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Accessing Alternative Investments through ETFS

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Accessing Alternative Investments through ETFS Powered By Docstoc
					ACCESSING ALTERNATIVE
INVESTMENTS THROUGH
ETFS



                     Presented by
                 Matthew McCall
  President, Penn Financial Group
   www.PennFinancialGroup.com
Alternative Investment Themes
   Inflation
   Commodities
   Currencies
   Infrastructure
   Green Energy/Water
   Alternative Investments
Inflation
   The investment community is torn between inflation and deflation. I feel
    inflation is a near certainty in the coming years.

   Fed late to the game – will keep rates low for too long
       "The duration of the extended period prior to policy firming might last for quite
        some time and could even increase if the economic outlook worsened
        appreciably or if trend inflation appeared to be declining further," the minutes
        said.

   Factors Leading to Inflation:
       The DC Printing Press - US government is flooding market with dollars
       History On the Side of Inflation - Countries that have printed money to pay for
        programs/problems (in this case bailouts) have encountered inflation
       In the Numbers – Look at the action of gold (all-time high in late 2009), TIPS (1-
        year high in 2009), and Food
           Excluding the cost of shelter, consumer prices were up 3.4% from a year earlier in
            February
Inflation ETFs
   SPDR Gold ETF (GLD)
       $1000 - $1500 range in 2010; buy GLD near $105 for a move towards
        $150/share

   iShares TIPS BOND ETF (TIP)
       Will outperform normal US bonds; inflation hedge
       Dividend Yield 5.0%

   Claymore/Beacon Global Timber ETF (CUT)
       Basket of 30 international stocks in the land, timber, and paper industries
       Will benefit from inflation

   SPDR International Govt Inflation-Protected Bond ETF (WIP)
       Countries with highest allocation: UK and France
       UK inflation rose to 3.5% in January, fastest annual pace in 14 months
       France hit 1.3% in February, 1-year high
Inflation (GOLD)
Inflation (GOLD)
Three possible outcomes for Gold:

   If the economy weakens and the government continues to
    print money and spend
       = GOOD FOR GOLD

   If the economy improves at an above average pace it will
    lead to inflation
       = GOOD FOR GOLD

   If the economy recovers at a sluggish pace
       = BAD FOR GOLD
Commodities
   Three factors that could cause commodities to rise
       Weak US Dollar
       Increased Demand, Stagnant Supply
       Inflation

   Specific Sectors
           Base Metals
               Copper, Aluminum, Steel, etc.
           Energy
               Oil, Nat Gas, Coal
           Agriculture
               Wheat, Corn, Rice, etc.
           Precious Metals
               Gold, Silver, Platinum
           Miscellaneous
               Cotton, Coffee, Cocoa, etc.
Commodities (Base Metals)

   PowerShares Base Metals ETF (DBB)
       Composed of 3 metals: Copper, Aluminum, Zinc
       Benefits from Inflation, economic rebound, and
        weak US Dollar play
       China Play


   Market Vectors Steel ETF (SLX)
       At 18-month high on pricing announcement last
        week out of China
       Top Holdings: VALE, RTP, MT
Commodities (Energy)

   United States Oil ETF (USO)
       Tracks the price of oil futures
   First Trust Natural Gas ETF (FCG)
       Composed of 31 NatGas stocks, top holdings Pioneer
        (PXD) and Apache (APC)
       Up 67% in last 12 months vs. UNG -49%
   United States Gasoline ETF (UGA)
       Tracks the price of gasoline futures
   Market Vectors Coal ETF (KOL)
       Only 29% of stocks from the US
       Top Holdings: ANR, BTU, CNX
Commodities (Agriculture)

   Market Vectors Agribusiness ETF (MOO)
       Composed of a basket of agricultural chemical stocks
       Top Holdings: POT, MOS, MON, SYT

   iPath Grains ETF (JJG)
       Composed of: Soybeans, Corn, Wheat
       The “weather factor” in its favor. Not enough rain, too
        much rain, etc = Helps JJG

   COMING SOON: Teucrium Corn ETF (CORN)
Currencies

   An asset class often overlooked by investors

   Can be used as a hedge in a bear market
       In 2008 Rydex CurrencyShares Japanese Yen ETF
        (FXY) was up 22%; Swiss Franc ETF (FXF) up 6%;
        Euro ETF (FXE) only down 4%

   Long-Term Trend for the US Dollar remains
    bearish
       Recent rally in the US Dollar Index can be attributed
        to the weakness in the Euro
Currencies (US Dollar Index)
Currencies (?????)
Currencies

   WisdomTree Emerging Currency ETF (CEW)
       11 emerging market currencies – equally weighted
       Includes: Brazil, China, India, Chile, Poland, etc.
       Will benefit from a weak US Dollar, but also from much
        higher money market yields in the emerging countries
        (some as high as 7%) vs. low rates in the US

   PowerShares DB US Dollar Bearish ETF (UDN)
       Offers results that are the inverse of the US Dollar Index

   Rydex CurrencyShares Canadian Dollar ETF (FXC)
       Tracks the action of the Loonie versus the US Dollar
Infrastructure

   Worldwide stimulus packages (US, China)
   Global Infrastructure spending estimated to
    reach $35 Trillion over the next 20 years
   Needs versus Wants
       India expects to spend $1 trillion over the next five
        years (double their current spending)
   Treasury Secretary Geithner said last week
    he is prepared to spend more of the 2009
    stimulus on infrastructure
Infrastructure
   PowerShares Emerging Markets Infrastructure ETF (PXR)
       Top Countries: China, Brazil, South Africa (sports)

   iShares S&P Global Infrastructure ETF (IGF)
       40% Utilities, 40% Industrials, 20% Energy
       US makes up 23% of the portfolio

   Emerging Global Shares China Infrastructure ETF (CHXX)
       Real Estate Mgmt & Development 23%, Mining 15%, Construction 15%
       Largest Holding is China Railway; 1.1% Expense Ratio

   Emerging Global Shares Brazil Infrastructure ETF (BRXX)
       Diverse: 14% Mining, 14% Telecom, 12% Utilities
       Largest Holding is VALE; 1.1% Expense Ratio
Green Energy/Water

   2008 and 2009 were difficult years for the
    alternative energy stocks; water stocks were
    able to recoup a small portion of their losses
    in 2009; 2010 has not begun well for the
    sector
   Both sectors are “real trends” and not fads,
    however they are long-term investment
    themes that require patience
Green Energy/Water

   PowerShares Global Water ETF (PIO)
       Invests in stocks that generate at least 50% of their revenue from
        water-related activities
       Exposure to developed and emerging countries around the globe

   Claymore Global Solar Energy ETF (TAN)
       Basket of stocks in the solar energy sector
       ETF and sector has lagged for the last 2 years

   PowerShares Global Progressive Transportation ETF
    (PTRP)
       Companies engaged in developing cleaner, less costly, and
        efficient means of transportation
       Top Holdings: BYD Corp, Clean Energy Fuels (CLNE)
Alternative Investments

   Investments that can hedge a portfolio in
    uncertain times

   Move independently of the equities market

   High-Yielding investments

   Flying Under the Radar
Alternative Investments

   Fiduciary/Claymore MLP Fund (FMO)
       Invests in Master Limited Partnerships (MLPs) with the majority in the oil & gas pipeline
        sector
       Dividend Yield = 7.0%

   iShares S&P US Preferred Stock ETF (PFF)
       Invests in a preferred stocks with a heavy exposure to the financial sector (85%)
       Dividend Yield = 5.9%

   PowerShares Private Equity ETF (PSP)
       Invests in publicly listed private equity firms
       2/3 of the stocks are located outside the US
       LUK, BX, AINV are in top 10 holdings

   ProShares Short 20+ Year Treasury ETF (TBF)
       Returns the inverse of the long bond

   Leveraged & Short ETFs
       Proceed with CAUTION!!
30-Year Bond Yield
ACCESSING ALTERNATIVE
INVESTMENTS THROUGH
ETFS



                     Presented by
                 Matthew McCall
  President, Penn Financial Group
   www.PennFinancialGroup.com

				
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