Portfolio construction for retail investors is oftened made out to be far more difficult and technical than it really needs to be.
I don't claim to be an expert on the subject by the stretch of anyones imagination - but I have got some thoughts around using ETF's that might be interesting for active South African retail investors trying to level out some of the volatility in their portfolio.
ETF's in my portfolio are (in my opinion) great for one reason - variety....
- Access to asset classes that are not normally open to retail investors (e.g. bonds)
- Access to markets that are not normally available to retail investors (Japan, US, World indices)
These are the ETF's that I've tried to blend into my portfolio:
DBXJP - Deutsche Bank Japan X-tracker
DBXWD - Deutsche Bank MSCI World Index
DBXUS - Deutsche Bank MSCI US Index
ZGOVI - Investec's government bond ETF
On top of that I'll add in the RMB / Bips Inflation-X product when it lists later this month.
My strategy at the moment is to mix in about 20% of these into my portfolio just to try and balance out the stock-picking and asset diversification.
It is a pretty cheap and easy way to balance out this risk - Anyone else using these tools for the same reason?
Thursday, April 30, 2009
BIPS INFLATION-X
This is a product I've been waiting for since I first got wind of it at the end of 2008 and I reckon it could be a really nice addition to any retail investors portfolio.
The product gets officially announced on Monday but basically Rand Merchant Bank and their "Bips" team have created an ETF product comprising four government-issued Inflation-Linked Bonds. Basically your real return on the proudct is inflation + 2.5%.
The reason this product is really interesting is that if you buy into the theory that the bailouts have created "un-natural" liquidity in the system, we're about to have a huge second bout of inflation hit the global economy.
When that comes in, many of your other investments will fail to grow or keep pace with inflation and this is one of the few "guaranteed" (I hate that word) ways in which you can continue to generate a positive return.
To me it is a "must-have" in your portfolio going forward and I'm definately going to be adding a few. The IPO for the product is next week and it will be listed on the 15th of May.
Just a thought - use it don't use it.
The product gets officially announced on Monday but basically Rand Merchant Bank and their "Bips" team have created an ETF product comprising four government-issued Inflation-Linked Bonds. Basically your real return on the proudct is inflation + 2.5%.
The reason this product is really interesting is that if you buy into the theory that the bailouts have created "un-natural" liquidity in the system, we're about to have a huge second bout of inflation hit the global economy.
When that comes in, many of your other investments will fail to grow or keep pace with inflation and this is one of the few "guaranteed" (I hate that word) ways in which you can continue to generate a positive return.
To me it is a "must-have" in your portfolio going forward and I'm definately going to be adding a few. The IPO for the product is next week and it will be listed on the 15th of May.
Just a thought - use it don't use it.
And so it goes...
How is this bloody rally! That's the only way I could start this post I'm afraid.
I'm not complaining - I went long last Thursday and so far I'm smiling all the way to the bank but geez it goes against everything I would believe fundamentally.
Somebody raised a good point yesterday which I think we should stick in the back of our heads - the US earnings in particular haven't been as bad as people were expecting largely because these businesses have been hacking costs at every turn primarily around staff..
Now you go into the next reporting season with a far higher unemployment figure. Having said THAT you then need to step back and ask yourself whether or not the current rally in the stock-markets has a lot to do with excess liquidity coming in from the bailout packages - has the idea of printing money to get us out of a recession actually worked... If it has then inflation is right around the corner....
... need to think about this a bit.
I'm not complaining - I went long last Thursday and so far I'm smiling all the way to the bank but geez it goes against everything I would believe fundamentally.
Somebody raised a good point yesterday which I think we should stick in the back of our heads - the US earnings in particular haven't been as bad as people were expecting largely because these businesses have been hacking costs at every turn primarily around staff..
Now you go into the next reporting season with a far higher unemployment figure. Having said THAT you then need to step back and ask yourself whether or not the current rally in the stock-markets has a lot to do with excess liquidity coming in from the bailout packages - has the idea of printing money to get us out of a recession actually worked... If it has then inflation is right around the corner....
... need to think about this a bit.
Thursday, April 23, 2009
Catchup
Hhhhhmmm these South African public holidays have really played havoc with any day-trading activities so I've had to spend my time on the "investment" side of my portfolio.
Added a few more PSG and ZGOVI's to my portfolio and I've also added Country Bird Holdings to my watchlist.
PSG
Was pretty happy with the results out of PSG and I'm quite liking the way that their companies are actively seeking acquisitions while others are heading for the hills. Check how nicely Capitec has done in recent weeks since their results came out.
Below R16, I've been adding a few more PSG to the portfolio.
I'm also watching PSG for some action around their Paladin subsidiary which has been steadily adding to its holding in Top Fix Holdings. (Not totally sure what the strategy is here, because I'd have thought there were better quality assets - but I guess we trust Jannie Mouton's judgement on all of this)
ZGOVI
I'll blog separately on my Exchange Traded Fund (ETF) strategy for my portfolio but I've continued to add these ZGOVI's to my portfolio for a bit of diversity into another asset class.
These things have held up quite nicely and coupled with their distribution, they've been worthwhile to hold through all this turmoil.
Pick 'n Pay / Pikwik
How good were those results out of Pick 'n Pay! I have a couple of Pikwik in my portfolio and those results mean I'll probably add a few more to my portfolio. Some success in Australia with the Franklins operation at last and good cash flows. Nice defensive option in the portfolio and with decent cash flows come decent dividends.
Altech / Altron
Altech released their financial results yesterday and they also looked good. As far as IT companies go, my pick would be Altech. However while I like the Altech story, I've actually been adding the Altron shares (wider power and infrastructure story as well as access to ALT) as well as the Altron prefs to my portfolio for some dividend yield.
Strategy
In terms of strategy, I'm still short equity and long gold (underlying and AngloGold).
I see China has just announced that they've bought a stack of Gold which has driven the price back above the 900 dollar mark.
Equities are still looking a little shaky in general and it would appear that Chrysler is going into bankruptcy protection in next few days. Stress tests out of the banks also due out today... gonna be interesting.
Added a few more PSG and ZGOVI's to my portfolio and I've also added Country Bird Holdings to my watchlist.
PSG
Was pretty happy with the results out of PSG and I'm quite liking the way that their companies are actively seeking acquisitions while others are heading for the hills. Check how nicely Capitec has done in recent weeks since their results came out.
Below R16, I've been adding a few more PSG to the portfolio.
I'm also watching PSG for some action around their Paladin subsidiary which has been steadily adding to its holding in Top Fix Holdings. (Not totally sure what the strategy is here, because I'd have thought there were better quality assets - but I guess we trust Jannie Mouton's judgement on all of this)
ZGOVI
I'll blog separately on my Exchange Traded Fund (ETF) strategy for my portfolio but I've continued to add these ZGOVI's to my portfolio for a bit of diversity into another asset class.
These things have held up quite nicely and coupled with their distribution, they've been worthwhile to hold through all this turmoil.
Pick 'n Pay / Pikwik
How good were those results out of Pick 'n Pay! I have a couple of Pikwik in my portfolio and those results mean I'll probably add a few more to my portfolio. Some success in Australia with the Franklins operation at last and good cash flows. Nice defensive option in the portfolio and with decent cash flows come decent dividends.
Altech / Altron
Altech released their financial results yesterday and they also looked good. As far as IT companies go, my pick would be Altech. However while I like the Altech story, I've actually been adding the Altron shares (wider power and infrastructure story as well as access to ALT) as well as the Altron prefs to my portfolio for some dividend yield.
Strategy
In terms of strategy, I'm still short equity and long gold (underlying and AngloGold).
I see China has just announced that they've bought a stack of Gold which has driven the price back above the 900 dollar mark.
Equities are still looking a little shaky in general and it would appear that Chrysler is going into bankruptcy protection in next few days. Stress tests out of the banks also due out today... gonna be interesting.
Tuesday, April 14, 2009
Interesting directors dealings
Two interesting directors dealings jumped out at me yesterday.
1. Grindrod - Ivan Clark sold R31m of ordinary shares in the shipping firm / diversified industrial company yesterday at R12.50... I know he had some big SSF positions open and some of those options had been exercised but I'm guessing that means he doesn't see much upside from these levels.
2. Country Bird Holdings - The chicken farmer / agri firm has seen two of its directors very active in the market in the market in the last few months since releasing its interim results in February.
The company is on a pretty undemanding price to earnings ratio of 5.2 and a pretty handy dividend and it also kind of fits in with the farming and food theme. Haven't taken a position either which way on it yet, but it would appear to be something to consider.
1. Grindrod - Ivan Clark sold R31m of ordinary shares in the shipping firm / diversified industrial company yesterday at R12.50... I know he had some big SSF positions open and some of those options had been exercised but I'm guessing that means he doesn't see much upside from these levels.
2. Country Bird Holdings - The chicken farmer / agri firm has seen two of its directors very active in the market in the market in the last few months since releasing its interim results in February.
The company is on a pretty undemanding price to earnings ratio of 5.2 and a pretty handy dividend and it also kind of fits in with the farming and food theme. Haven't taken a position either which way on it yet, but it would appear to be something to consider.
Goldmans
It was helluva interesting to watch the market response on Monday and Tuesday after Goldmans Sachs came out and announced it would be reporting a first quarter profit of US$1.8bn.
The market took initial heart from the announcement and then the overwhelming bad news and "reality" set in. Retail figures in the US were poor and that weighed on markets from the moment they came out.
Locally we had a pretty widespread rally with resource heavyweight Anglo American up over 5% and Old Mutual up 8%.... and the retail figures were my chance to take a couple of short-dated (10 day) puts on the local and international markets.
Dunno - think there is simply too much bad news for much more upside in the short term. Headlines from Bloomberg this morning:
The market took initial heart from the announcement and then the overwhelming bad news and "reality" set in. Retail figures in the US were poor and that weighed on markets from the moment they came out.
Locally we had a pretty widespread rally with resource heavyweight Anglo American up over 5% and Old Mutual up 8%.... and the retail figures were my chance to take a couple of short-dated (10 day) puts on the local and international markets.
Dunno - think there is simply too much bad news for much more upside in the short term. Headlines from Bloomberg this morning:
- Cathay Pacific Said to Ask Workers to Take Unpaid Leave to Help Cut Costs
- Fiji Devalues Currency by 20% After Military Takes Power, Judiciary Sacked
- Australia's Banks Face `Headwinds' as Economy Slows, CLSA's Johnson Says
- North Korea Expels Nuclear Inspectors Following UN Condemnation of Launch
- Bangkok Enters Fourth Day of Emergency Rule as Police Seek Protest Leaders
- Intel Profit Declines 55% on Falling Chip Demand
Wednesday, April 8, 2009
Fascinating
It's been a fascinating couple of weeks in the market. Biggish rally which seems to have sucked in a lot of people seeking some relief from the constant selling pressure and suddenly the downside has "re-emerged".
Somebody made a good point though - last week was the end of the first quarter reporting period for unit trusts so while I'm sure they will deny it there must have been some "padding" going on.
Didn't really do much with the rally but rather elected to sit on the sidelines. The only thing I bought was a few more shares in Zeder to satisfy my farming fetish. Their results came out recently and weren't too shabby and I see I'm basically getting a 5% dividend yield from them (at R1.35) so I can't complain too much.
The unlisted investments are valued at R1.92 which looks like you get them at a pretty deep discount if you follow the rights issue at R1.35.
Anyway - watching the US market yesterday and rest of global markets today, the sell-off trend seems to be back. It looks like we've got two things to watch now which are likely to weigh on the markets going forward:
Credit card debt: In the US credit-card debt rose to 8.82 percent in February, the most in the 20 years that Moody’s Investors Service Inc. has kept records. Moody’s cited higher unemployment and forecast so-called charge-offs will exceed 10 percent by the end of the year.
As credit cards tighten remember the pressure this is going to have on retailers who depend on credit based sales... This is a very real problem and its coming to your doorstep...
CDS defaults rate on the up: Credit Default Swap default rates are on the up again which adds fuel to my thought that the rally may have suckered in a few more people.
Remember that this rate went up sharply when the "smart money" decided to start taking some collateral just before the October crash.... If this is on the up again then tread warily...
Autos
The auto companies are an interesting one... I think that while people accept that Chrysler and GM are effectively about to go into "prepared" bankruptcy I think the actual "shock" to the system will send shudders through the US markets.
Looking at the data, experts are predicting that GM will go down in the next 2 - 3 weeks...
Wouldn't be particularly long in this market I'm afraid.
Somebody made a good point though - last week was the end of the first quarter reporting period for unit trusts so while I'm sure they will deny it there must have been some "padding" going on.
Didn't really do much with the rally but rather elected to sit on the sidelines. The only thing I bought was a few more shares in Zeder to satisfy my farming fetish. Their results came out recently and weren't too shabby and I see I'm basically getting a 5% dividend yield from them (at R1.35) so I can't complain too much.
The unlisted investments are valued at R1.92 which looks like you get them at a pretty deep discount if you follow the rights issue at R1.35.
Anyway - watching the US market yesterday and rest of global markets today, the sell-off trend seems to be back. It looks like we've got two things to watch now which are likely to weigh on the markets going forward:
Credit card debt: In the US credit-card debt rose to 8.82 percent in February, the most in the 20 years that Moody’s Investors Service Inc. has kept records. Moody’s cited higher unemployment and forecast so-called charge-offs will exceed 10 percent by the end of the year.
As credit cards tighten remember the pressure this is going to have on retailers who depend on credit based sales... This is a very real problem and its coming to your doorstep...
CDS defaults rate on the up: Credit Default Swap default rates are on the up again which adds fuel to my thought that the rally may have suckered in a few more people.
Remember that this rate went up sharply when the "smart money" decided to start taking some collateral just before the October crash.... If this is on the up again then tread warily...
Autos
The auto companies are an interesting one... I think that while people accept that Chrysler and GM are effectively about to go into "prepared" bankruptcy I think the actual "shock" to the system will send shudders through the US markets.
Looking at the data, experts are predicting that GM will go down in the next 2 - 3 weeks...
Wouldn't be particularly long in this market I'm afraid.
Friday, April 3, 2009
Hahaha
Good for a bit of a laugh:
Doctors' Opinion of Financial Bail Out Package
The Allergists voted to scratch it, and the Dermatologists advised not to make any rash moves.
The Gastroenterologists had sort of a gut feeling about it, but the Neurologists thought the
Administration had a lot of nerve, and the Obstetricians felt they were all laboring under a misconception.
The Ophthalmologists considered the idea shortsighted.
The Pathologists yelled, 'Over my dead body!' while the Pediatricians said, 'Oh, Grow up!'
The Psychiatrists thought the whole idea was madness, the Radiologists could see right through it,
and the Surgeons decided to wash their hands of the whole thing.
The Internists thought it was a bitter pill to swallow, and the Plastic Surgeons said,
'This puts a whole new face on the matter.'
The Podiatrists thought it was a step forward, but the Urologists felt the scheme wouldn't hold water.
The Anesthesiologists thought the whole idea was a gas, and the Cardiologists didn't have the heart to say no.
In the end, the Proctologists left the decision up to some assholes in Washington .
Doctors' Opinion of Financial Bail Out Package
The Allergists voted to scratch it, and the Dermatologists advised not to make any rash moves.
The Gastroenterologists had sort of a gut feeling about it, but the Neurologists thought the
Administration had a lot of nerve, and the Obstetricians felt they were all laboring under a misconception.
The Ophthalmologists considered the idea shortsighted.
The Pathologists yelled, 'Over my dead body!' while the Pediatricians said, 'Oh, Grow up!'
The Psychiatrists thought the whole idea was madness, the Radiologists could see right through it,
and the Surgeons decided to wash their hands of the whole thing.
The Internists thought it was a bitter pill to swallow, and the Plastic Surgeons said,
'This puts a whole new face on the matter.'
The Podiatrists thought it was a step forward, but the Urologists felt the scheme wouldn't hold water.
The Anesthesiologists thought the whole idea was a gas, and the Cardiologists didn't have the heart to say no.
In the end, the Proctologists left the decision up to some assholes in Washington .
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