Friday, June 28, 2013

With Ride of the Valkyries blaring from loudspeakers, Bill Dudley flew the Fed’s helicopter to its lower Manhattan fortress with the message that investors don’t get it, easy money is here for a long time so get on your surfboards, it’s risk on!  As you paddle out to pick your wave, ETF Globalsm is here with analytics and selections which have been keeping you on the sweetest rides for the last year.  We covered the countries in Quant’s top 100 ranked funds yesterday and will look at the sectors today.

8 energy funds appear on the list with three (OIH, XOP, XLE) in the top 10 giving the sector the highest average Quant Score of 69.9.  Their average Red Diamond Risk Rating comes in barely below 4 but those three are all above that level.  Technology gets 6 funds on the list with IYW and VGT both in the top 10.  The sector scores slightly lower on average Quant Score but with a higher average Green Diamond Reward Rating and a 3.5 average Risk Rating.  Industrials get the next highest average Quant Score within the top 100 at 68.7 and an even lower average Risk Rating of 3.35.  The sector’s highest ranked fund is PSCI in 12th place.  When we did this exercise last month, basic materials was Quant’s favorite sector driven by the gold mining funds, proving even an algorithm as good as ours is going to take some occasional incoming fire.  4 of them are among the sector’s 8 funds on today’s list led by GDX in 16th place.  The average Quant Score of the 8 is 67.3 with a high average Risk Rating of 6.48. 

Health care has been a strong sector this year but has not been among Quant’s favorites even though 6 ETFs make today’s top 100. Three of them are biotech funds, 22nd place PBE, 25th place IBB, and FBT tied at 99th.  Only 2 financial funds appear today, XLF in 26th place and IYF in 83rd.  The consumer sectors have also done well without catching Quant’s affection but 1 of each appear on our list, Vanguard’s Consumer Staples Sector Fund (VDC) tied at 99th place and the cyclical EGShares Emerging Markets Consumer Fund (ECON) in 33rd place.  There is one utilities fund, UGEM in 61st place, but no telecomm funds in today’s top 100.

Today is the last day of our first year and our monthly performance updates will show it to be a propitious one.  ETF Globalsm has brought you quantitative models that have heretofore been the exclusive province of billion dollar hedge funds and we thank you for placing your trust with us.  Please send any questions to and have a nice weekend.

Thursday, June 27, 2013

Calm waters surround Wall Street this morning as equities take solace in a slower economy than previously thought.  In the age of financial repression, bad news is good, even if Bernanke’s rotor blades stir things up sometimes.  Sailing the seas brings plenty of opportunities where bad news is already discounted.  22 foreign funds appear in Quant’s top 100 today, close to last month’s high for the year but still below levels we saw last fall.

Setting our compass to the Far East we see emerging markets rising among the top ranked foreign funds.  Two China funds, GXC and FXI, are in the top 25 at 7th and 17th place and India’s INXX holds 9th place while the SPDR S&P Emerging Asia Pacific Fund (GMF) has climbed up to 22nd place from 140th on June 17th.  Other emerging markets funds appear including ECON, UGEM, EEM, VWO, and ADRE in order of rank ranging from 40th to 88th place.  Malaysia and Egypt see EWM and EGPT at 35th and 85th place and China also gets PGJ and HAO in the bottom half of the top 100.  Australia’s 83rd place EWA isn't emerging but is classified as Asia-Pacific and the iShares MSCI All Country Asia ex Japan Index Fund (AAXJ) in 55th place shows Quant likes Asia but not Japan.

Maybe you are like Chip Starnes and long for the West in which case the three European funds in the group may be appealing.  They are led by Switzerland’s EWL in 24th place, followed by Italy’s EWI in 67th and Germany’s EWG at 80th place today.  Riding the easterlies further west, we see the Market Vectors Latin America Small-Cap Index Fund (LATM) scoring as well as it ever has in 53rd place after already sustaining a year to date bear market.  Looking at those calm waters this morning we thought we saw a black swan but it turned out to be a Canadian goose.  They like it calm and Quant likes Canada with EWC in 4th place, CNDA in 17th and EWCS in 46th.  There are also a handful of global sector funds which we will cover another day.

The forecast calls for stormy weather so set your bearing and batten down the hatches for the quarter’s end.  We hope those funds provide some ideas for your portfolios aside from the models’ continued US stance.  Thanks for reading; we’ll close out the week, quarter and our first year tomorrow.

Wednesday, June 26, 2013

Thousands of people are feared dead from the worst Indian monsoon season in decades and more rain is in the forecast.  The benchmark Bombay Sensex Index has held up better than most emerging markets this year, down about 4%, but if you bought it with US dollars it has been much worse as the Indian Rupee has been washed out with the rain.  Quant doesn’t analyze weather or currencies but the EGShares India Infrastructure Fund (INXX) has risen with the flood levels up to today’s 4th place.  It ranked as low as 213th place on June 7th before the rains.

Calling bottoms is tricky and INXX is at the lowest point of its almost three year life as other India funds struggle to hold above their 2012 lows.  Its 57.4 technical score is evenly balanced across the three timeframes but is nothing to get excited about.  Sentiment is better at 68.6 as bears watch the water rise and the Rupee fall.  Global Theme and Quality scores are below 50 which contribute to a higher than average 6.37 Red Diamond Risk Rating so keep a close on eye on this one if you put it in your portfolios.  The reason Quant has highlighted INXX is its 97.2 Fundamental Score with high 90s across all four fundamental categories.  That accounts for half of the Green Diamond Reward Rating which comes in at 9.77, today’s second highest. India’s government knows they need to do more to develop their infrastructure and announced plans yesterday to ease caps on foreign direct investment.

That should help to support the Rupee as companies rush in to help rebuild that infrastructure so their planes, trains and autorickshaws can reach more of the country’s 1.2 billion people.  India’s travel and telecommunications infrastructure was famously inadequate even before the monsoon washed so much of it away and the 30 companies in INXX should benefit from the rebuilding efforts. Our thoughts and prayers go out to the suffering people in India but Quant is a cold, heartless algorithm lacking any such sentiment.  INXX is one of several higher risk names reaching the upper ranks which may suggest a bullish reversal, or it could be these names have just gotten too washed out.  If you think emerging markets are due for a bounce, take a look at INXX but don’t forget to also keep an eye on the Rupee.

Tuesday, June 25, 2013

A month ago, the talk was all about our low tail risk environment where earnings either improve or Fed liquidity would make up the difference.  Then we began last week by breaking through a month long down-trending resistance line and it looked like the 3.5% correction was about as much as we would see.  We also heard talk then about Boston in 6 and it looked like Tuuka Rask would make it happen in 7 as late as 2 minutes to go last night.  But like a puck contacting Jonathan Toews’ hockey stick, Mr. Market has a way of upsetting the conventional wisdom.  Now equities are back below that resistance line as well as a rising support line from November.  Bruins fans are stunned to watch the Blackhawks hoist the silver in their Garden and we are all looking at the risks we are taking in our portfolios.

ETF Global’ssm predictive scores and ratings have a proven ability to identify the best performing equity ETFs but our reflective Risk Ratings apply to all exchange traded products.  Appearing under the Analytics button, the ETFG Red Diamond Risk Ratingssm  page breaks out every product’s full rating into six sub categories.  Volatility and Deviation are both compilations of various industry standard metrics with emphasis on downside deviation.  Country Risk is an example of our Diamond models borrowing from Quant but separating risk from reward.  Structure also borrows from Quant and adds further proprietary data points.  A large diverse fund gets a lower Structure Risk score than a small one that owns futures; swaps are scored even higher and with risk, lower is better.  Liquidity also borrows from Quant addressing trading volume and spreads, and Efficiency looks at tracking error and expense ratios.

We break them out because managers want to emphasize certain risks at certain periods.  Some will want to stitch up their faces like Andrew Shaw and get back on the ice to ride any rebound as far as it can go.  They can sort to see those products with the highest Volatility Risk by double-clicking the header.  Whatever kinds of risk you are managing, the ETFG Red Diamond Risk Ratingssm give you the information and analytics you need to decide how to play the puck.  Thanks for reading and congratulations to the Chicago Blackhawks for getting some more of their names on Lord Stanley’s Cup.

Monday, June 24, 2013

A new week to open a new season and close out the quarter, we would like to see some change but Quant’s top ranked funds look the same.  Foreign markets also look the same with red across our screens as everything is being sold.  BRICS, MIST, VISTA and BROOMS are all getting swept aside and if you have to hold an equity allocation, the US has been the best place to hide.  Quant’s top ranked funds led on the way up this year and have withstood the selling better than most.  Not only do those funds look the same as last week but they also look similar to the end of the last quarter.  That was before the last leg up and some of those gains have still held.  The relative outperformance could be in a bullish or bearish environment as the current configuration has worked in each.

That configuration sees large caps tracking the S&P 500 (IVV and IVW) and Russell 1000 (IWF) alongside small caps in the Russell 2000 (IWO), three of the four are the growth versions of those benchmarks.  The NASDAQ is represented by our friend PWO holding all 10 Green Diamonds again.  The other 5 members of today’s top 10 include the Canadian broad market EWC, and Vanguard’s VGT and VDE bookending the group with technology and energy at 1st and 10th place.  Those sectors are also represented with IYW and OIH holding 3rd and 4th place. 

Entering that group of 10 into a Portfolio Tearsheet shows an average Green Diamond Reward Rating of 8.79 and a low average Red Diamond Risk Rating of 3.69 compared to today’s all equity ETF average of 4.52.  Lower Risk Ratings are preferable, especially in times like these.  Not surprisingly, the sector pie charts show more than 34% in technology and 25% in energy with consumer discretionary and healthcare the next highest weights at about 8% each compared to their 12% weights in the broad market.  You can enter up to 12 tickers, at any weights, in the Portfolio Tearsheet function to see how your portfolios look from a bird’s eye view.  It is another way that ETF Globalsm is providing the most powerful tools to manage ETF portfolios in today’s challenging environment.  Your questions have improved our offerings so please keep them coming to Thanks for reading and good luck this week.

Friday, June 21, 2013

Traders thought it was the last two days, but today is the year’s longest, happy summer solstice.  Recent volatility forces us to shine some sunlight on our portfolios to see what has held up best.   ETFs are accounting for a larger percentage of market volume and ETF Globalsm has identified the best ones through a few shifts over the past 12 months.  It was Europe last summer and emerging markets in the fall before our predictive models focused on US broad market funds since last December.  Those have been among the best on the way up as well as the correction over the last month and managers using our selections are outperforming their peers.  Our sector selections have been mostly limited to energy and technology and while the former have lagged somewhat, the technology names have mostly outperformed.  No other ETF has dominated our Green Diamond Reward model like the PowerShares Dynamic OTC Portfolio Fund (PWO) which is today’s 10 Green Diamond fund again.

With half of AUM in technology, this smart beta fund makes quarterly selections from the NASDAQ  and our June 12th post takes you through the various times we have highlighted it.  It got its first 10 Green Diamond rating on January 4th and has almost doubled the S&P 500’s return since then.  You would be hard pressed to find a time from any of its 51 days atop the Diamond model when it has not outperformed the market.  On many of those days, it dominated the model so much that there were no 9 Green Diamond funds, forcing us to shine some sunlight to make sure we were calculating correctly.  It dominates to a similar extent today as there are only a few 9s which you can see by sorting the ETFG Scanner output by Reward.  A typical distribution would see about a dozen 9s. 

If you have yet to consider a smart beta product, PWO is worth a look.  Check out the ETFG Tear Sheet for it or any exchange traded product and as you shine some sunlight on your equity ETFs, see how they score in Quant and our Green Diamond Reward models.  You won’t be disappointed with their proven selection processes. Please send questions you have on anything you see at ETFGsm to, we are here to help.   Have a nice weekend, we have all earned it this week.

Thursday, June 20, 2013

No brakes in Bernanke’s racecar, the only question is how hard to press the accelerator and the markets demand pedal to the metal.  The mere mention of easing up for the turns was like throwing marbles on the racecourse and like we suggested yesterday, a glance at our home screen provides an interesting view of the worldwide reactions.

Interesting to us anyway, because our finely honed machines handled the adverse conditions splendidly.  The Geographic Indices show Latin America and Middle East & Africa both down more than 3% while Europe and Asia-Pacific each lost more than 2%.  In that context, the US broad market funds that have been dominating the ranks look like winners losing less than 1.5%.  Under the Sector tab, all 10 were down on the day but the Energy and Info Tech Indices kept their losses to less than 1% and readers know those have been leading the recent sector recommendations of our Quant and Green Diamond Reward models.  The yellow flag must be out because those same funds mostly continue in their positions.

International funds provided accurate price discovery for their markets that had yet to open as overnight trading has largely confirmed yesterday’s moves in the US based ETFs.  Today brings another lap of racing and we will be watching the iShares MSCI Canada and Italy Index Funds (EWC and EWI), the only foreign names in today’s top 10 at 2nd and 9th place.  Quant doesn’t make short term calls but both have decent Fundamental Scores and elevated sentiment readings for that extra kick of octane.  Both of our Dynamic indices contain 4 foreign funds which mostly outperformed their peers helping their indices outperform the S&P 500 in yesterday’s smashup.

The ETFGsm models do not predict market direction, you need other race engineers for that and there are plenty out there.  However, our daily rankings of over 700 equity ETFs have a proven ability to identify the best performers over the intermediate term.  Consider us your pit crew making sure the vehicles you choose are the best on the track.  We may trim an occasional wing too far but ETF Globalsm will shave seconds off your time.

Wednesday, June 19, 2013

To taper or not to taper, it may not be a question, it may be a fact of diminishing supply.  The varied international financial markets will react to Ben Bernanke’s transparency later today and no other place can provide an assessment as granular and concise as ETF Global’s home page.   That is where you will find our family of indices that segment those markets by assets classes, regions, sectors and more.  It begins with our benchmark ETFG Global 500 Index (ETFG500), the first in the world to cross asset classes and regions.  It reflects the 500 largest exchange traded products (excluding leveraged and inverse) and is relevant to managers of ETF portfolios that similarly cross various segmentations and had yet to have an appropriate benchmark.  You can follow this real time assessment of the international financial markets to Fed policy or anything else under the ticker ETFG500.

Under that, we have sliced the ETF market into its various asset classes, reflecting daily reactions and year to date performance of each, all in one quick glance.  The tabs reveal similar segmentations by region and sector which are also updated nightly.  Maybe you like to look for value ideas among the red or hot performers among the green, clicking on any index will show its constituents and clicking on any of them will bring up their tear sheet with ratings, scores and much more.  The Quant Scores drive our two smart beta Dynamic indices which are published real time intraday.  The ETFG Quant Equity 10 (ETFGQE10) represents the top 10 funds selected on the third Friday of each month and the ETFG Quant Equity 12 (ETFGQE12) is the top 12 that meet certain liquidity requirements common to institutional managers.  Both have outperformed the S&P500 and MSCI All Country World Index since inception last July.

We have others under development including a rules based market neutral index approaching double digit returns as it approaches its 1st birthday.  If you are interested in more than a reference point to all the different markets around the world, we provide benchmarking data on the ETFG Global 500 free of charge and others on a contractual basis.  We will also construct indices according to your specifications; contact us at or 212-223-ETFG to discuss.  Watch Bernanke later today for transparency into Fed policy and keep your eyes on ETF Globalsm for transparency into how the world’s myriad financial markets react.  Thanks for reading and keep your chin straps buckled.

Tuesday, June 18, 2013

Fewer Europeans are driving their cars but Middle Eastern tyrants are looking back to the USSR.  The latter appears to be carrying the weight of the oil market and Quant has a feeling the energy sector will keep you satisfied.  Three of today’s top 10 are familiar energy funds that have been scoring and performing well for much of the year.  The 4th place SPDR S&P Oil & Gas Exploration & Production Fund (XOP) has had a volatile 2013 but mostly kept pace with the broad market as has the Vanguard Energy Sector Fund (VDE), tied at 4th place today.  The 8th place iShares Dow Jones U.S. Oil & Gas Exploration & Production Index Fund (IEO) has been more helter skelter but is up almost 18% this year.

All three score better on the Behavioral side with decent short, intermediate and long term technical scores around 70 and even better sentiment scores.  Put call ratios and short interest are elevated and the downtrends over the last four weeks have sustained their implied volatility scores, although with room to rise from their current levels around 70.  The broader VDE has the better Fundamental Score of 69.6 while IEO and XOP score 66.2 and 61.1 as their constituents are fracking here, there and everywhere with consequences to their income statements.  You can’t buy love but all that oil and gas should fix the holes in their balance sheets with all three getting Green Diamond Reward Ratings just above 8.6 while the broader VDE surprisingly has a higher Red Diamond Risk Rating of 5.15.  The ETFGsm Risk Ratings are reflective of a product’s price volatility and structure and IEO and XOP score lower at 4.63 and 4.28.  With risk, lower is better.

Whether you take your magical mystery tour down the long and winding road or in a yellow submarine, you need fossil fuels and probably still will when you’re 64.  Even if you are Mother Nature’s son, you can sing Good Day Sunshine as America’s abundant natural gas is reducing carbon emissions. When it looks as though Middle Eastern troubles are here to stay Quant says these energy funds can make you a rich man.  Thank you for helping us spread the ETF Globalsm message; we get by with a little help from our friends and we wish a happy 71st birthday to Sir Paul McCartney.

Monday, June 17, 2013

Crossing onto this side of the Galactic Alignment last December 21st, ETF Globalsm announced a commitment to transparency in quantifying and reporting on the performance of our ratings.  Closing out the second half of the year in which we launched, our models had directed our users to the opportunities in Europe and emerging markets that few others had recommended.   When we said our recommendations could lead you to outperform the S&P 500 by a wide margin we did not know the shift  the market was about to take.  But by the time Santa was steering his sleigh clear of the fiscal cliff, Quant recognized the forthcoming shift. Our December 31st post was clear in recommending the US market that lifted off on this year’s first trading day and has led the world in 2013.  The model has been weighted towards US broad market funds all year with ETFs exposed to the S&P 500 and various Russell market cap segments dominating the ranks.

Outperforming that benchmark by a wide margin has become impossible when that is what we are recommending but despite spending almost half our existence in that posture, out top ranked funds continue to outperform.  We group them by Quant’s top 10, 25, 50 and 100 ranked equity ETFs each day, average their performance over the coming 1, 2 and 3 months, and compare to how the S&P 500 did in those same rolling periods.   The ETFGsm average has beaten the benchmark a majority of the time, albeit at a narrowing margin.  You can see each month’s performance update on the publicly available part of our website under the ETFG Quantsm button.

Today we see iShares funds tracking the large cap Russell 1000 Value index (IWD) and small cap Russell 2000 Growth index (IWO) in the top 10 maintaining that US broad market exposure but also some technology and energy sector funds.  Not many foreign funds are catching Quant’s attention but the Market Vectors Egypt Index Fund (EGPT) sees it first trip to the top 25 at 24th place today on a strong 85.1 Fundamental Score.  The correction in Japan has boosted the iShares MSCI Japan Index Fund (EWJ) up to 13th place driven by a solid 78.4 Behavioral Score.  We welcome the separation from the benchmark these products will provide  for our coming performance reports and in this new era of investing, we thank you for being part of ETF Globalsm.

Friday, June 14, 2013

The news is filled these days with high government officials violating the trust we have placed in them.  Wall St. has experienced similar circumstances and advisors know how difficult it was to maintain the trust of their clients when their corporate leaders were exposed as naked emperors.  ETF Globalsm has over 100 years of combined financial services experience within our management so we know what advisors and mangers need and reliable recommendations are high on that list.  They can rely on our Quant and Green Diamond Reward models because we fully disclose performance on a monthly basis.  We will cover the latter today which has been posted with prior months under the Analytics button.

One fund gets the 10 Green Diamond Rating each day and we typically see roughly 15 9s, 3 or 4 times as many 8s and the bulk of the population clustered in the 5-7 range.  Grouping them by their whole numbers, we break out the average performance of the 7s and higher on rolling 1, 2 and 3 month bases (using a constant 21 day month).  The Market Vectors Gold Miners Fund (GDX) was the daily 10 Diamond fund on several days earlier this year and its spring swoon is why the average return on the 10s is lower than the 9s.  Regular readers also know our numbers looked much better earlier this year before our models turned their focus towards US broad market funds like those tracking the S&P 500 to which we are comparing.  It is not easy to outperform the S&P 500 when that is what you are recommending but we beat the benchmark more than 60% of the time and the stance has paid off as the rest of the world has been left behind this year.  We are recently seeing some separation from the US broad market with technology and energy sector funds scoring better.  Today’s 10 Green Diamond fund is the smart beta First Trust Mid Cap Growth AlphaDEX Fund (FNY) which has mostly kept pace with the market since its only other 10 diamond day on April 2nd.

We will put our performance up against anyone else’s but nobody else discloses their performance.  The ETFGsm quantitative models have proven adept at consistently identifying the best areas of the international equity markets for the intermediate term, even if we get an occasional disappointment like GDX (which is scoring better again.)  We tell it to you straight with no taking the fifth, it is how we strive to earn your trust for which we are grateful.  We will cover Quant next week, thanks for reading and happy Father’s Day.

Thursday, June 13, 2013

Red skies in the morning, sailors take warning.  Things are looking red this morning as investors worldwide are remembering risk, central banks notwithstanding.  One risk of ETF investing is that a fund closes and experiences wide swings in its final days.  The ETFGsm Liquidation Watch List is meant to keep you out of those funds with the most risk of closing.  It can be found under the Analytics button and is covered in a monthly column we write at

June’s list contains 71 products that have existed for at least two years, hold less than $5 million in assets and have negative performance for the trailing twelve months.  71 is a high number as is the 40 funds that have already closed in 2013.  Many of the listed funds are niche products and almost half of them are ETNs.  When an ETN closes, deviations from NAV are not much of a concern because holders will receive their fair value based on the index the product tracks. But that is where problems can arise. Many products track indices that exist solely for those products and as offerings have become more niche and complex, so have the indices, which can complicate an unwinding.  Sponsors have become more creative in structuring indices to deal with liquidity constraints in the markets they track so a final liquidation value may not resemble the spot market price.

Only five funds on this month’s Liquidation Watch List are equity ETFs: three Chinese sector funds, one broad market Columbia fund and an all world ex-U.S. materials sector fund. Their average Green Diamond Reward Rating is a low 5.73.  The other 20 equity products are leveraged, inverse or ETNs. Seventeen of them are ProShares short funds, some of which have barely $1 million under management. If you would be reluctant to allocate to a manager with that amount in a strategy, maybe you should also be reluctant to purchase a public vehicle that small.

Inclusion on the ETFGsm Liquidation Watch List does not guarantee closure and exclusion does not guarantee longevity but as risk has come back into focus lately, liquidation risk is worth considering.  If you own niche products that appear on the list, check the ETFGsm Scanner for stronger products with similar exposure.  Thanks for reading and try to stay dry today.

Wednesday, June 12, 2013

Every day, one equity ETF gets the 10 Green Diamond Reward Rating as the fund with the single best prospects for the next few months.  For the last few months it has mostly been the PowerShares Dynamic OTC Portfolio Fund (PWO).  We have written about it extensively this year as its ratings and performance have commanded attention.  It got its first 10 Green Diamond Reward Rating on January 4th and is up 17.88% compared to the S&P 500’s 10.88% rise since then.

We wrote about it then and again on April 5th explaining how its smart beta selection process changes the portfolio every quarter,  May’s reconstitution has maintained the top three sectors in info tech, consumer discretionary and health care with the first two at lower weights than the NASDAQ 100.  The biggest difference from that benchmark is the absence of Apple from PWO’s constituents which tend to be lower market caps although large cap Cisco Systems occupies more than 3% of AUM.

On April 12th we compared its technical scores to SPY’s which has also led the ranks this year, and on May 3rd we wrote about PWO’s low liquidity advising to use limit orders.  Its constituents are plenty liquid which ultimately determines an ETF’s liquidity so don’t be scared off by its low trading volume.  Then on May 15th we reviewed these posts and added commentary on the fund’s Red Diamond Risk Rating, lower than average at 3.75 today.  You can review any of those posts but there is one topic we have not covered yet.

PWO has been the 10 Green Diamond fund every day except one since May 3rd, an unprecedented streak since our inception last July.  For many of those days it has dominated the model so much that there have been no 9 Green Diamond funds, a typical distribution would see about 15.  That means that no other fund came close in the algorithm’s calculations.   IYW gets a 9.27 Reward Rating today but it is the only 9.

We have said we like to write about PWO since it has performed so well and we also like to write about smart beta because it is at the heart of ETF Globalsm.  However, the nature of quantitative analysis is that our personal fondness has nothing to do with the scores and ratings which are free of any human emotion.   Today’s volatile world markets make that an even more powerful and important selection method.

Tuesday, June 11, 2013

29 year old Edward Snowden says the US government has a program that enabled him to secretly wiretap anyone he wanted, even the President of the United States.  Such government power may not surprise you but did you know that Mr. Snowden isn’t even a government employee?  The high school dropout with such awesome power is an employee of Booz Allen Hamilton, an information technology company giving new meaning to its sector.  If you are wondering how yesterday’s 2.5% drop in the company’s stock price may have impacted your ETFs, enter its symbol, BAH, in the upper right search box.

The answer is probably not too much.  Underneath the data box and interactive price chart you will see the equity’s ETP Grey Market Summary showing that 0.57% of BAH’s market capitalization is exposed to exchange traded products.  We say exposed because some of the 42 listed products track indices of which it is a member without actually holding the equity.  They include leveraged and inverse funds that use futures and swaps to achieve their stated exposure.  Investors who believe those derivatives ultimately get hedged with the underlying like to look at our implied exposure among those products calculated to the position amount based on its index weight, fund size and leverage factor.

BAH is somewhat unique in that its $2.44 billion market cap straddles different segmentations.  Small, mid and large cap funds all appear on the list of 42 at the bottom of the report, albeit with mostly low weights.  Larger exposures can be found among the constituents of the S&P 500 and we have compiled a concise list just for that that group.  Found under the Research button, the S&P Grey Market Report lists all 500 companies in one place, sortable by any column.  Clicking on a symbol brings up that company’s individual Grey Market Report which is available for any equity.

You can express your view of Mr. Snowden as a hero or traitor at the ballot box but in the meantime you can use the power of Big Data to identify those equity ETFs that are most likely to outperform the rest.  The ETF Globalsm Quant and Green Diamond Reward models have consistently done just that and unlike other ratings providers, we don’t keep their performance secret.  We will highlight each monthly performance report when they are published in coming days, thanks for checking in today.

Monday, June 10, 2013

Two hot areas in 2013 that have not caught much of Quant’s affection have been Japan and financials.  The former has proven beneficial but financials have continued to outperform the S&P 500.  The Big Daddy financial ETF, the SPDR Financial Select Sector Fund (XLF), has begun to score better in June and is at 8th place to start this week.  Some of its outperformance stems from its 8.55% weighting in Berkshire Hathaway and its insurance positions but having almost 30% in the big four US banks hasn’t hurt performance either.

There has been some recent press about the quality of bank earnings and while we have seen XLF’s P/E score rise as the ratio has come down, its other fundamental sub scores have not risen as much.  Its overall Fundamental Score of 65.4 is good enough to get it in the top 10 today because its Behavioral Score is a very solid 81.1.  All three technical sub categories show strength over the short, intermediate and long term at close to 80 for each and the three sentiment sub categories are similarly strong led by a 99.8 short interest score.  Its substantial size, liquidity and sponsor combine for an 80.3 Quality Score but the financial sector is not Quant’s favorite, leading to a middling 49.1 Global Theme Score. Those latter two categories do not get factored into its 8.11 Green Diamond Reward Rating because some of their components are part of the ETFGsm risk model.  Even considering 2008, XLF gets a low 2.16 Red Diamond Risk Rating, which is more a reflection of its gradual and steady recovery over the last four years.

XLF’s 83 constituents are not all banks and insurance companies as brokers, REITs and consumer finance make up another 30% of AUM with other colorful slices of its pie charts too.  We’ll let the analysts and columnists debate earnings quality and when the Fed will turn the tables on these companies but nobody thinks Bernanke is going to send the industries he oversees into cold turkey withdrawal spasms.  It may be too easy, but like the late Marty Zweig used to say, “Don’t fight the Fed”.  Quant is finally dipping its cup into the punchbowl suggesting XLF will continue to outperform over coming months.  Thanks for checking in with ETF Globalsm this morning and good luck this week.

Friday, June 7, 2013

They say today’s job report has to be just right, too hot and the Fed will take the needle out of the market’s arm and too cold will expose monetary policy as pushing on a string, call it the inverse Tepper trade.  Quant suggests Goldilocks is going to find that perfect job as 8 of today’s top 10 are US funds with Switzerland’s EWL and the gold miners in GDX rounding out the group.  It could be a flight to quality ahead of a storm but we see a growth bias in today’s top selections with technology, energy, mid caps and small caps appearing atop the Quant page.  Most are familiar to this space but we have not written about the 7th place Powershares Fundamental Pure Mid Growth Portfolio (PXMG).

The fund tracks a fundamentally weighted Research Affiliates index and its substantial annual turnover suggests some smart beta component of the index strategy.  So far in 2013 it has outperformed the S&P 500 during rallies but given much back in the few minor selloffs seen in February, April and the last few weeks.  The full breakout of its low 3.86 Red Diamond Risk Rating shows a nice spread between a 5.34 volatility score and a 3.79 deviation score so if you think the market is ready to rally again this could be a good way to ride it.  That choppy performance hasn’t helped its low Behavioral Score at 52.5 but it scores very well on the other side with a 97.8 Fundamental Score.  The colorful pie charts on its Tear Sheet resemble Elvis’ morning medications with every sector but utilities represented and three pages of industry exposures within its 107 constituents.

Today is the second time this year that PXMG has made the top 10 and its 9th place rank on April 18th proved to be a good entry point.  Getting back up top may signal a resumption of the rally or its strong fundamentals may be a safe harbor in case Goldilocks doesn’t get that job or if it’s only part time flipping burgers.  Maybe the small and mid caps are scoring better because they are less susceptible to the currency volatility rattling world markets.  We’ll let you decide but whether you think we are heading up or down, take a look at PXMG for your equity allocation.  Thanks for taking a look at ETF Globalsm Daily Perspectives and have a nice weekend.

Thursday, June 6, 2013

If you don’t know the significance of June 6th, ask an old man.  If he’s in his 90s he will tell you about the Normandy Landings and how it marked the birth of the US superpower.  America’s technology industry is most responsible for our modern superpower status and two tech funds dominate the Quant rankings this morning.   We call it India-Yankee-Whisky, the 1st place iShares Dow Jones U.S. Technology Index Fund (IYW), and today’s 10 Green Diamond fund.  In 2nd place is the Vanguard Information Technology Fund (VGT) with a 9.33 Green Diamond Reward Rating, and like IYW, a low Red Diamond Risk Rating below 4.

Both funds rank so high thanks to very strong Fundamental Scores in the 90’s as the technology sector is the rare one where fundamentals have outpaced price gains.  Part of the reason is their price gains have trailed the monster rally this year although both are leading the S&P 500 on the last leg up since April 19th, as well as the current leg down since May 21st.  That helps their technical scores which each come in around 70.  Their weakest scores result from the common knowledge that these finest companies in the world are also among the world’s best values, leading to identical but middling sentiment scores of 53.1.

The 2nd place VGT does better on the Quality Score due to its 82.2 diversification score and a look at its Tear Sheet explains why.  Its 416 constituents with Apple weighted at 13.64% score better than IYW’s 136 with Apple weighing 16.44%.  Beyond that you might be more interested in the Industry Group exposure showing VGT with 52.2% of AUM in software and services and 34% in hardware while IYW has less software and more hardware. The popular ETFGsm pie charts even give you detail down to the sub-industry exposures.

For those lamenting that America doesn’t make things anymore, these funds remind us that America makes the best technology companies that make the things that make our lives easier and our workers more productive.  Many voices point to Big Data leading the next leg of the world’s industrial development and the companies in either fund will lead that charge.  Mark us as believers as we see the power of quantitative analysis to predict equity outperformance.  69 years since D Day, we thank the greatest generation that made America so powerful and we thank you for recognizing the power of Big Data here at ETF Global.

Wednesday, June 5, 2013

Buongiorno!  As much of Europe looks like Venice we see the iShares MSCI Italy Index Fund (EWI) in 10th place, its highest position since last summer and running through the ranks like a Ferrari.  Occupying  deep waters just a couple of weeks ago, the fund has achieved a 70.4 Quant Score today jumping more than 15 points in 10 days thanks to its 80.9 Behavioral Score.  A move like that is usually attributable to a spike in option activity and while its put/call score is very elevated at 95.8, so are its other sentiment indicators.  The technical score on this prima donna has caught our eye though as it has improved from 24.4 last month to today’s 71.1.

You don’t have to know about Fibonacci to appreciate EWI’s chart.  Matching its 2009 low below $10 per share last summer, the fund moved up to almost $15 in January then gave back about 60% of that move to early April’s low of 11.59.  Getting back up to yesterday’s close of 13.46 has boosted its short and intermediate term technical scores into the 70s and its long term score up to a decent 65.8.  Its current price is now above what bears could have seen as a left shoulder from last September.  Quant’s technical scores are its most complex algorithms calculating several different relative strength and momentum indicators in each time frame.  The strength in January also saw good technical scores that turned down quickly in early February as the fund began its 20% correction.  Rallying almost 18% from the April low still leaves plenty of room to run to that January high which is still less than half of its $36 all time high at 2007’s double top.

EWI’s 26 holdings have three quarters of AUM concentrated in financials, industrials and energy companies that combine to give it a respectable 63.2 Fundamental Score contributing to its 8.66 Green Diamond Reward Rating.  It’s 4.18 Red Diamond Risk Rating is higher than most top rankers that average below 4 again but is lower than today’s all equity ETF average of 4.53.  As you paint your masterpiece portfolios, let Quant be your Gondolier through the overly liquefied world markets and consider EWI as a tasty espresso on this lovely primavera day that would inspire Botticelli. Grazie e arrivederci.

Tuesday, June 4, 2013

Michael Douglas reminds us that risks can lie where we expected safety and come in various forms.  Only ETF Globalsm breaks out Risk and Reward Ratings and while our predictive Green Diamond Reward Ratings are exclusive to equity ETFs, all exchange traded products get ETFGsm Red Diamond Risk Ratings that you can see on their own page under the Analytics button.  Beyond the composite rating found on our tear sheets, we score all products in six separate risk categories which are each a proprietary composite of industry standard metrics.

Half of the Risk Rating is weighted towards price risks such as volatility, deviation and the home country of a fund’s constituents.  The other half addresses the integrity of a product using metrics relating to its structure, liquidity and efficiency.  The bottom of the page shows that the price risk scores are weighted towards volatility and deviation which include our proprietary ETFG Implied Volatility Score and emphasize downside deviation over standard deviation.  Country Risk is an example of how we break out certain components from our Quant model in our Diamond models.  On the integrity side, structure addresses how a product is comprised, using swaps for example is more risky than futures and concentrated funds carry higher risk than more diversified ones.  The sponsor’s strength is also incorporated in structure risk.  Liquidity comprises various trading metrics like bid/ask spreads and average volume as well as our proprietary Liquidation Watch List.  Lastly, efficiency looks at tracking error and expense ratio.

It being Tuesday, you might want to indulge your more risky proclivities.  Clicking twice to sort the volatility column in descending order will display products to get the best ride out of a rally.  If you are the straight and narrow type, click deviation once to find those products with the lowest deviation risk or click any column once or twice to sort in either order.  Entering a term in the search box will bring up all products that contain it in their name.  In a market where bad news is good it is more important than usual to keep a close eye on the risks in your portfolios.   Quant’s top 10 today have Risk Ratings ranging from Taiwan’s 10th place EWT on the low end scoring 2.59 to 6th place GDX carrying the highest risk with 5.41.  As always send any questions to

Monday, June 3, 2013

Two European funds have moved into the top 10 to begin the week and both have been here before.  The 7th place iShares MSCI Switzerland Index Fund (EWL) has seen several trips to the elite ranks in 2013 and has largely kept pace with the S&P 500 until recent weeks.  The 5th place iShares MSCI France Index Fund (EWQ) has not ranked or performed as well until late April when it broke back into the top 10 and began to outperform.  The closely ranked funds track countries that share a border differentiating two distinct economies.

Switzerland is among the rare European countries with a growing economy which is reflected in EWL’s strong 79.2 Fundamental Score.  On the Behavioral side we see decent mid 60s scores but the fund’s lagging performance since early May has brought down its short term technical score even as its long term has improved.  That suggests the 4% correction since early May could be providing an attractive entry point.  Large companies in the heath care, consumer staples and financial sectors drive the fund’s 9.01 Green Diamond Reward Rating with only 2.11 Red Risk Diamonds.

They speak French in the western Swiss cantons but crossing the border will bring you to the poster child of too big to fail European states where recent efforts to bring fiscal balance to France have not met their objectives.  EWQ’s lagging performance this year reflects that but outperforming the market since mid April has helped the fund achieve a high Behavioral Score of 79.  More than the technicals though, that Behavioral Score is driven by a high 88.7 sentiment score suggesting the French shorts are overly exposed.  EWQ’s constituents are also large recognizable companies with financials and industrials comprising almost 40% of AUM.  It all combines for an also attractive risk reward spread with an 8.94 Reward Rating and a lower than average 3.54 Risk Rating.

Both funds have Total Quant Scores above 70 which we see in 11 funds today.  That number is about half the usual level but twice the recent levels as corrections in recent weeks have improved fundamentals.  Other European funds also saw moves up in their rankings over the weekend which could be a result of Friday’s late day selloff in the US or a more enduring move.  We will monitor the potential shift and thank you for monitoring ETF Globalsm.  Have a good week.