Continued Ailments in the Pits
Because we like to stay close to our roots, a few of the Attain crew headed down the CME’s trading pits today to show some of the new hires around and catch up with a couple of our contacts. Our gracious guide was the affable Danny Riley of MrTopStep – a commodity futures market commentary blog and chat site for traders. He told the story of how the pits evolved and what he thinks is in store for the pits in the coming years.
The boom falling on the Nasdaq?
While Kid Dynamite likened the S&P 500 chart action to “Hulkamania” recently, we’ve been calling the Nasdaq action here in the office a ‘Boom Crane formation’ – and waiting for the point when the boom starts falling. Or more correctly for those in the crane business – waiting to see just how low the main hook block on the end falls once the crane operators decide to lower the hoist line and try and pick some stuff up down below.
Managed Futures Mutual Funds Exposed
It’s been over a year since we last dedicated a newsletter to the so-called managed futures mutual fund/ETF, and we thought it was high time we revisited the subject. While their performance then and to date has continued to be lackluster and well below managed futures as an asset class, it doesn’t seem to have hurt the popularity of the idea, with several smaller players now joining the fray to the tune of 19 such funds now clamoring after investor’s managed futures money. We found ourselves scratching our heads. Just why is so much money pouring into these so-called managed futures mutual funds when they have done very little in the way of performance? Are the investors in so-called managed futures mutual funds really understanding what they are getting? Well, we’re going to do our part to make sure those investors do know what they are getting, with an in-depth look at these products, and, unfortunately for the product managers, our research into the full universe of these publically traded products unearthed even more levels of complexity than we saw previously.
Another (Bad) Way to Get Commodity Exposure
We’ve written about commodity ETFs before… and update our readers regularly on just how much investors in such ETFs underperform a simple strategy of just buying the December futures contract and rolling it annually. But our reservations notwithstanding, the commodity ETF market has continued to grow, leading to products like Proshares leveraged commodity ETFS.
Weekend Reads
Not many surprises this week: European debt worries were downright muted compared to previous weeks on the heels of the latest round of ECB intervention. Gas prices and US stocks (aka AAPL) continued to climb while US house prices continued to search for the bottom.
Disclaimers
Managed futures, commodity trading, forex trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. You should not rely on any of the information as a substitute for the exercise of your own skill and judgment in making such a decision on the appropriateness of such investments.
The entries on this blog are intended to further subscribers understanding, education, and – at times – enjoyment of the world of alternative investments. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.
The mention of specific asset class performance (i.e. +3.2%, -4.6%) is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.), and investors should take care to understand that any index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.
The performance data for various Commodity Trading Advisor (“CTA”) and Commodity Pools are compiled from various sources, including Barclay Hedge, RCM’s own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor’s disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor’s track record.
The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on RCM’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by RCM, and averaging of various indices designed to track said asset classes.
The mention of market based performance (i.e. Corn was up 5% today) reflects all available information as of the time and date of the publication.
The owner of this blog, RCM Alternatives, may receive various forms of compensation from certain investment managers highlighted and/or mentioned within the blog, including but not limited to retaining: a portion of trade commissions, a portion of the fees charged to investors by the investment managers, a portion of the fees for operating a fund for the investment managers via affiliate Attain Portfolio Advisors, or via direct payment for marketing services.
Managed Futures Disclaimer:
Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.
See the full terms of use and risk disclaimer here.
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