Contributors

Barclays Offers New Variation of 19 Existing Commodity ETNs

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Barclays rolled out 19 new commodity-based exchange-traded notes (ETNs) last Thursday (4/21/11).  The 18 new Pure Beta products attempt to track the same commodities as 18 existing iPath ETNs, the primary difference being the process used by each underlying index to roll future contracts.  The iPath Seasonal Natural Gas ETN (DCNG) was also introduced, although it is not part of the new Pure Beta methodology.

Barclays new Pure Beta indexes intend to provide a more representative measure of commodity market returns by reducing the negative impacts of contango.  Instead of rolling futures contracts on a monthly basis, they may roll into one of a number of futures contracts with varying expiration dates.

Each index will attempt to provide the best proxy for the average price return of the front-year futures contracts for each commodity in the index, while avoiding parts of the futures curve that are subject to persistent market distortions.  A new Barclays’ special report, The Basics of iPath Pure Beta Commodity ETNs (pdf), provides additional information and background on the methodology.

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US Dollar-Apropos of Everything

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“In May 2007 we wrote a lengthy piece called The Value of the Dollar in which we argued the following: Consistently excessive money and credit growth has taken the US economy past the point of no return. What (policy makers) have done consistently – and will continue to do – is inflate the money supply and promote more credit, thereby sustaining asset prices at the expense of the purchasing power of the US dollar. We argue the US dollar will ultimatily lose it’s status as the world’s reserve currency. In fact, we believe events currently unfolding may be foreshadowing the … Read more

Natural Gas Breakout on Nuclear Tragedy

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Notwithstanding our sympathy for those who have suffered tragically as a result of the earthquake, tsunami, and nuclear radiation in Japan, the event has profound long-term implications for natural gas, the most attractive alternative fuel. Trading in futures has begun to validate the strategic change. The latest quote for U.S. delivery of natural gas for the next six years at $5.57 a million btu has crossed above its 40-week average for the first time in the 15 months since December 2009 (see chart below Natural Gas Six-Year Futures Strip). Diminished confidence in nuclear power also helps confirm the price uptrend … Read more

Top 6 Oil and Gas Drillers Paying Impressive Dividends

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In two of our recent articles, we looked for the top six oil & gas companies, and the top eight gas utilities paying excellent dividends. With oil and gas prices going even higher, we decided to screen for the best oil and gas drillers with quite impressive dividends, and a maximum P/E ratio of 30. All of the companies that follow offered a minimum 5% dividend yield, and have a minimum market capitalization of $300 million. Data is derived from finviz. While there are hundreds of drillers listed in NYSE, only the following large cap drillers fit this criteria: Crestwood … Read more

‘s the Hindenburg

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China is often admired as an economic miracle, especially since the government has been able to balance, thus far, a Communist/Socialist political infrastructure while operating a semi-capitalist “free” market. But as a side effect of a global economic slow down, and considering bits of information that filter out of an extremely well controlled society, China’s economic power is beginning to be questioned. The often mentioned Chinese “housing bubble” appears in the headlines from time to time, despite a lack of understanding of what exactly is taking place. In the United States and Europe, citizens understand what happened, and why the … Read more

Chart of the day: Rolling 3-Month Correlation Between Oil & S&P500

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Over the past few years the correlation between oil (especialy WTI Crude Oil) and the S&P500 has been remarkably consistent with an average of about 0.75 (scale from -1 to 1).  However, over the past month that strong correlation that traders had become acustomed to has diminished at an exponential rate.  Over this past month, the rolling 3 month correlation (rolling windows give a much more accurate measure) has fallen to its lowest level since the early 2000s (less than 0.20). Basically, the Energy sector and oil have been moving less in tandem with each other on a day to day basis than they have in years.  Source: Bespoke Investment … Read more

Recently Discovered Video Interview with Seth Klarman

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For those who don’t know Seth Klarman, here’s some brief info from Jacob Wolinsky at Valuewalk:

Seth Klarman is undoubately one of the greatest investors of our time. Klarman manages Baupost Group, the 11th largest Hedge Fund in the US, with over $20 billion in assets.  There is a rumor that Buffett, (a big fan of Klarman) keeps a copy of Klarman’s out of print and super expensive book Margin of Safety, by his bed. Seth Klarman’s Baupost fund has produced returns of approximately 20% annually since inception in 1983. Klarman has produced phenomenal returns despite the fact that he usually holds huge amounts of cash.

According to a lecture given by Bruce Greenwald: Warren Buffett says that when he retires, there are three people he would like to manage his money. First is Seth Klarman of the Baupost Group, who you will hear from later in the course. Next is Greg Alexander. Third is Li Lu.

Below are the videos (6 in total), enjoy:

[youtube=http://www.youtube.com/watch?v=u0aRiDI1wnk&feature=related&w=400&h=300]

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XOIL Tries to Be Spot-On Spot

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  Global X launched a new equity ETF on Tuesday (3/15/11) that attempts to achieve high correlation to crude oil spot prices. Global X Oil Equities ETF (XOIL) provides exposure to pure-play oil companies with significant oil reserves that are typically not involved in other industries such as natural gas or downstream operations.

The underlying Solactive Global Oil Equities Index tracks the performance of 25 equal-weighted companies that have shown a high correlation to the spot price of oil. Constituents are ranked and chosen by their correlation to the spot price of oil in the quarter preceding the selection day. The index has a global mandate, but only North American stocks passed the most recent correlation screen with 80% currently allocated to the U.S. and 20% to Canada.

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Best Hedge Against Rising Oil Prices: Part 1

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by: Dr. Osman Gulseven After the UN resolution on no-fly zone in Libya, the coalition forces just launched an almost full-scale operation on Libya. I was watching Euronews to get latest updates on the Libyan crises. Obviously, this is not a single operation that will last for a couple of days. Libya is on fire! We might see a full-scale war in Libya that will last for weeks or months or even years. After learning a smart lesson in Iraq, France is trying to lead the coalition forces with 20 aircraft and a number of warships. Gaddafi’s spokesman said that … Read more

‘s Focus Growth Fund: A Brief Analysis

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by: Dr. Osman Gulseven In a recent article, I discussed the top holdings in Morgan Stanley’s portfolio. According the latest 13F filings, Morgan Stanley’s (MS) year-to-date performance was mediocre and below the S&P 500 (SPY) return. The investment banks mutual funds have been lagging behind the market since the last decade. The mediocre performance of investment banks portfolio shows that they take hard-earned money and invest in under-performing assets. They also charge management fees and hidden costs such as front-end/back-end loads, plus commissions you never heard of. Some companies charge up to 3% in management expenses. I was checking which funds … Read more

Insider Buying: 7 Stocks With CEO Buys of at Least $100,000 in the Past Week

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by: Steven Kiel Each week I highlight large insider purchases made by the CEO. These purchases must not be option grants or exercises. I prefer to track insider buying at the CEO and CFO level, rather than at the Board level, because management should have a better idea of what’s going on in the day-to-day operation of the company. An insider buys company shares because they have confidence in the company and the stock, and occasionally these purchases foreshadow a coming catalyst. At the same time, these insiders are humans and can get caught up in the market and may … Read more

What to Buy in Rebuilding Japan

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   Japan has been hit by a triple calamity – monster quake, killer tsunamis’ and nuclear disaster– that only a Hollywood disaster film director could imagine. The damages wrought by this catastrophe in terms of human life and suffering as well as economic damage will be remembered as one of the worst in history. From our standpoint on the ground in Tokyo, it was (and is) hard to be an objective observer given the ongoing Fukushima nuclear crisis, daily earthquake aftershocks, checking radiation levels, gas lines and empty shelves in neighborhood convenience stores and supermarkets. But Japanfs stock and financial markets, being the amoral animals they are, have largely or completely discounted the worst in losing 12.6% or 1,305 points on the Nikkei 225 from a mid-session high on Friday March 11, 2011 to a mid-session low on Friday March 18, 2011; the caveat being that the Fukushima nuclear crisis does not deteriorate into a level 7 Chernobyl-like nuclear disaster.

  • Historically, monster quakes (in 1855, 1923 and 1995) have marked or

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About HSAX & CO., LLC

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HSAX & CO, LLC is an independent investment advisory firm based in Park City, UT.  Its managing member, Harvey Sax, has earned a national reputation for substantially outperforming the market in good times and bad.  He has served as Vice President and Senior Vice President at Bear Stearns, Inc, Paine Webber, D. Blech & Co., and Oppenheimer Co. In addition to his financial acumen, Sax is recognized as a pioneer in the technology field.  He is responsible for creating one of the first publicly traded Internet companies, HomeCom Communications, Inc., and is also credited for creating the first web presence for … Read more