Thursday, November 3, 2016

As Municipals and ETF Strategy

11/3/16 We shut down our Ameritrade accounts where we were purchasing bonds. Our bond trader left the company and his replacement could not find us an inventory of municipal bonds. When the account reached 50% cash, because of bonds being called, I had no alternative. Money has to be put to work. The new trader managed to invest half of that cash sticking to our specifications in a single day.

Why Municipals and ETFs?

It is a bit weird, I was pursuing the ETF strategy when I was profit taking and thinking about getting a CD to "store" the money for later. The guy at the bond desk, asked if I had considered municipals. I did have some already, but as I was sharing my bond requirements, I jumped online and started a screen. I found one that look attractive, highly rated, very fair premium, short duration, it was callable, but at today's yields, why would I care. That guy left the bond desk, (without even saying goodbye). When I moved to Seattle, we went to visit the Ameritrade office and told that account manager that I would like some help screening bonds by someone with a Bloomberg terminal account. He introduced me to Sam Houston, we hit it off, and we diverted all the money still on the sidelines to bonds.


As I approach retirement, I need to reduce risk. With individual equities, there is a risk of total failure. This has happened to me twice, Worldcom and some shipping company. ETFs allow me to have access to the stock market with less risk of a total loss, though it is certainly easy to lose money with ETFs. The As basket is about half ETFs, though I talk about individual equities a lot, the majority of my investment dollars are in ETFs. I have about as many of them as individual stocks but I make bigger bets. That does not mean I can't lose money though. I am tracking the losers and the analysis decisions from the worst performing in the final section of the blog past. Some online brokers are starting to offer selections of ETFs that can be traded for free ( no broker fee), so if they start coming back I can add to my position cheaply. And a bunch of these are international. Of course, the expense ratio needs to be carefully monitored.

Rules of the basket:

All ETFs
Solid international representation ex Canada (these are stored in basket Ck)
No bond funds
Everything else is in play

3/2/15 Let's list the ETFs that are worth less than when I bought them back in 2012.
CCXE, (materials), Last close: 25.87 down 21%
EWX, (emerging markets small cap), LC 45.39 down 2.44%
IDX, (Indonesia), LC 24.84 down 9.9%
REMX, (rare earth), LC 26.48 down -70.41%
RSX, (Russia), LC 17.37 down -45.6%
RSXJ, (Russia smal cap), LC 22.07 down -63.5%
Action: Let them ride

Update March 19, 2013 Reds that are less of a disaster
               5  30  90  180
CCXE   2     2    2
GERJ    1    1    1

This much falling action leads me to want to look at some of the ETFs in the green. Least green to  more green.
               5  30  90  180
EWX      3   2    3
EIDO    2    1     1
VIG      1    2     2

And even more green to even greener.
IVE      1     2    1    1
RWX    2     3
EWG    3           3    3
IDX            1    2    2

Decision: sell market 25 GAF, 55 ILF, 100 FXI, 200 EWY, 165 GXC, 85 VEU. This is a good thing anyway, the plan is to make As primarily fixed income. Set calendar to check again next week.

Analysis, we have some serious weakness developing in this basket.
Update February 24, 2013 Worst losers
On the main this basket (As) is doing well, but need to tune it just a bit. Here are the red, or losing ETFs in the basket from the biggest loser on top to only slightly down at the bottom:
3/19/13                            5  30  90
               5  30  90  180
REMX                            2
RSXJ      3   1    1     3     1   3    1
EPI                          1          2    3
EWZ      4          4           2   1    2
CCXE    2  3     2     2

Need to keep in mind, this is comparing losers to losers, and some of these are cyclic. A screener I use suggests similar ETFs VAW and XLB. If I was to switch, VAW is currently at 86.04 and CCXE last closed at 32.35.

GAF is a small investment and about the only exposure I have to the Middle East and Africa so I am going to let it ride for now. REMX is my worst performing ETF, but it is a small investment and I do not have any other exposure to rare earth, let it ride. ILF is exposure to Latin America, I will check for a replacement, but plan to let this one go as well.

The interesting thing to note is RSXJ, Russia Small Cap. It is down 16% for the year, but seems to be outperforming the other losers.
Decision: No action at this time.
3/19/13 The worst are still bad and continuing to lose, I am going to stay the course and not lock in my losses, but these are smelly.

Here is the list of commission free ETFs I currently hold in the basket:

ETF               Focus             MGT Fee  1/9/13
EPI                India               .83         -11.47
EWA             Australia         .52            9.09
EWG             Germany         .51            7.97
EWZ              Brasil             .59           -9.67
FXI                China             .72            9.76
ILF                 Latin             .5             -5.83
RSX               Russia           .62           -6.49
RWX              Real Estate    .59            6.69
VEU               World ex US .18           11.06

IJR                 Small cap       .16          14.74
IVE                SP 500 V       .18              .24
IWP                Mid G           .25            6.85
MGK              Mega cap      .12           16.05
VIG                Dividend       .13             0

ETFs that trade on commission

ETF      Focus           1/9/13
CCXE  Commodities -2.65
EIDO   Indonesia      -3.83
EWD   Sweden         16.48
EWW   Mexico         26.23
EWX    Emerge SM   2.78  
EWY   Korea           10.94
FXO     US Leverage 9.43
GAF     MEA         -1.63
GERJ  -0.06
GXC    China          14.64
GXF    Nordic          16.10
IDX     Indonesia        4.06
IJR     Small IDX     14.74
JKF     Large V       15.11
REMX Rare Earth   -39.16
RSXJ   -24.88
TUR   Turkey         48.70

ETFs that are down and action analysis

(List order: worst performing on the top)

REMX, this is a rare earth ETF, it was a portfolio diversity play pure and simple. I am down by almost 50% when all of my baskets are positive so in an insane way it is working. Don't have much financial exposure, let it ride.
Update January 1, 2013 13.16 up 5% in past 30 days
2/24/13 12.17, down 6.5% past 30 days
3/1/13   11.81

 RSXJ, Russia small cap. Down 30%, but very little financial exposure, do not lock in the losses and keep an eye on it.
Update January 1, 2013 15.24 up 6.8% in past 30 days
2/24/13 15.82 up 0.7% past 30 days
3/1/13   15.32

 EPI, I have never been able to make India work for me. I am down 15%, and have a significant exposure, but it has been up slightly for the last month. Monitor, this is my only India play so I hesitate to pull the trigger.
Update January 1, 2013 19.37 up 2.9% in past 30 days
2/24/13 19.02, down .9% past 30 days
3/1/13   18.19

 EWZ, the bloom is off the rose for this Brazil Index fund, down 16% and I do have a significant exposure. Set a calendar to monitor and be ready to take my losses.
Update January 1, 2013 56.06 up 8% in past 30 days
3/1/13  55.20

 RSX, another Russia ETF, down 13% and do have significant exposure.
Update January 1, 2013 29.97 up 7.4% in past 30 days
3/1/13  28.81

 ILF, Latin America, down 12% with moderate exposure. I think the picture for Latin America still has promise, let it ride.
Update January 1, 2013 43.84 up 5.3% in past 30 days
3/1/13  43.40

 GAF, emerging Middle East and Africa, it is up 3% for the past 12 months, so this is one to watch about growing the position. I am currently down 8.87%
Update January 1, 2013 73.57 up 9.3% in past 30 days.
3/1/13  68.48

 CCXE, basic materials fund. It is up 6% and is cyclic, this would be a good choice for a deep limit and add to the position, things like this seesaw up and down. Down 8.19%. Set a limit for 50@28.00.
Update January 1, 2013 31.83 up 5%, limit will probably not happen, let it ride.
3/1/13  32.30 added 20@market

 GERJ, Germany small cap, very thinly traded and I have a  small position. Down 7.76%. Limit order for 25@21.00.
Update January 1, 2013 22.91 up 4.5% in past 30 days
3/1/13  24.16  added 30@market

 EIDO, Indonesia index, up 17% in past six months. Down 5.38%. Limit order for 25@29.50.
Update January 1, 2013 30.26 up 1% in past 30 days
3/1/13  34.36 added 20@market

EWX, emerging market small cap, seems to be on the mend. Down 5%. Limit order for 25@43.00.
Update January 1, 2013 46.64 up 6% in past 30 days
3/1/13 47.20 added 15@market