Related ETFs: UNG & FCG
With hedge funds performing miserably this year compared to the indexes, you’ve got to say that sometimes it helps to be a little stupid. Those investors who didn’t read the Q’s, ignored the warnings of slowing Chinese growth and EU double-dip recession and just blithely kept long dividend staples in Vanguard index funds have done spectacularly well. Such a year would make Jack Bogle proud, never have we seen such a complete vindication of his hold, hold, and hold strategy as 2013. I am a big fan of Mr. Bogle and try to keep a major portion of my portfolio under wraps and unmoving – but I’m also a trader and my career has been about improving performance based on tactical allocation and better understanding the commodity cycles – with a look to improve on mere indexes.
By David Gillie
In a One-Man Market, nothing matters except Fed Chairman Bernanke. As soon as he’s on camera, traders faint like teenage girls at an Elvis concert. Economic data - irrelevant. Fundamentals - irrelevant. Technical analysis - irrelevant. Government embroiled in scandals - irrelevant. Do we get our $85 Billion a month? Yes or No! That's all that matters. As usual, traders make the "wrong" move first - and then correct. In this case, the "safe bet" is always to the upside. Naturally, Gold, Oil and the S&P make the most violent moves. Then through the rest of the testimony, the algos pluck words and respond in a matter of nanoseconds. As it turns out, the whole "tapering" story was just a plant to test the market's reaction. There was never an intent of cutting back the gravy train. If there are ANY changes, it's likely to be an INCREASE of QE as the Bank of Japan continues an unprecedented currency destruction of the Yen. Today's testimony and the previous testimony have been a hurricane of confusion. Out of one side of his mouth, Bernanke states that they may continue QE as the economy shows signs of softening. On the other side, he states the Fed will be discussing cutting back on purchases at the next few meetings. There. Trade THAT!
Markets and $5.2bn inflows push US ETP assets to $1.519 trillion
Data in this report is as of Fri, May 17th
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Market and Net Cash Flows ReviewEquity markets were mostly higher during last week with the exception of EM markets which ended slightly lower. The US (S&P 500) edged higher by 2.07%; while, outside the US, the MSCI EAFE (in USD) rose by 0.44% and the MSCI EM (USD) dropped by 0.36%. Moving on to other asset classes, the 10Y US Treasury Yield rose by 5bps last week; In the meantime the DB Liquid Commodity Index was down by 0.34%. Similarly, the Agriculture sector (DB Diversified Agriculture Index), Gold and Silver prices retreated by 1.60%, 6.12% and 6.81%, respectively, while the WTI Crude Oil end flat for the week. Last but not least, Volatility (VIX) dropped by 1.11% during the same period.
The total US ETP flows from all products registered $5.24bn (+0.30% of AUM) of inflows during last week vs. $13.79bn (+0.90%) of inflows the previous week, setting the YTD weekly flows average at +$4.2bn (+$84.46bn YTD in total cash flows).
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Precious metals remained under pressure last week as a narrowing US deficit helped the US dollar appreciate and sent most precious metals (in dollar terms) lower. Many investors in gold and silver ETPs continued to rotate into equities despite mixed cyclical signals. Meanwhile the Reserve Bank of India added a further obstacle to gold-hungry Indian consumers by restricting the ability of banks to import gold on consignment (meaning that they will only be able to import gold to fulfil a specific customer order from now on). The only bright spot in precious metals came from palladium which continued to rally on growing supply deficit expectations. As market participants from around the globe gathered in London for Platinum and Palladium Week, there is a growing consensus that the palladium deficit in 2013 will be meaningful.
The Fed carefully planted the WSJ "tapering" story in the Friday news dump last week to allow the weekend to smooth it over with investors. Monday's Retail Sales number was good enough to hold the market despite a day with no POMO. To counter, on Tuesday, uber bull hedge fund manager David Tepper was put on CNBC to move the premarket off its decline. This was met with $3.3 Billion of POMO in the morning session. Combined this was enough crack for the bulls to create a panic buy. Oddly, the VIX also rose during the frenzy. Wednesday morning the market noted poor manufacturing data; Empire Manufacturing Index missing at -1.4 from expectation of 3.5; Industrial Production was also a miss at -0.5 from expectation of -0.2 (previous 0.3);; MBA Mortgage index was a big miss at -7.3% from the prior 7.0%. On the flip side, the Housing Market Index rose. France has joined Southern Europe in recession with negative GDP while German GDP was flat. Commodities across the board are deflating. Sounds like all bad news? Nope. The bulls enthusiastically are buying every dip no matter how small. Of all the politicians on earth, Bernanke is the ONE that has never let his flock down.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.