Category Archives: Indices

Inverse ETF

There is a big difference between betting and investing. Investing in inverse ETF’s equates to betting. This article talks about the demise of XIV. People investing in products such as XIV should be given a lobotomy sponsored by the NHS. This is starting to bring back memories of 2008. The culprit was Hedge Funds then. Today it is ETF’s. That time one person I spoke to that worked for a bank that was heavily marketing Hedge Funds admitted that they did not read the fine print and did not know about gating. Another person told me that he was told hedge funds would never lose money. I wonder what that person’s view would be on ETF’s today. I am not a betting man but if I was then I would say that he would cease investing in ETF’s for the next one year. I would be telling him to keep his wallet out.

The active versus passive debate has been skinned so many times that there is nothing left to skin. The answer is that there is a place for both. However, in neither should there be a place for inverse ETF’s. There is nothing wrong with shorting stocks or ETF’s. You cannot crucify the undertaker for making money when people die. Investing in inverse ETF’s is like injecting yourself with a lethal substance hoping that you will make money off the insurance. The reality though is that action of your will probably leave your health beyond repair and cause heartbreak to the ones closest to you.

Except for two people; everyone else I know who passed through the gates of Credit Suisse has been glorified cold calling salespeople. Their structured products are so beautifully created that the client will not even realise that the only people making money are the banks themselves. Of those two people, one died and the other is a gem of a person who is thankfully working for another institution. I have told him that leaving Credit Suisse was the best thing that he did. It has been some time since I spoke to him. Maybe I should now.

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Filed under Banking, Blog, Business, Compliance, ETF, Family Office, hedge funds, Indices, Investments, Market Outlook, Market Timing, Private Banking

Bitcoin: Digital gold or fool’s gold?

https://vanguardblog.com/2018/02/06/bitcoin-digital-gold-or-fools-gold/

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Filed under Blog, Business, Compliance, ETF, Indices, Investments, Market Outlook, Market Timing, Private Banking, Regulations, Tax Avoidance, Vanguard

An APPLE a day

I love alternate indices. RAFI which can be invested through PowerShares is probably my favourite investable index. The other index I really like is the Christmas Price Index. I had written a post on the following topics

  1. Religion-based Indices
  2. Condoms and Chocolates
  3. Analysis Test Series England vs. South Africa

I am still in the process of tweaking my cricket index. The common assumption in all this is my strong belief that the methodology used to measure certain indices is not completely accurate and some like the  ICC cricket ranking is completely wrong. One decision I really liked was a recommendation to buy the shares of Apple when the news that Steve Jobs had cancer broke out. Yes, I did feel sad that Steve Jobs had cancer but I absolutely was furious at the people who thought that Apple would collapse because Steve Jobs would no longer be involved and would die. Today I feel the same way about the negative ratings given by analysts about Apple. The good thing though is that the fall in the share price of Apple is a good opportunity to buy it. Apple is an innovative company and will continue to do so. Everyone initially predicted that the cost of the iPhone X would under perform the iPhone 8 and would eat into the profits of Apple. Analysts more often than not get their calls wrong. Does it really matter if a company distributes less dividend than analysts expected? The important thing is that Apple is a good company. I read an interesting astrological article on the numerology analysis of certain tech companies. I am not a great believer in astrology or horoscopes. I do consider that there is a certain amount of science in numbers. It does not matter whether it appears as numerology or the significance of numbers in various religious texts. This post on the thirteen tribes of Israel is extremely good. There is a logic in Shmita. Apple will always be an attractive company to buy into. Buying it when the share price is down is a bigger bonus.

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Filed under Apple, Business, Christianity, Cricket, ETF, Healthcare, Indices, Investments, Islam, Leaders, Market Outlook, Market Timing, religion, Test matches

Religion-based​ Indices

(Originally posted on 27th April 2010)

I wonder if it is a coincidence that I am writing another post related to religion. Any cataclysmic event will have an effect on a person’s psyche. On the surface, I do not think I have become more religious. However, there may have been a subconscious change.
My fascination with indices and especially those that have an alternate view should be apparent by now. So the launch of Europe’s first Christian Equity Index has caught my eye.
First, there must be a legitimate reason for launching an index. The reason for this is that there is an apparent demand by investors for so-called ethical stocks. First, the companies are drawn from the Stoxx Europe 600 Index. Second, they should derive their revenues from sources that are not against the values of Christianity as defined by a committee are only included.
Therein lies the first problem. The companies will be based on the interpretation of Christianity as set by people. Companies that have birth control are not included. This is an obvious reflection of the fact that members of the Vatican are present in the committee. Secondly, I refuse to believe that each and every company that will be listed there has not made any profit from non-Christian principled companies.
Thirdly is there a need for such an index? Shariah indices, for the most part, should act similar and contain the same underlying as a Christian index. Off the top of my head, I would say alcohol companies and the way interest is treated would differ.
I have stated earlier that the futures or stock market can reflect how well the country may perform in sports. Going by this philosophy then if this Christian index outperforms the European index and a shariah index then does that mean that Christian values are better than those of a secular world or Islam?
According to me, actions do not mean anything. What matters are your beliefs? In my mind, a Christian company is one that is led by people who have accepted Christ as their personal Saviour.  If Christians are looking to invest in ethical companies then this should be the starting point. Everything else will flow.

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Filed under Christianity, Indices, Investments, Islam, Market Outlook, religion

Condoms and Chocolates

(Originally posted on March 8th, 2010)

Durex in one of their studies just after the financial crisis reported that their sales had gone done and the average number of times people had sex reduced significantly. Around the same time, there was a report stating that the sales of chocolates had gone up. I told my friend then that a good sign that the world was in recession was when the sales of condoms decrease and that of chocolates go up. I view this as a sign of nervousness. The next step would be that the sales of condoms increases while the sale of chocolates begins to stabilise (rather than stagnate) This is a sign that the economy is improving. Then the final stage is when the sales of condoms increase at a significantly higher rate than that of chocolates. The sale of chocolates may actually decrease during this period. This I would equate with the economy being really good. People feel good about themselves. They feel happier. They go out more. Chocolate sales decrease because people no longer depend on it as a cure for depression. They avoid it so that they can get fit and look sexy again. I do not have any research yet to back my theory but I may be able to do it if I spend a few hours on Bloomberg.
If I can empirically prove my theory then I think this will be a better index than the Big Mac or iPhone because the number of people having sex and thereby using condoms is higher than people consuming either the Big Mac or the iPhone. The same with chocolates. The alternatives to both of these are limited. It is possible to make this index more accurate by calling it ” The Contraceptives and Confectionary Index (CONCON)” However that sounds too boring and not as exciting and naughty as “The Chocolate and Condom Index (CHOCO). Give me naughty and nice any day over formal and boring.

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Filed under ETF, Healthcare, Indices, Investments

Marks and Spencer

I have always been opposed to investing directly in Marks & Spencer. My view was simple. M&S sat in no man’s land. You had John Lewis that provided high-end goods. On the other end, there was Primark. If M&S made a few wrong calls on fashion then they would have a major slump. This did happen quite a few times. Yesterday’s news that M&S is to close down more stores came as no surprise. I strongly believe that M&S food is the ventilator that has kept the company alive. It will continue to do so. As always all you have to do is have a walk through the stores of M&S. In general, M&S Food will have the largest percentage of people. This trend will change unless M&S can appeal to the people who are inclined towards healthy but quick food but their older base that would like their traditional British meals. Will M&S be able to balance their traditional Cottage Pie with their Thai green curry? In light of Brexit, I hope they do as they are one of the iconic British brands. If one has to gain exposure to the UK today then possibly the best way to do it is through  VGK.  The Vanguard European Fund has about a 29% exposure to the UK. The exposure to the European markets would act as a hedge. I believe we are going through an extremely interesting time right now. I do not like making predictions but there will be a winner and a loser in the whole Brexit process. Either way, the financial markets will get affected. Overall the European markets will go up.

 

Disclaimer: I do not hold any shares of Marks & Spencer or VGK right now.

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Filed under Brexit, England, Europe, Food, FTSE, Indices, Investments, Market Outlook, Market Timing, United Kingdom, Vanguard

Analysis Test Series England vs. South Africa

Analysing this series from a pure numbers point of view and as a portfolio has been very interesting. To see my theory finally come alive has been rewarding. Although I have to admit the data entry has been a slight pain. If there are any good data base programs that can work well with excel then I will be grateful if you let me know.

This was a great series. It was extremely well fought. Sadly the final margin of victory does not reflect how close the series was. South Africa was 7.6% ahead after they levelled the series. This increased to 18.1% for the third test where both England and South Africa made changes. After the third test England was ahead by 9.3% and they ended with a lead of 31.4%. In comparison the West Indies and Pakistan series ended up with Pakistan leading the series by 9.5%. This should generally indicate that the test matches were closely fought. There may be some truth to this. The margins of victory were smaller. All of the matches were won on the fifth day. Apart from this the extra test and the margin of victory would have greatly contributed to the differential. I am not entirely convinced that the difference should be so great. The best way to check this is to create a benchmark or to average the scores.

The player of the series for England was Moeen Ali and for South Africa was Morne Morkel. This is where things get interesting. Root has the most points in the series. He leads Moeen by 1%. The question is whether the all round performance by Moeen Ali is better than the fairly consistent performance by Root with the bat and his captaincy. In my view the role of the captain is vital in cricket. Further this is Root’s first test as a captain. When tests go badly the captain is usually the first head to roll and get criticised . Before Cook and Strauss; you had Freddie Flintoff and Kevin Pietersen who lost their captaincy because of the bad performance of the team. Overall I would be tempted to give the Man of the series to Root. The performance of both Moeen and Root are too close to call.

The numbers do not support giving Morne Morkel the player of the series for South Africa. Yes he bowled beautifully and was unlucky not to have picked more wickets but a millimetre is the difference between not getting any wickets and getting five wickets just like a snick off the bat that could get a batsman out for a duck or the one that leads to a double hundred. For me it is clear that Hashim Amla is the man of the series for South Africa. After Amla the next best performer was Quinton De Kock. However a good portion of his score came from his wicket keeping role.

The top five performers are below

1) Joe Root

2) Moeen Ali

3)Johny Baristow

4) Ben Stokes

5) Hashim Amla

The best batsmen are below

1) Joe Root

2) Hashim Amla

3)Johny Baristow

4)Ben Stokes

5) Dean Elgar

The best bowlers are

1) Moeen Ali

2) James Anderson

3)Morne Morkel

4)Keshav Maharaj

5) Kagiso Rabada

De Kock has got more points for wicket keeping than Baristow. Both of them are pretty close for their wicket keeping. The role of the wicket keeper has changed. Your wicket keeper must be able to bat really well. It is in this department where Baristow excelled.

My playing eleven for this series would be as follows.

1) Alastair Cook

2) Dean Elgar

3) Hashim Amla

4) Joe Root (Captain)

5) Faf Du Plesis

6) Ben Stokes

7) Johny Baristow (Wicket Keeper)

8) Moeen Ali

9) Toby Roland-Jones

10) Morne Morkel

11) James Anderson

The only spot that could be up for debate is whether the number Rabada should be played instead of Rabada. You have experience with Rabada. Roland-Jones just started his international career. Rabada did get more points than Roland-Jones but Toby got more average points than Rabada. It would have been nice to have Bavuma in the mix but you can’t pick him over Du Plesis and Ben Stokes has to be in the side.

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Filed under Cricket, England, Indices, Test matches

Analysis England vs. South Africa third Test Match

South Africa did a straight swap where they replaced Duanne Olivier for Kagiso Rabada. Olivier’s performance was well below standard. His economy rate was very high. His strike rate was good but you would expect it to be significantly lower. He just gave too many runs. Of course it can be argued that it really did not matter at the end of the day because South Africa had a big lead. While this could be justified for the second innings where he gave 7.5 runs per over; you really can’t justify his first innings economy rate where he gave 5.57 runs per over. These are closer to what would be acceptable in One Day Internationals and T20’s and not in tests. The result was that South Africa started 4.1% higher than where they finished.
England made a few changes. Gary Ballance was dropped and Tom Westley was brought in at number three. Michael Wood got injured so Toby Roland-Jones was brought in to replace him. Liam Dawson was dropped and interestingly Dawid Malan was brought in to replace him. These changes made the English team look better. It also removed the illusion that Moeen Ali was their second spinner. I was sceptical about Moeen Ali wearing the hat of a spinner early on in his career. However he has improved heavily over the years and definitely deserves the title of the main spinner. These changes meant that England started 22% lower than South Africa.
The headlines may have been about Moeen Ali’s hat trick but this was definitely Ben Stokes games. A fast century and a quick fire 30 along with wickets in both the innings made sure that the deal was sealed. England excelled in their batting and bowling. Westley did reasonably well. I did wish that Malan would have done better. His performance with the white ball recently has been magnificent to say the least. I do hope he is given more chances. For the bug scores England are largely dependent on Cook, Root, Stokes, Baristow and Ali. There are still problems with the opening pair. There is no serious middle order that can be spoken of. Due to the weakness in the batting, the partnership that are essential are Root and Stokes, Stokes and Baristow and finally Moeen Ali with the tail and either Stokes or Baristow.
With this victory we have another all rounder playing an instrumental role and England regain their lead and are 9.3% ahead.

Cricket at the end of the day is a game analysed by numbers and stats but lives because of passion. Moeen Ali’s hat trick was the first in the Oval. It was the third hat trick to finish a test match in the history of test cricket. The last being in 1902. It was the first where all the batsmen who got out were left handlers. History was made. This hat trick will probably be excellent of spin bowling in England because it was done by a person who has come from the Indian subcontinent. The fact that the hat trick was achieved by a spinner in England makes it more valuable than if a seamer would have achieved it.

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Filed under Cricket, England, Indices

Analysis England vs. South Africa 2nd Test.

As expected England played with an unchanged side and South Africa made quite a few changes. Du Plesis was back and captaining the side. Rabada was left out because he was banned for one test. South Africa also made one strategic choice by replacing de Bruyn who is more of a pseudo all rounder with Chris Morris who fits the term all rounder more suitably.
The result was that South Africa started 62% weaker than the English team. This compares to them underperforming England by 32.2% in the first test match. By the end of the test match South Africa was was in front by 7.6%.
Hashim Amla performed extremelly well with the bat. However once again it was an all round performance by Vernon Philander that sealed the match. Hashim Amla scored more runs than Philander. Chris Morris got more wickets than him. Philander's batting strike rate was much better than Amla's which meant that it was worth more. Morris had a better bowling strike rate but his economy rate was bad. Philander had a better bowling average. Faster runs combined with a better economy rate and a bowling average was too much for England. He seemed to be batting and bowling on a different wicket altogether.
My numbers indicate that England bowled better than South Africa. This is definetly because there were better individual performances from England but you had all of the South African Bowlers contributing. I am not too concerned about this because this actually shows the system is working. The match was won and lost in the batting department. The batting of South Africa was 3% better than the last test match. However England was 50% worse.
I am looking forward to the next match. South Africa will definetly bring back Rabada. England will most likely make changes.

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Filed under Cricket, England, Indices

Do what you want to but don’t get caught

The tube strike is on. Waiting for transportation is crazy. LI guess the strike is partially justified. Demanding that the employees that made mistakes be given their jobs back does not make sense. Asking for a rise in pay is acceptable. They are doing a much better job than the bankers. If they can get bonuses then why can’t the tube employees? Besides in my opinion the tube workers provide a more essential service. I should make it clear that I support giving of bonuses to people who perform well in the financial sector. However I think it should be based on a risk reward basis. Possibly more related to the Sortino ratio than Sharpe. The sledging of the Ashes has gone political. Gordon Ramsay called a leading Australian TV presenter a lesbian and “pig woman”. He also recommended that she use Simon Cowell’s Botox doctor. The Australian PM said “I think I can describe his remarks as reflecting a new form of low life. Good on Tracy Grimshaw for coming out and giving him a left uppercut.” Politicians should do what they do best. Let them continue making empty electoral promises and fleecing the tax payers money. I am not only referring to what has been happening in the UK. The rule in politics, finance and to a certain extent in life is”Do what you want to as long as you don’t get caught.” If you do get caught then you have to be ready to face the repercussions. These don’t only hurt the person who caused the mistake and cheated but also other people around. This should be a lesson that we have to learn from the financial crisis and the current political situation in the United Kingdom. I do not know whether the head of Gordon Brown will role. However I am sure that the public has lost faith in the political leaders.

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Filed under Ashes, Indices, Politics, Ratios, TFL, United Kingdom