Humor attempts.
There were comments left noting that India and advances in medicine as big themes. Those are of course valid, while we are at it what about Russia, Turkey or maybe uranium? The ones left by readers or these other ones might all end up being better places to be than the ones I mentioned.
I would not put too much into the three I mentioned. To me they are the biggies but the point of the post was for you to think about what really big themes you believe in for your portfolio, if you even think in those terms. I do.
I can promise you that one of the long-term themes you believe in will test your conviction at some point. Taking a 30,000 foot view every now and then is a good idea.
A reader asked me to expand on what I meant by water as a theme. Last December PowerShares came out with an ETF that focuses on companies in the water business, I wrote about the fund for TheStreet.com when it came out and have mentioned in numerous times on the blog. There are some potentially gloomy demographic issues with water, globally speaking. Growth in consumption is growing at about twice the rate of the population. There is a lot of evidence that says there will be a shortage of drinking water. This is something I buy into, I have owned the ETF personally and for clients since the second or third day after it started trading.
A reader asked me to compare the Gateway Fund (GATEX) to the BXD which is a buywrite index for the Dow 30. I'm not sure why this person is interested in the narrower Dow 30 but be that as it may. According to PortfolioScience.com GATEX and BXD have a correlation of 0.869.
The reader said he had a hard time charting the two, I also found a distortion on BigCharts, Yahoo had no chart and StockCharts did not know one of the symbols.
I was able to find this chart on Morningstar, the fund is red and the S&P 500 is in green. It kind of looks like the chart of the Merger Fund from over the weekend.The fund is one of several OEFs that sells options for extra income. The fund owns a lot of mega cap stocks and for a call writing fund I would expect a higher yield. According to Morningstar it yields 2.15% which surprises me. As an OEF there is no leverage so it won't yield anywhere close to a CEF but 2.15%? The SPX yields 1.7%, I don't think it is crazy the fund could generate more yield but maybe the 0.95% expense ratio is too big of a bogey?
Either way, in the context of things that will not fully keep up with the market, but come close over long periods of time, with very little volatility, it looks like it belongs in the discussion; its standard deviation is only 5.11, about half of the S&P 500.
Lastly a reader, who said he can't own OEFs (must live in another country?) asked if there are any long/short CEFs. I am aware of one, the Old Mutual Claymore Long Short Fund (OLA). I wrote a negative piece about it for RealMoney in July but haven't looked at it since.
12 comments:
As a point of clarification, I assume when you listed China as a theme yesterday you also were including Hong Kong.At present, their markets and transparency are not alike.
actually no, I don't have a lot of interest in Hong Kong
How would you go about playing uranium, or advances in medicine, as big themes?
John in Albuquerque
John in Albuquerque,
I may be missing something in your question. There are hundreds of stocks dozens of OEFs, plenty of CEFs and ETFs in health care and plenty of uranium stock ranging from big companies with lots of reserves to small companies with no proven reserves yet.
An obvious investment theme would be the return of interstate warfare with the bonus of nuclear weapons and or other weapons of mass destruction having a much higher likelihood of use. The current interlude (if you can call it that) is not likely to last given our historical track record (actually going back to pre-historical findings), and the lack of any evidence that humankind has changed its overall propensity of solutions through violence.
How would you invest in this theme? Satellite technology, submarine manufacturing might be possibilities - or one of the many firms involved in corporate warfare of the real type:
See Corporate Warriors: The Rise of the Privatized Military Industry (Cornell Studies in Security Affairs)
by P. W. Singer (Author)
http://www.amazon.com/Corporate-Warriors-Privatized-Military-Security/dp/0801489156/ref=pd_sim_dbs_b_4/002-2050358-2787240?ie=UTF8
These types of events are hard to predict, but it should be noted that India often makes the list of potential hot spots likely to go nuclear.
A note on GATEX:
The fund also purchases far out-of-the-money put options on it's index for downside protection. This is probably where some of the yield goes.
that makes sense, the puts.
roger, we're all a bunch of dreamers, today i'm thinking about how important my golf game is, tomorrow it may be all about a disaster and a multi year project rebuilding my home. any hoot, baby boomers are the center of the world who will be making the big ripples in the thematic pond, a lot of bidding to take care of recreation, village communities, health, and money. speaking of which, annuities are back in a big way. somesay worth a look despite bad rep. what's your opinion? frankly, i was surprised to see another nusbaum...related?...blogging them..very different styles you guys. congrats on the cnbc pick up
CNBC pickup? What do you mean?
I am not a fan of annuities in general. However I know some people that have them and for those the huge expense is worth the peace of mind.
Hard to argue with that.
cnbc rant that got picked up by the journal...correct?...may have added to some mo'..sure hope so becuase nbc needs to improve and help my ge stock
OK, I'm with you, thank you.
Yes, annuities are back in a big way - driven by equity indexed annuity sales, an almost uniformly bad product understood by neither those that buy them or those that sell them. Variable annuities (with various living riders) offer peace of mind for those that can't be troubled with trying to understand how they really work and what the benefits actually offer. The tragedy of both of these products is that people don't realize how badly they've been screwed until they've held them for 7 or 8 years and wonder why they haven't made any money.
Anyway, on the big picture theme, if China, India & oil sands are still big stories 10 years from now, today's commodity prices (DJP, GSP, etc) will probably look cheap.
Another big demographic trend is the aging and stagnating growth of all the developed economies populations. This creates obvious opportunity for things like financial services and pharma, but who knows what kind of unforseeable dislocation will come from the threat of having to dismantle entitlements (particularly in european countries) that are no longer economically sustainable. I don't know if we reach the tipping point in the next 10 years, but big decisions with big impacts will have to be made sometime...
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