Still looking grim

I am not one of those perma-bears in the Marc Faber mould, but I have been short for the last few weeks (often at some cost to myself).... I'm sure I keep forgetting the mantra - THE TREND IS YOUR FRIEND!!!!!!!

In fact I am actually a believer that the worst is behind us, but the structural problems and the volatility still need to be dealt with and markets have simply run too far too fast.

Anyway, finally into a decent short position on the JSE Top 40 (J200) which looks like it still has some legs.

Reasons that I reckon you can stay short:
- Two bombs in Pakistan this weekend are likely to keep the whole area alert for more tension
- More US troop losses in Afghanistan - the US is caught between a rock and a hard place between Iraq, Iran and having to commit resources to Afghanistan which is becoming a real problem
- On the ALSI on Friday there was a decent downward move and with resources still under the whip, there could be more downside to come - ask yourself why stocks should move up now?

Faber
Speaking of Faber he was interviewed by Bloomberg recently and this is what he had to say:

“You cannot postpone the hour of truth forever,” adding “The next stage is for total breakdown of the financial system and for an economic and financial crisis that will bankrupt governments.”

Strategy wise he continued to beat the drum of buying Asian stocks and gold while selling down the US Dollar and the Pound - I can agree on the pound, I'm less sure on the dollar although I think in time it will be replaced as the global fiat currency.

Playing into this strategy I am still a buyer of the DBXJP and DBXWD exchange traded funds (ETF) and considering using the spreads account to short the pound... the question is what do you short it against? The Euro...? Not so sure.

The Privateer
There is an excellent piece in the latest copy of The Privateer talking about protectionism, trade tariffs, Obama and the Chinese.

Summing it up are these two paragraphs - sound familiar?:

Any student of the depression of the 1930s will be familiar with the “beggar thy neighbour” policies which did as much if not more than any other piece of economic insanity in turning a stock market crash into a decade-long global depression. The infamous “Smoot-Hawley” tariff act was signed into law by President Hoover on June 17, 1930. It did notbring US tariffs into being, what it did was to lift tariffs on 20,000 imported items to record levels to “protect” American business.

Eight months before the act was signed in October 1929, US and world stock markets had crashed. Six weeks before the act was signed, US stock markets had reached what proved to be the top of their post-crash rally. Within weeks of the passage of the Smoot-Hawley act, trade barriers in the form of tariffs and quotas went up across the world.

Any ideas?

Does anybody know of any offshore Exchange Traded Funds (ETFs) that you can buy through an online broker and pay for on your credit card?

As a South African our locally-listed ETF options are relatively limited. It would be nice to access other markets like Brazil and China.

At the moment locally I have the following ETF's in my portfolio:

The Deutsche Bank X-Trackers - DBX Japan (DBXJP), DBX World MSCI Index (DBXWD) and DBX MSCI US (DBXUS) as well as the New Gold ETF (GLD) and the local government bond offering from investec ZSHARES GOVI (ZGOVI).

Obviously it would be nice to expand the universe a bit and be able to find ETF's that give exposure to other regions as well.

Zecco.com
Has anyone locally had a look at this Zecco.com offering?

It looks quite interesting in terms of a low-cost investment and trading platform. Would be nice to be able to use a credit card to transfer funds into an account though.

Thoughts on which online brokers allow you to transfer funds via your credit card?

ETF's and portfolio construction

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?

Where to?

Its a pretty sickly looking equity market at the moment. It doesn't seem to matter where you look, the bad news just keeps on coming.

The BRIC (Brazil, Russia, China and India) seem to chug along but this isn't really helping the ordinary South African investors who are just trying to work out how to PROTECT some of their money.

A couple of people have asked me what I was planning to do next from an investment perspective and I stuck to the theme about diversification for my portfolio building.

Next on my shopping list is my first exposure to the Deutsche Bank X-Tracker ETF's.

Basically the ETF's are there to try and give me a bit of protected brain dead 'basket' exposure to the major markets. Would have loved exposure to the BRIC economies via ETF's but no such luck so I guess I have to go with what I've got.

It is nice to also have some offshore exposure and enjoy the quarterly distributions that these ETF's provide (Even if the yield is relatively low).

My buying order for these instruments is likely to be
DBXJP (Japan)
DBXUS (US)
DBXWD (World)
DBXUK (UK)

I think the systematic adding of these to the portfolio will provide some nice spread to the portfolio and at least let me look at some offshore assets without dipping into my offshore allowance.

Something a little different
I don't have any plans to buy any (no funds available) but Sterling Waterford will be issuing the second of their Carbon Credit Notes. These worked quite well the last time providing investors with a return of 150%+. Second time around in a tougher economy I think will be slightly trickier, but still believe they are something different while still providing a nice investment.

I guess thats just something to stick in the back of your head...