Office Rumors

A very interesting post at Odd Numbers (Portfolio.com) compiles reports from FedEx and UPS’s and shows how much those have dropped in the instance of recession. The numbers from the recession around 2002 show a significant drop. FedEx just announced a pretty stiff fourth quarter loss. Is this adding to the body indicators pointing to a recession?

Have a look at the post for the charts and further analysis to decide for yourself.

Via Gawker, here are some pretty priceless mis-speaking incidents by news media-types.

(Via Ann Althouse)

I’m a little late getting this up, but they’re pretty neat. The midwest has been seeing some awefully severe and wet weather this spring/summer. This set of photos, from the blog Backing Winds, and commentary is pretty interesting.

We’ve talked in the past at Office Rumors of how you might use ETFs to create your own “lazy” portfolio. Index Universe has a perfectly simple example (links added):

• 51% U.S. Equities (41% SPY, 10% QQQQ)
• 39% Foreign Equities (25% EFA developed markets, 14% EEM emerging markets)
• 10% Gold (GLD)

Maybe use Oil (USO) instead of Gold? Or even a broad commodities ETF? Either way, the expense of this portfolio is a razor-thin .28%. That’s better than you’d get on the vast majority of mutual funds, or anything through a full service broker.

Disclosure: At the time of publishing this post, I do not own any of these securities.

It is nice to be back. I’ve been taking care of some personal stuff over the past few days. That said; let’s look at a few articles that have caught my eye since Friday.

First, while you are busy funding your IRA or 401k, your broker and the mutual funds take cuts out of your investment. The hope is that they can exceed this in the overall growth of your investment. Sometimes they may swing for the fences, leveraging themselves to the hilt (the case with many hedge funds), and miss. Greg Wolper at Morningstar wrote yesterday about a different situation: how fund managers (aka “Smart Money) can–for lack of a better term–get into bed with the companies they’re buying.

Specifically, he points to the case of Cerberus’ investment in GMAC, Chrysler, and others (see articles from the Financial Times here). While regulators are stepping in here, what can the average investor do? Is there any way to determine the strategy of a fund manager and to insure they are going about their business professionally? The Wall Street Journal has an occasional report on mutual funds that features fund manager commentary. These managers are the statistical anomalies, though, with returns (generally) well above average.

From this, the author moves to ask the question of how the average investor can determine the strategy of their fund managers. If it is a follow-the-leader strategy, the fund manager is probably slightly behind the returns on the index tracked by the fund. (See any fund’s prospectus for this information. It should be plainly spelled out.) Also, look at the fund management’s descriptions of the market environment of the fund. These are often found on the fund’s website. For example, here is one for Annaly Capital Management, Inc. (a REIT). Red flags should go up if the manager (or management) cannot explain what they are doing based on current conditions with a reasonable degree of clarity. Managers won’t tell you that they’re buying something on the basis of what a friend said, but it should be of some comfort that they are able to marginally sell you on it.

The second article comes from Index Universe, where Matthew Hougan writes on what ETFs really bring to investors. After a bit of discussion, he narrows it down to two things:

1. Tax efficiency, and
2. Easy access to high-caliber investments in new asset classes.

Easy examples of number two are the United States Oil (USO) and other ETFs previously mentioned on this site (see links below). Hougan gives a more exhaustive list as well:

Today, you can buy the entire stock market for 7 basis points, and you can also buy into commodities and real estate and timber. You can buy Treasuries, and you can also buy global TIPS, sophisticated quant strategies and buywrite funds. You can buy currency exposure, and you can also get leverage, sell short without using a margin account and tap into the carry strategy.

And the author means YOU, the independent investor that doesn’t have the millions required to invest in complex securities, hedge funds or venture capital. Now we just have to figure out how to invest in them properly!

Disclosure: at the time of publishing this, I do not own any securities specifically mentioned in the post.

Also, thank you to all the visitors looking at my posts on ETFs (especially here and here). If you have any questions, comments or ideas to add to the discussion, please offer them up!

Here’s to getting out of this severe weather cycle in the midwest. We don’t need any more rain for a few weeks.

Today’s photo comes from Ann Althouse. She hosts it on Flickr and posted it to her blog yesterday.

Sunny here right now. We’ll see how long that holds.

That’s what just was announced on the UEFA broadcast of the Swiss v. Turkey on ESPN 2. He’ll take over July 1, in time for preseason training tours to begin. Thoughts?

(Xinhua/Reuters Photo)

He certainly has shown the ability to take offensively talented teams and get them to play solid defense (and get results). Examples of this can be seen in Brazil (won a WC) and Portugal. Very interesting.

Watch out, United (and the rest of the Prem). His teams play well and are successful where ever he goes.

Timing is a little odd, though.

UPDATE @ 3:45p: Here’s some links: first, google news’ results for “scolari” and from totalodds.net, he’s the odds-on favorite to take the job.

UPDATE @ 5:00p: I’ve got a better link now, from the BBC. It includes interesting speculation on the Christiano Ronaldo situation and whether Scolari has given him any advice on which club to chose (Real or United).

Boston.com has a blog post with some great pictures of the atmosphere, as taken by astronauts.

I’ve always wondered what lightning looked like from above the clouds. There is one showing that, through the link and halfway down the page.

Barry Ritholtz points out, at his blog Big Picture, a New York Times blog writer’s discussion of the change in private sector jobs. Over the past year, it has been off 125,000. He then goes on to point out that every recession since 1953 has seen negative numbers. The comments are well moderated, so worth while discussion continues there as also.

Have a look at the NYT article and Ritholtz’ post.

Two interesting things from an article at ETFguide.com–venture capital is flooding to alternative energy to the tune of $571 million in Q1 ‘08, and following this trend, for more casual investors, ETFs have popped up from various fund families. First, here’s the key bit on the venture capital:

According to a recent Ernst & Young report using data from Dow Jones VentureOne, $571.6 million of venture capital was invested in 34 clean technology companies during the first quarter of 2008. A significant portion of investment was focused on alternative fuels ($178 million), energy/electricity generation ($148.3 million), and energy efficiency ($116.4 million).

A number like $571 million is not really even the start of this stuff. Let’s compare it to one of the largest companies in the world, a member of “big oil” (hiss hiss). Exxon Mobil (XOM) has $470 billion in market capitalization. That doesn’t even count any leverage/liabilities from lenders. Chevron, BP, and Shell all have more than $200 billion. They also have billions of dollars in working capital.

My point here being that alternative energy, combined with the entire green movement, should continue to expand. In addition, the high prices of oil and electricity should help them upward. This sector has had issues recently because energy prices weren’t high enough to have people consider alternatives (good feelings from helping mother earth don’t apply for the entire market).

There have been many talks of bubbles at this point, but there aren’t enough good public companies to push this. There has to be value initially for a bubble (although not much), and it doesn’t seem to be there, yet. Growth along these lines, because of the nature of energy, and its infrastructure-heavy requirements, should give us a period of broad steady growth after an initial capital intensive startup.

In the volatile market, one thing is for certain–political movements the world over for environmental-based taxes and programs will effectively increase demand for these “green” services. CNBC reported in April that the average for clean energy stocks was off. I’m willing to write off that as mostly market volatility and a downward trend market-wide. Even as far back as November, MSN Money was talking about a green bubble. Again, I would reiterate: its just getting started. Energy costs have to rise to a point that it becomes valuable for people to look at alternatives.

Back to the article–most of us don’t have access to start-ups or enough money to qualify us to receive venture capital offerings. The availability of new ETFs lets the common person invest in companies that have made public offerings, so they’ve been around a little longer than the “start-up”. Also, it allows an expert (who you pay through gains in capital) to choose them for you. Whatever your strategy, there are many different types available, as ETF Guide documents (links in the block are from the original website):

The range of investment strategies are a broader industry sector approach, with ETFs like PowerShares WilderHill Clean Energy Portfolio Fund (Ticker: PBW) or PowerShares WilderHill Progressive Energy Portfolio Fund (Ticker: PUW). Each of these funds cover a range of emerging technologies like biofuels, wind power, hydroelectricity, geothermal power and solar energy.

The other strategy, which is more aggressive, is to make sub-sector bets that focus exclusively on a specific niche of alternative energy, like Solar (Ticker: TAN) or Nuclear Power (Ticker: NLR).

Top performing areas so far this year include the PowerShares Global Nuclear Energy (Ticker: PKN) ahead by 10.5 percent, the Claymore MAC/Global Solar Energy (Ticker: TAN) up 9.3 percent, and the PowerShares Progressive Energy (Ticker: PUW) advancing 2.1 percent.

Alternative energy ETFs generally charge annual expenses between 0.60 to 0.75 percent.

Make sure the expense ratios work with each fund’s probable growth, to ensure you’re not burning away any profits. Also, as with any investment, understand what its components are (know the stocks an ETF holds significant portions of, or mutual fund for that matter).

These might be a nice option for those that want a riskier investment in their portfolio, but would choose a simple stock. Instead, this allows you to diversify within a specific area (as laid forth in the fund’s prospectus) for relatively low cost. Again, this simply adds to the options set forth in previous posts of mine, and elsewhere.

Disclosure: I do not own any security listed in the post.