Financial market prices are moved by participants anticipating changes in supply or demand, the fundamental forces of economic activity. Prices move based on what is expected to happen at some point in the future.#-ad_banner-#​ This is why markets often seem to move in the opposite direction many investors expect. The anticipation of a sharp change in supply or demand is often much more powerful than the actual confirmation of the change. The old market saying “Buy the rumor, sell the fact” is a great way to think of this concept. Nowhere is this better demonstrated than in the… Read More

Financial market prices are moved by participants anticipating changes in supply or demand, the fundamental forces of economic activity. Prices move based on what is expected to happen at some point in the future.#-ad_banner-#​ This is why markets often seem to move in the opposite direction many investors expect. The anticipation of a sharp change in supply or demand is often much more powerful than the actual confirmation of the change. The old market saying “Buy the rumor, sell the fact” is a great way to think of this concept. Nowhere is this better demonstrated than in the commodity markets. Rumors and forecasts of supply disruptions due to weather, government action or a host of other factors can send short-term commodity prices skyrocketing. Next, after the disruptive event occurs (or doesn’t), prices fall back to the norm. (Regular readers of Dave Forrest’s Junior Resource Advisor are kept abreast of potential changes in investors’ perception of supply & demand in the commodity markets.)   Recently, this is being witnessed in the natural gas market. Forecasts and the reality of an ultra-cold winter in the northeastern U.S. have pushed the spot price of natural gas prices from $3 per million… Read More

A few months ago, my colleague Dave Goodboy examined the risks and rewards of what he called “the financial world’s Super Bowl”  — initial public offerings, or IPOs.#-ad_banner-# Because IPOs can be so risky, he recommended investing in them with an exchange-traded fund (ETF). He also described his favorite ETF for the job, the First Trust U.S. IPO Index Fund (NYSE: FPX). I also think ETFs are the best way to play the exciting IPO market, but there’s another option that became available right around the time of Dave’s article. I thought investors… Read More

A few months ago, my colleague Dave Goodboy examined the risks and rewards of what he called “the financial world’s Super Bowl”  — initial public offerings, or IPOs.#-ad_banner-# Because IPOs can be so risky, he recommended investing in them with an exchange-traded fund (ETF). He also described his favorite ETF for the job, the First Trust U.S. IPO Index Fund (NYSE: FPX). I also think ETFs are the best way to play the exciting IPO market, but there’s another option that became available right around the time of Dave’s article. I thought investors should know about it because it provides broad exposure to IPOs and can be a great complement to FPX. This newer ETF complements FPX in a couple of ways. First, it focuses a lot more on small and midsize companies, like data analysis software firm Splunk (Nasdaq: SPLK) and payment processing technology provider Vantiv (Nasdaq: VNTV) — two stocks that are among the newer ETF’s top 10 holdings. (By the way, both have been hot, climbing nearly 40% and 20%, respectively, since the newer fund’s launch last October.) Another way the newer ETF can complement FPX is through sector diversification. Read More

Exchange-traded funds (ETFs) have changed the face of investing.#-ad_banner-#​ First launched in 1993, the ETF industry has surged to more than $1.5 trillion in assets spread across more than 3,100 ETFs and exchange-traded notes (ETNs).  Nearly every conceivable strategy has been converted into an ETF. I can only imagine the financial mad scientists who are hard at work designing the latest ETFs. Unusual ETFs are meant to fill a niche in your portfolio while allowing you to capitalize on your investment ideas for the coming year.  Out of all the niche ETFs available in 2014, my… Read More

Exchange-traded funds (ETFs) have changed the face of investing.#-ad_banner-#​ First launched in 1993, the ETF industry has surged to more than $1.5 trillion in assets spread across more than 3,100 ETFs and exchange-traded notes (ETNs).  Nearly every conceivable strategy has been converted into an ETF. I can only imagine the financial mad scientists who are hard at work designing the latest ETFs. Unusual ETFs are meant to fill a niche in your portfolio while allowing you to capitalize on your investment ideas for the coming year.  Out of all the niche ETFs available in 2014, my favorites are those that follow the share repurchase trend and those that will benefit from a falling U.S. dollar.  Buyback programs indicate management’s strong belief in the potential of the company’s own shares. This confidence could be signaling bullish activity that is taking place behind the scenes. At the very least, buybacks are a clear sign that the company believes the best use of its cash is to buy back its own shares. Buybacks intrinsically increase the value of investors’ shares by decreasing the number of outstanding shares, thereby lifting earnings per share (EPS).  Last year alone, the 30 companies… Read More

You don’t need a crystal ball to see where the U.S. economy is headed in coming years. We already know. Certain industries are poised for very good years ahead, and there’s no need to wait around for signs of their revival.  Nor do you need to spend days or weeks finding the right stocks to play such themes. Well-constructed exchange-traded funds (ETFs) have already built portfolios with all the exposure you’ll ever need. Let’s take a closer look. 1.    The Manufacturing Renaissance​ More than a year ago, I read one of the most compelling business articles… Read More

You don’t need a crystal ball to see where the U.S. economy is headed in coming years. We already know. Certain industries are poised for very good years ahead, and there’s no need to wait around for signs of their revival.  Nor do you need to spend days or weeks finding the right stocks to play such themes. Well-constructed exchange-traded funds (ETFs) have already built portfolios with all the exposure you’ll ever need. Let’s take a closer look. 1.    The Manufacturing Renaissance​ More than a year ago, I read one of the most compelling business articles written in the recent era. As the authors noted about a strategic decision by General Electric (NYSE: GE) to crank up once-dormant assembly lines here in the U.S., it simply no longer made sense to build the company’s hot water heaters in China: “A funny thing happened to the GeoSpring on the way from the cheap Chinese factory to the expensive Kentucky factory: The material cost went down. The labor required to make it went down. The quality went up. Even the energy efficiency went up. GE wasn’t just able to hold the retail sticker to the ‘China price.’ It beat that… Read More

Twenty years ago, who’d have thought America would ever be anywhere near achieving energy independence? Back then, the majority of our fuel was imported, and the prevailing concern was the U.S. would always have to rely on foreign oil to meet its ever-growing energy needs.#-ad_banner-# Boy, have things changed. Now people are talking about America’s energy boom. According to the U.S. Energy Department, domestic oil production is reaching highs not seen since 1970 and should rise by around 800,000 barrels per day through 2016. Just this past October, the U.S. began producing more oil than it imports for the first… Read More

Twenty years ago, who’d have thought America would ever be anywhere near achieving energy independence? Back then, the majority of our fuel was imported, and the prevailing concern was the U.S. would always have to rely on foreign oil to meet its ever-growing energy needs.#-ad_banner-# Boy, have things changed. Now people are talking about America’s energy boom. According to the U.S. Energy Department, domestic oil production is reaching highs not seen since 1970 and should rise by around 800,000 barrels per day through 2016. Just this past October, the U.S. began producing more oil than it imports for the first time in nearly two decades. What’s more, domestic natural gas production is projected to climb 56% between 2012 and 2040, from 24.1 trillion cubic feet to 37.6 trillion. According to the International Energy Agency, the U.S. will overtake Saudi Arabia as the world’s top oil producer by 2015. It’s already No. 1 in natural gas production. Clearly, something huge is afoot on the domestic energy front. But before I say anything further, let me acknowledge the controversy around hydraulic fracturing (aka fracking), the relatively new drilling method that has enabled energy companies to extract previously unreachable reserves of oil and… Read More

The stock market rarely gives you a chance to prove your investment thesis in real-time. Expectations for share price moves usually take many quarters to play out, if not longer. Yet a recent set of events has opened a window to provide a simple test for a recent suggested trading strategy. Nearly two months ago, I noted that the early snowpack in Siberia was an accurate predictor of colder-than-usual weather in the United States. And that would have a profound effect on natural gas prices as consumption increased. That part of the thesis played out like a charm. It’s been… Read More

The stock market rarely gives you a chance to prove your investment thesis in real-time. Expectations for share price moves usually take many quarters to play out, if not longer. Yet a recent set of events has opened a window to provide a simple test for a recent suggested trading strategy. Nearly two months ago, I noted that the early snowpack in Siberia was an accurate predictor of colder-than-usual weather in the United States. And that would have a profound effect on natural gas prices as consumption increased. That part of the thesis played out like a charm. It’s been quite cold in much of the eastern United States, which led to a faster-than-expected drawdown in gas storage. And that has led natural gas prices to quickly spike. In that column, I recommended three companies that had an inordinately high exposure to gas, relative to most oil and gas producers. How have those stocks fared? Decently, but not nearly as fast as the underlying commodity price itself. #-ad_banner-#Considering gas prices have surged roughly 30% in that time, these moves might be seen as a disappointment, disproving the thesis that these… Read More

ETFs are designed to decrease risks by offering investors access to a group of stocks. However, the use of highly specialized indexes by ETFs can increase exposure to the riskiest sectors and lead to large losses when trends reverse. To find the right balance, we look for ETFs that have diversified holdings and can benefit from several investment trends.#-ad_banner-# Heading into 2014, we see several important economic themes developing that should have a large impact on stocks. In the U.S., robust retail spending in November and an upward revision to October’s data has led to hopes that consumer spending will… Read More

ETFs are designed to decrease risks by offering investors access to a group of stocks. However, the use of highly specialized indexes by ETFs can increase exposure to the riskiest sectors and lead to large losses when trends reverse. To find the right balance, we look for ETFs that have diversified holdings and can benefit from several investment trends.#-ad_banner-# Heading into 2014, we see several important economic themes developing that should have a large impact on stocks. In the U.S., robust retail spending in November and an upward revision to October’s data has led to hopes that consumer spending will pick up in 2014. Since consumer spending accounts for about two-thirds of GDP, it is unlikely we’ll experience a recession if this trend continues. Recent data also indicates that Europe will finally be joining the U.S. economy in an expansion. And with Asian economies expected to expand too, this could be the first synchronized global expansion since at least 2008, when the credit market crisis sparked deep economic declines around the world. Automakers could be among the biggest winners from a strong global economy. In the U.S., some analysts expect car sales to reach 16.4 million in 2014, the highest… Read More

Wall Street is famous for creating new products. Sometimes, these products prove to be disastrous, like derivatives on subprime mortgages were in 2008.#-ad_banner-#​ At other times, new products turn out to be beneficial to individual investors. Exchange-traded funds (ETFs) are an example of a Wall Street innovation that helped individual investors. Assets in ETFs topped $1.6 trillion in October, and individual investors have more than 1,250 funds to invest in. The vast number of ETFs serves two purposes. First, a large number of investment options provides individual investors with an opportunity to diversify their portfolio. Second, it provides… Read More

Wall Street is famous for creating new products. Sometimes, these products prove to be disastrous, like derivatives on subprime mortgages were in 2008.#-ad_banner-#​ At other times, new products turn out to be beneficial to individual investors. Exchange-traded funds (ETFs) are an example of a Wall Street innovation that helped individual investors. Assets in ETFs topped $1.6 trillion in October, and individual investors have more than 1,250 funds to invest in. The vast number of ETFs serves two purposes. First, a large number of investment options provides individual investors with an opportunity to diversify their portfolio. Second, it provides a way for fund sponsors to maximize their potential revenue by having products that appeal to almost all investors. This second purpose, generating fees, has led to some funds with objectives that are not suitable for most investors. Many leveraged funds fit into this category. On the other hand, the drive to generate fees has led firms to offer ETFs that provide individual investors with access to markets that are not available to them otherwise. Senior loans are an example of one investment that market individual investors cannot access without an ETF. Senior loans are generally made to companies with… Read More

I am convinced that 2014 will go down in history as the year the European economy rose from the ashes. #-ad_banner-#​ Many nations in the European Union are showing signs of recovery after a prolonged economic slowdown. These slowly improving economies create profitable opportunities for savvy investors. The question is: What’s the best way to position your portfolio to capture profits from the nascent recovery? The answer lies in the United States’ financial crisis and recovery. While it isn’t likely that the European recovery will be as sharp and rapid as that of the U.S., powerful investing guidance can… Read More

I am convinced that 2014 will go down in history as the year the European economy rose from the ashes. #-ad_banner-#​ Many nations in the European Union are showing signs of recovery after a prolonged economic slowdown. These slowly improving economies create profitable opportunities for savvy investors. The question is: What’s the best way to position your portfolio to capture profits from the nascent recovery? The answer lies in the United States’ financial crisis and recovery. While it isn’t likely that the European recovery will be as sharp and rapid as that of the U.S., powerful investing guidance can be gleaned by studying what happened in the U.S. stock market during its dark days and recovery. First, let’s take a brief look at the European economic picture. In this year’s second quarter, the 17 countries comprised in the eurozone had collective economic growth of 0.3%. That doesn’t sound like much — until you look at it in context.  This is the first overall positive signal since 2011, and its importance is magnified by the fact that the Markit manufacturing purchasing managers’ index has remained above the critical 50 level through October. (I discussed the significance of PMI as a… Read More

Gold is getting hammered, and the pain in the sector is putting gold bulls in a panic. The yellow metal is down more than 27% year to date, and in just the past month, gold prices have tumbled more than 7%.#-ad_banner-#​ The latest decline in gold came on Tuesday, when it traded lower by as much as 2.7%, breaking down below very weak support levels around $1,225. About the only hope for gold longs here is to pray for a bad jobs number Friday, as that may keep the Federal Reserve from tapering sooner rather than later. Yet… Read More

Gold is getting hammered, and the pain in the sector is putting gold bulls in a panic. The yellow metal is down more than 27% year to date, and in just the past month, gold prices have tumbled more than 7%.#-ad_banner-#​ The latest decline in gold came on Tuesday, when it traded lower by as much as 2.7%, breaking down below very weak support levels around $1,225. About the only hope for gold longs here is to pray for a bad jobs number Friday, as that may keep the Federal Reserve from tapering sooner rather than later. Yet aside from prayer, what can a precious metal investor do if he wants to stay in metals but get out of the sinking ship that is gold? One answer would be to seek shelter in another precious metal, one that’s also benefiting from strong industrial demand tailwinds, and that metal is palladium. Rather than trading palladium on the commodities futures market, a prospect I find fraught with difficulty, I prefer to use exchange-traded funds (ETFs) such as the ETFS Physical Palladium Shares (NYSE: PALL). PALL has held up very well this year when compared with other precious metals. The ETF… Read More