopoulos, they probably don’t feel as if there is much to lose . When asked for his feelings on the original bailout, the 31-year-old Athens taxi driver said, “So what? Things will only get worse. We have reached a point where we’re trying to figure out how to survive just the next day, let alone the next 10 days, the next month, the next year.” But investors in Greek assets do have something at risk, and the market showed its disapproval of the country’s predicament by dropping the Global X FTSE Greece 20 ETF (NYSEARCA: GREK ) to within pennies of its 52-week low. If today’s -6.70% fall is an indication of future performance under a Syriza-led government, then prepare for more pain. Germany Says Austerity Is Working; The Greek People Disagree What we know is that, earlier today , the Greek parliament rejected Prime Minister Antonis Samaras’s nominee for president, and the country is now set to hold a general election on January 25th. Opinion polls point to victory for the Syriza party, which is set on eliminating the austerity terms accepted in exchange for a bailout package now valued near $300B. To hammer home this point, Syriza leader Alexis Tsipras said that , “In a few days the Samaras government, which pillaged the country, will belong to the past, as will the memoranda of austerity.” In response, German finance minister Wolfgang Schäuble indicated his position on the issue, stating that whoever assumed power must respect the agreements already in place and that, “the tough reforms are bearing fruit and there is no alternative to them.” To support this claim, the German’s can point to the fact that the Greek economy has returned to growth for the first time in six years, and that signs of a recovery are beginning to take hold. But the people will counter this argument not with numbers, but with experiences; their own experiences, which emphatically say that their lives have not improved during austerity’s reign. For all of the pain, unemployment for 3Q2014 came in at 25.5%, which is down from its peak of 28% in 2013 but almost twice as high as the number from 2010. (click to enlarge) More damning, though, is a statistic from the International Labor Organization that says the number of Greeks at risk of poverty has more than doubled in the last five years. The support for Syriza and frustration with austerity might be related to the lack of correlation with statistical growth and quality of living. What Does It All Mean I think the wheels are in motion and that Syriza will win the general election in January. While some believe Mr. Tsipras is only talking tough, I would disagree. He has softened his rhetoric a bit, but he and the party will not back away from demanding changes in austerity that are more than symbolic. However, the eurozone barely flinched at the news, which indicates that it may be quite comfortable with letting Greece forge its own path. For me, whether Greece is better or worse off in the euro over the long run is irrelevant to my investment thesis. I would be a seller of the Greece 20 ETF because I believe the shares will be pressured in the nearer term for a couple of reasons. For one, with the election of Syriza, there will be an extended period of uncertainly regardless of the path the country chooses. If Greece attempts to stay in the euro, it will have to meet the German’s somewhere further away than Mr. Tsipras’ current rhetoric places it. This negotiation would be intense and take some time. Conversely, if it decides to exit the euro, there will be an even longer period of uncertainty, with significantly more questions to answer. Secondly, and more importantly, Greece may be made an example for any other country thinking of following its path. There is talk that the fear in the eurozone isn’t of Greece leaving but rather that other countries may follow their lead. To alleviate this concern, game theory would suggest that interested parties attempt to make the transition difficult enough to give others pause. As cynical as this opinion may seem, I do believe it is a risk that must be accounted for. While it may seem tempting to buy Greek equities sitting at or near their 52-week lows, I would be a seller as I believe that uncertainly will persist through the January 25th elections, and the increasing risk of a euro exit will push shares further south.