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Rough Days Ahead For The Platinum ETF

Thanks to a stronger dollar led by expectations of higher interest rates, many of the commodities have been reeling under pressure this year. The broad-based DB Commodity Index Tracking ETF (NYSEARCA: DBC ) is down 4.5% this year, indicating that the pain has been felt across the broad. In fact, the precious metals space has been one of the worst performers with ETFS Physical Platinum Shares (NYSEARCA: PPLT ) down 10.8% since the start of the year. Despite a long-term deficit, which indicates a bullish trend, the sentiment for the precious metal has been weak. Last week, platinum prices were trading near the $1,060/oz mark – falling to their lowest levels since 2009 – hit by strong supply. Supply Glut Unlike last year, wherein labor unrest crippled the output of South Africa – the world’s biggest platinum producer – production this year has returned to levels ahead of the five-month strike in 2014. A sharp depreciation of the South African rand – which has fallen to a 14-year low against the dollar in early June this year – has been the primary factor for the flood in supplies. A weaker rand lowers costs for South Africa’s miners, offsetting falling platinum prices and providing them with an incentive to keep producing. Johnson Matthey plc ( OTCPK:JMPLY ), one of the biggest makers of platinum-based chemicals, estimates that platinum supplies from South Africa are expected to jump by nearly 20% this year, the largest year-over-year gain since 1993, as per an article by the Wall Street Journal . Other Factors Apart from the supply glut, investors’ sale of shares of the physically backed platinum ETF is also pushing supplies higher and dragging prices down. Slowing growth in China – the world’s top consumer of platinum for jewelry – has also been a cause of concern. Chinese platinum imports fell 11% year over year for the first four months of the year, per TD Securities. Adding to the concerns, European car sales rose at the slowest pace in six months in May. Platinum is a key component of catalytic converters, so when car demand falls, platinum demand tends to fall as well. Thus, given robust supply and dwindling demand, platinum might have a rocky road ahead. This is also expected to dampen the performance of PPLT. PPLT in Focus Launched in January 2010, this ETF tracks the performance of platinum’s price and is quite a popular fund in the precious metals space managing assets worth $550.8 million. The product invests in bars of platinum and holds them in a secure European facility on behalf of the custodian, JPMorgan Chase Bank. The product charges a decent 60 basis points a year and has an average volume of more than 32k shares traded a day. PPLT is down 10.8% in the year-to-date frame. There are also a few ETNs in the platinum space including the iPath DJ UBS Platinum TR Sub Index ETN (NYSEARCA: PGM ) and the UBS ETRACS CMCI Long Platinum TR ETN (NYSEARCA: PTM ) . Both of these suffer from lower assets and low volume levels, though they have seen similarly bad performances in the year-to-date frame. Bottom Line A strong dollar and a weaker rand have been the primary factors boosting South Africa’s platinum supply. Diverging monetary policies across the globe is to be blamed for the raging currency war. Apart from this, slowdown in China and falling car demand in Europe are also supporting lower platinum prices. However, European car registrations, a proxy for sales, have increased 6.9% to 1.17 million units in April – the best sales volume for April since 2009. Nonetheless, it remains to be seen whether the momentum can sustain or not, boosting the demand for platinum, or will platinum prices continue their downtrend led by a supply glut. Original Post

Inside iShares’ 2 Factor-Based International ETFs

Rolling out a global version of a successful domestic fund is the latest trend. Many issuers first launched a unique-themed product on the U.S. economy, and then witnessing its growing acceptance and sensing the need of the hour, brought out its international edition. iShares, one of the most sought after ETF sponsors in the world, also follows this strategy. Back in 2013, the issuer had launched the iShares MSCI USA Size Factor ETF (NYSEARCA: SIZE ) and the iShares MSCI USA Value Factor ETF (NYSEARCA: VLUE ) in the backdrop of the U.S. market. While SIZE has generated over $236 million in assets, VLUE has garnered even more, with $712.5 million so far. Now, the sponsor has initiated two ETFs with the same investing theme as that of SIZE and VLUE on the international environment. Let’s take a look at the two ETFs in detail: The newly launched ETF looks to track the performance of the MSCI World ex USA Risk Weighted Index. The fund currently holds 842 stocks with a lower risk outlook from the 17 developed markets. Though the fund takes large- and mid-capitalization stocks into account, stocks with comparatively lower market capitalization also get preference. With the surge of policy easing in the developed economies, international investing has become extremely popular this year. This was fueled up by the QE launch by the ECB and rock-bottom interest rate levels in the eurozone. The Japanese market also maintained the winning momentum on a stepped-up stimulus measure. However, one should note that relatively small-cap stocks better reflect the strength of an economy than larger ones. Large-cap stocks normally have a higher international presence and are affected by global events. On the other hand, small-cap stocks are highly volatile. Thus, a portfolio with smaller-cap stocks but lower realized volatility, like ISZE, can be an intriguing bet on the developed economy right now. The fund has a tilt toward Japan (19.73%), Canada (13.13%) and the U.K. (11.81%). Each of the other countries has less than 9.27% allocation. Sector-wise, Financials dominates the fund with 27% allocation, while Industrials (18.23%), Consumer Discretionary (13.02%) and Consumer Staples (9.94%) occupy the next three spots. The fund is low on Telecom (4.57%) and Information Technology (3.90%). It has very low company-specific concentration risk, with no single stock occupying more than 0.45% of the total. The fund charges 30 basis points as fees. Competition: The newly launched product is likely to face competition from quite a number of funds prevalent in the global equities space. Among them, ETFs with low risk exposure, including the PowerShares S&P International Developed Low Volatility Portfolio ETF (NYSEARCA: IDLV ), deserve a mention. Overall, the FlexShares Morningstar Developed Markets ex-US Factor Tilt Index ETF (NYSEARCA: TLTD ) and the PowerShares FTSE RAFI Developed Markets ex-U.S. Portfolio ETF (NYSEARCA: PXF ) can be considered as potential competitors. iShares MSCI International Developed Factor ETF (NYSEARCA: IVLU ) in Focus This ETF looks to focus on value in the broad developed economic stock market, tracking the MSCI World ex-USA Enhanced Value Index for its exposure. The fund holds 265 stocks in its basket and charges investors 30 basis points a year in fees. IVLU will focus on large- and mid-cap stocks and reweight firms based on several valuation metrics. These include price-to-book value, price-to-forward earnings and enterprise value-to-cash flow from operations. Though the developed economies have hemmed the investing theme so far in 2015, the path is not free of odds. Occasional threats including the nagging “Grexit” worries, the possibility of the Fed rate hike sometime later in 2015 and the consequent strength in the greenback, plus overvaluation concerns which keep bothering these markets. Thus, a keen attention on the value factor is warranted for edgy investors, and IVLU could do justice to them. In terms of exposure, the basket results in a big chunk of assets going to Financials (26.64%), followed by Industrials (12.52%) and Consumer Discretionary (12.08%). Healthcare (11%) and Consumer Staples (10.47%) take the next two spots. The fund is heavy on Japan (39.04%) followed by the U.K. (15.69%) and France (12.75%). Its holdings are a bit concentrated as compared to ISZE, as Sanofi (NYSE: SNY ) (4.46%), Toyota Motor (NYSE: TM ) (2.97%) and Teva Pharma (NYSE: TEVA ) (2.80%) combine to take up roughly 10.23% of the assets. Competition: The list of competitors is moderately crowded, as there are dozens of funds that focus on value for their exposure. The Schwab Fundamental International Large Company Index ETF (NYSEARCA: FNDF ), the FlexShares International Quality Dividend Dynamic Index ETF (NYSEARCA: IQDY ) and the ValueShares International Quantitative Value ETF (BATS: IVAL ) are some of the ETFs which could pose as threats to this newbie. Original Post

If Greece Defaults, Buy These 4 ETFs To Profit

Unless you haven’t been paying attention at all over the last few months, you should be well-aware of the tumultuous situation taking place in Greece right now. Thanks to a huge debt load and few good choices, Greece appears to be perilously close to an outright default, and with payments due at the end of the month, it appears as though Greece may be out of options. If a default happens, it looks to be catastrophic for the Greek markets, at least in the near term. While it might help to promote long-term growth (eventually), the short-term pain could be quite severe and especially if we use the Global X FTSE Greece 20 ETF (NYSEARCA: GREK ) as a proxy. This fund was down over 15% in Monday trading on extremely heavy volume while it has been having a horrendous 2015 as well. In fact, since the start of the year, the Greek ETF has lost over one-fourth of its value while the S&P 500 has remained more or less flat in the same time frame. What’s an Investor to Do? Worries over a Greek default are not limited to Athens by any means though. A number of European banks stand to lose a great deal in a default scenario while a variety of other European markets could be impacted by Greece leaving the euro. And with Europe being a major market for U.S. corporations, it shouldn’t be surprising to note that many American stocks are being hit by this turmoil too. Save for a few rate sensitive beneficiaries, pretty much every U.S. stock has been rocked by European concerns in the past couple of days. However, there are a few places where you can stash your cash in the ETF world in this difficult time. Below, we highlight four exchange-traded funds that look to offer up stability – or even profit – as the Greek situation continues to unfold: SPDR Gold Trust (NYSEARCA: GLD ) In difficult market environments, gold is considered a great store of value. And when you aren’t sure what your currency is going to be at the end of the year, gold becomes even more important and especially so given the long list of bank closures and currency concerns hitting the Greek market right now. These worries could impact other European markets too, increasing gold demand across the continent. We have already started to see this trend take place as GLD is pretty much flat over the last five sessions though GREK has lost 16%, the S&P 500 has declined 2.4%, and Vanguard FTSE Europe ETF (NYSEARCA: VGK ) (broad Europe) has fallen over 5%. For these reasons, a look to the most popular gold ETF of GLD could be an interesting way to hedge exposure in the near term. And if you are looking for a slightly longer-term investment, iShares Gold Trust ETF (NYSEARCA: IAU ) is also a viable option as it charges a bit less in fees though it doesn’t have as tight of a bid ask spread (due to having a lower per share price). iShares 20+ Year Treasury Bond ETF (NYSEARCA: TLT ) Concerns over a rate hike have plagued bond ETF investments as of late, but the Greek situation could be just the kick to get things moving back in the right direction. After all, given the uncertainty in Europe, the demand for safe American bonds will increase, helping to push yields lower in the process. We have already seen part of this take place with TLT as lower rates help to boost the prices in this fund, as it added about 2% in Monday trading. And if Greece slides closer to default, look for the gains to continue here as more investors pile into American debt. It should be noted that there are a variety of bond ETFs trading in the market right now, but TLT and other long-dated securities look to be the biggest winners. That is because they are the most sensitive to changes in rates so a big drop stands to make these securities benefit more than most in the fixed income world. iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA: VXX ) The VIX is often known as the ‘fear index’ as it can surge when investors are skittish about the market’s current direction. Obviously, this is the case right now, and we have been seeing prices for the ETN tracking this benchmark, VXX, surge as a result. VXX was up double digits in Monday trading, and I’d expect this trend to continue as the Greek situation becomes increasingly dire. Just remember that this is a terrible long-term investment due to the futures curve, so be careful when trading volatility. VXX has lost over 35% of its value so far in 2015, and most of this is due to a difficult futures curve which makes long-term investing very hard. With that being said, an outright default in Greece will likely make this ETN a big winner and a very liquid choice for traders seeking to make a bet on fear levels in the market. Volume levels here average over 38 million shares a day, and if anything I think you could argue we were long overdue for a bout of volatility in markets. ProShares UltraShort FTSE Europe ETF (NYSEARCA: EPV ) If you are looking to outright bet against Europe, then an inverse ETF could be the way to go in your portfolio. A fund that offers to pay the opposite of the return of a European benchmark seems built to profit in this uncertain time, and that is exactly what investors have with EPV. This ETF tracks the -2x return of the FTSE Developed Europe Index, which is a broad-based benchmark offering up exposure to a number of European companies across the continent. The euro currency accounts for about half of the exposure in the ETF, while financials make up the biggest single allocation at 22% of the total. The fund is up about 5% today, and it could continue to rise if the Greek impact ripples across the continent. Just remember, this is a daily resetting ETF, so it isn’t really intended for long-term investors (though the -200% daily factor should have been a clue to that as well). Original Post