The first chart compares the CBOE Put Write Index (PUT) and the S&P 500 index for about as far back as BigCharts can go with PUT.
Well it looks like it has generally done what it is supposed to. That looks like a pretty good bear market result .
Um, so why isn't this some sort of fund yet?
The second chart compared the iPath
Carbon ETN (GRN) in blue, the S&P 500 in red and Climate Exchange PLC (CXCHF) which I own personally.I wrote about GRN for TheStreet.com a few weeks ago and my conclusion was that it is a way in to a new market that seems compelling, should march to its own beat but will be very volatile.
So far that seems to have been the case (volatile and doing its own thing) but I am surprised it is down so much in such a short time. In addition to not having much correlation to the S&P 500 it almost looks like it has a negative correlation to the exchange where carbon credits are traded. Maybe when the index moves down people think volume is increasing which, if true, would be good for the exchange.
The volume for the fund has been very low. In addition to being surprised buy the initial decline I am surprised there has not been more interest, volume-wise. This space is obviously new and while I think there is something here one way or another I don't have a strong opinion of what that is just yet.
Its been a while since I mentioned the DB G-10 Currency Harvest Fund (DBV) which I own in a couple of places. The fund is currently long the Norwegian krone (NOK), the Aussie (AUD) and the NZ Dollar (NZD). It is short the yen (JPY), swissi (CHF) and the greenback.
Since the SPX peaked in October, DBV is down about 6% compared to 19% for the stock market. YTD it is down 2% versus a little over 13% for SPX. The way the stock market cycle and economic cycle have each ended the carry trade was kind of a proxy for the health (or lack thereof) of market speculation. Yen rallies have derailed stocks more than once in the last couple of years.
I would say that DBV has really just been in a holding pattern throughout all of this which is actually has made it a pretty good place to hide out until the next bull starts.
It is said that the stock market is a leading indicator for the economy (meaning stocks roll over before a recession starts and turn up before the recovery starts). I will be curious to see if DBV turns up before the economy as well or before the stock market does. Some people think of the bond market as being smarter than the stock market, so is the carry trade smarter than stocks too?
9 comments:
I didn't expect DBV to have any relationship to the market whatsoever or maybe it's poor execution by the managers. In any case, I expected more and liquidated my position for cash sometime back. I've since added one of the new emerging market currency etfs that has fewer moving parts and (I believe) a more compelling case for outperformance. Thanks for keeping DBV on your radar.
I noticed GRN tracks close to USO. I purchased the first 100 shares traded. I should get the kind of special certificate.
http://finance.yahoo.com/echarts?s=USO#chart1:symbol=uso;range=1m;compare=grn;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined
Roger,
I have noticed that in the Emerging Market space, Value is leading Growth this year (DEM vs. VWO / PIE).
Do you think this could imply that EM is decoupling from the developed world in the sence that it is experience a normal slowdown where Value typically outperforms?
Thanks,
CA
Since PIE is not a static (for the most part) product I'm not sure the comparison makes sense in the context of trying to answer the question.
In looking at DEM and VWO I tried to find an obvious reason other than what you mentioned (as I usually try to do with reader questions) and I'm not sure what the reason is. I see DEM is heaviest in Taiwan which is down more than DEM.
DEM has less exposure to financials than VWO but not a lot less.
In the US growth is beating value, look at IVE versus IVW.
Maybe DEM is simply a better mousetrap?
More interesting to me is small cap growth is the top performing style. Small cap value is also beginning to show strength.
Historically small cap growth is the top performing sector in ecomomic troughs and small cap value lead the first phase of economic recover. The question is, has the economy bottomed?
as far as the economy bottoming?
my hunch no.
there are aspects of this cycle that seem to be unwinding (or winding) at a different rate than in past cycles.
the timing of certain relationships has changed on this go around.
roger - do you apply significantly different strategies to the taxable accounts you manage vs tax sheltered accounts? If so, maybe you could dedicate an upcoming post to some of these differences? You don't often touch on how taxes drive some of your decisions.
probably not enough for a post.
different strategies versus qualified? not really.
if a client has an ira and a taxable account i try to lean to making the taxable account as efficient as possible but performance dispersion is more of a priority.
last year we did have a couple of tax sales but I took every account out of those
I see that DBV is a position in the Rydex Alternative Strategies fund, which I own.
Holdings as of 08/01/2008
Stock Symbol % of Fund
MANAGED FUTURES STRA... RYMTX 47.37
POWERSHARED DB G DBV 16.15
COMMODITIES STRATEGY... RYMEX 13.36
ABSOLUTE RETURN STRA... RYMQX 11.89
REAL ESTATE A-SHARES RYREX 10.04
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