iShares Dow Jones US Utilities (IDU)

All Comments on IDU

  • commenter
    Ben5519
    Oct 12 03:43 PM
    Tactical Asset Allocation, Part I [view article]
    Geoff,

    If you believe in reversion to the mean, it would seem that IIH is a great buy right now, wouldn't it? Also, have you ever considered taking a short position on ETFs that QPP predicts will have a significant negative return?

    Thanks,
    Ben     Reply
  • commenter
    MachineGhost
    Oct 07 12:01 PM
    Tactical Asset Allocation, Part I [view article]
    Vernl, downside risk only measures the standard deviation below the mean. In the real world, a loss is a peak-to-trough drawdown, so standard deviation is inherently superior as it is the probability weighted maximum point above the mean to the minimum point below the mean. If the maximum historical drawdown is what one is worried about, then a simple heuristic ( 1 / maximum drawdown in % ) can be used to allocate.
    Reply
  • commenter
    Kenneth J.
    Gruneisen
    Oct 06 12:54 PM
    My Website
    Tactical Asset Allocation, Part I [view article]
    I'm new to this forum, so hopefully this is an ideal place to start with a comment.

    If one were able to buy MVV or any of the 2X long ETFs on margin they'd in effect be 4X long the index. Correct? So, in the event the investor might time that purchase such that the index subsequently rallies +10% , the investor might be up about +40%. Of course, this assumes the risk that the index might continue falling, and they are on the hook X4 to the ongoing losses that index might continue sustaining. This is not for the risk averse investor, however it seems like it might be a tempting investment tactic for those who are able to handle the risk.

    After seeing QLD fall from $83.55 on 8/15/08 (at its 200 DMA resistance) to the $40 area now, the probability of a +10% rally in the coming weeks seems rather good. Anyone?

    I originally attempted to post this comment in response to the 7/11/06 article by Greg Newton seekingalpha.com/artic...
    which mentioned the then soon to be introduced 2X ETFs linked to the major indices

    2x Long the NASDAQ-100 (QLD)
    2x Long the S&P 500 (SSO)
    2x Long the S&P MidCap (MVV)
    2x Long the Dow Jones Industrial Average (DDM)

    2x Short the NASDAQ-100 (QID)
    2x Short the S&P 500 (SDS)
    2x Short the S&P MidCap (MZZ)
    2x Short the Dow Jones Industrial Average (DXD)     Reply
  • commenter
    Flav
    Oct 04 02:11 PM
    Tactical Asset Allocation, Part I [view article]
    Geoff: i hope you don't get tired of my posts, but i have to tell you, once again, great article!!!!!!! Reply
  • commenter
    poet1
    Oct 03 09:06 AM
    Short Cut to Profits? A Closer Look at Inverse Funds [view article]
    anyone know how far out banks do profit projections? calculations on what percentage of people will default? i assume its at least 50 yrs? don't they know what to expect? PS-SRS is doing GREAT Reply
  • commenter
    jmorace
    Oct 02 12:53 PM
    Tactical Asset Allocation, Part I [view article]
    That's IIH...... Reply
  • commenter
    jmorace
    Oct 02 12:53 PM
    Tactical Asset Allocation, Part I [view article]
    Hi Goeff,

    Another interesting and informative piece.

    Regarding the internet etf, IHH, I notice that there was an odd downward move in the price of the index on one day in May. There was barely a corresponding volume blip or even the typical explosion in volatility one typically sees after a movement of this size. Of course, arbs sometimes come in to exploit the premiums or discounts on these etfs, but then you see the volume spikes and volatility. There are 14 stocks in the index and I looked at the price action of the top 10 of them on that day. There was no corresponding price move in any of them. Perhaps the etf was either restructured, reorganized or split.

    In any case, there are odd changes in securities prices because of cap distributions and reorganization, spin outs and what not. I’m wondering how qpp deals with these odd events to ensure robust and accurate data in the program?

    Thank you,

    JMorace     Reply
  • commenter
    Mynion
    Oct 01 03:34 PM
    Tactical Asset Allocation, Part I [view article]
    Thanks Geoff.

    Would you say, then, that reducing volatility as measured by standard deviation, by default reduces risk as measured by downside deviation?

    If so, constructing a portfolio that maximizes return for risk, as measured by standard deviation, would still be inherently efficient.

    In regards to TAA, which the article is about, have you read "A Quantitative Approach to Tactical Asset Allocation" by Mebane T. Faber (it is available on cambriainvestments.com I believe)? Just wondered what you thought of the research.

    Thanks Again! Keep up the great work!     Reply
  • commenter
    Geoff
    Considine
    Oct 01 02:59 PM
    My Website
    Tactical Asset Allocation, Part I [view article]
    Mynion:

    Okay--here's the argument: Volatility (up or down) represents the markets uncertainty as to how to value the future earnings stream of a company--this uncertainty is a measure of risk. An investment with very high skewness (asymmetry between upside and downside) would have important implications but realized volatility is a measure uncertainty and the magnitude of changes in opinion in the overall market. Frankly, I have nothing against modeling skewness but every increase in statistical complexity brings its own challenges. Estimating skewness is harder than estimating variance because skew is a cubed statistic...a few data points can easily sway the stats. I do lean towards the simplest possible models--you are correct--largely because additional parameters lead to their own issues.

    Geoff     Reply
  • commenter
    Mynion
    Oct 01 02:07 PM
    Tactical Asset Allocation, Part I [view article]
    Geoff, since Vernl brought it up, why does QPP use standard deviation to measure/analyze risk as opposed to downside deviation? It seems to me that an investment that has a high standard deviation but low downside deviation would be quite different than an investment with identical standard deviation but higher downside deviation. If you are using normal distribution of returns, as I believe QPP is, then standard deviation and normal distribution may not paint the most accurate picture. Just curious. Reply
  • commenter
    phdinsuntann
    ing
    Oct 01 09:38 AM
    My Website
    Tactical Asset Allocation, Part I [view article]
    yes Geoff, maybe is some fruit that I got in the jungle, by the way I like your academic approach, just take care of black swans. Jokes apart do you know any SAA or TAA model for preference shares? (stocks which provides a specific dividend that is paid before any dividends are paid to common stock holders, and which takes precedence over common stock in the event of a liquidation). Some good oportunities are around in financials... Reply
  • commenter
    couldashould
    a
    Sep 30 02:49 PM
    Tactical Asset Allocation, Part I [view article]
    perhaps a simpler approach is the Point and Figure methodology which is probably the oldest in investment methodology.
    It helps you determine three things;
    1. what is the risk level of the total market.
    2. what sectors are performing best relative to all others
    3. What is the risk level of individual stocks within each of the best sectors.

    The foundation of the method is relative strength. I find it very helpful, once learned. just a suggestion. Many books/sites availble to teach it.
     Reply
  • commenter
    Vernl
    Sep 30 02:05 PM
    My Website
    Tactical Asset Allocation, Part I [view article]
    I find your article interesting and I’d like to see how your approach worked over substantially more time periods. However, I think mean reversion has some statistical issues. Example: you flip a coin that comes up heads 10 times in a row, what do you bet the next flip will be? Trend followers would bet heads ... mean reversion tells us to bet tails. What is the right answer? The right answer is ... it doesn't matter. No one knows coin flipping is random; the next flip has exactly the same odds as any other flip 50/50 heads/tails. The stock market is random and on average over the long term neither a simple trend following or a simple mean reversion analysis will give you the edge. The market is more complicated than that. Mr. Bogel's approach seems to be the wiser approach here. He is basically recommending Modern Portfolio Theory (MPT).

    However, I do believe that the way advisors generally apply MPT today could be improved with the result leading to improved risk adjusted returns. First lower costs (per Mr. Bogel) could certainly be achieved with index ETFs. Second, standard deviation should be replaced as a measure of risk, using some measure of downside risk only. Standard deviation considers upside and downside volatility as equally bad. Yet, no investor worries about unusual upside returns. Third, large Growth, large Value, Mid-cap, and small-cap growth/value asset classes have correlations converging on one. This type of diversification doesn’t reduce risk especially in down markets. Investors and their advisors need to focus on a new group of asset classes with truly low correlation.

    These are principals being brought to the forefront of academic theory by Behavioral Finance and Post-Modern Portfolio Theory (Post-MPT). For more information on investments using Post-MPT principals visit isectors.com. There you will find examples of managed investment allocation models with a history of outperforming the market using these simple approaches to apply MPT more effectively. In addition, if you’re looking for more on the “science” (financial theory) behind the Post-MPT investment allocation models …read “Practical Applications of Post-Modern Portfolio Theory” also found on the iSectors® website.
    Reply
  • commenter
    Geoff
    Considine
    Sep 30 01:50 PM
    My Website
    Tactical Asset Allocation, Part I [view article]
    To phdinsuntanning:

    If you can time the direction of the market well enough to consistently be short when the market is going down (and vice versa), you don't need to worry about things like SAA, TAA, or risk management--you will make such large returns that you will own a large investment bank in no time at all. My writing is for those of us who lack your powers.     Reply
  • commenter
    phdinsuntann
    ing
    Sep 29 05:37 PM
    My Website
    Tactical Asset Allocation, Part I [view article]
    this is TAA in motion:

    SMN UltraShort Basic Materials ProShares22.92%
    EEV UltraShort MSCI Emerging Markets ProShares20.96%
    QID UltraShort QQQ ProShares10.34%
    SIJ UltraShort Industrials ProShares9.86%
    DGP PowerShares DB Gold Double Long ETN9.73%
    SDS UltraShort S&P500 ProShares9.64%
    IEF iShares Lehman 7-10 Year Treasury Bond Fund9.47%
    TWM UltraShort Russell2000 ProShares7.08%     Reply
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