Exchange Traded Funds

ETF InvestingManaged ETF portfolios are all the rage among money managers. The problem for individual investors is that the fees layer up quickly. A financial advisor might charge about 1% to recommend money managers to clients. The money managers often charge another 1%. The combined 2% in "service" fees is a HUGE barrier to overcome. Most people can manage an ETF portfolio very efficiently without having to overcome the layers of fees within the financial industry.

The Fundamental Trends Global Trends ETF portfolio is designed to be a slowly traded strategy that takes advantage of the big trends in the global economy. By managing risk with periodic trades out of downtrending asset classes and into uptrending asset classes we can greatly reduce our risk and increase reward. The combination of low expenses at Fundamental Trends, understanding the big trends in the global economy and stepping out of the way of falling markets is a winning combination. 

I screen ETFs based upon several key criteria: expenses, valuation, internal holdings, methodology of the index an ETF is tracking and long-term growth outlook. In this way I am considering both the top down and bottom up prospects for an ETF. Very few do either side of this analysis, rather others simply buy hot sectors and asset classes only to get burned in short order. By comparing the internal workings of ETFs we can pick out the best ones in the expanding universe of funds.

ETF strategies are ideal for both smaller beginning investors and those managing a larger asset allocation.


You must differentiate oil from oil stocks.

Oil is extremely volatile in the short-term and even more difficult to trade.

Many oil stocks are seeing increasing cash flow, leading to higher shareholder yield, as they realize higher oil sale prices.

Oil stocks are a still a screaming buy in my opinion and I think one easy play ETF will double in share price within 2 to 3 years.

There is a huge difference between oil and oil stocks. The price of oil moves on changing narratives in the short-term. The United States Oil ETF (USO) and 3x United States Oil ETF (USOU) are going to move a lot. You can try to swing trade those ETFs and affiliated options, and probably fail, or, you can scale in and out over longer time periods - that's what I do.


Risk assets have very little support - stocks are risk assets.

President Trump's trade policy is high risk and has an unknown ending.

While valuations have come in, earnings are clearly peaking, making the CAPE ratio relevant.

Indexers and closet indexers will get hit badly in a correction or outright bear market.

Use market strength to lighten up allocations to stocks and raise cash levels.

The time has finally come to be a net seller of stocks. This does not mean that stocks cannot continue to go up a while. As I said nearly a year ago in a conversation with Mark Yusko, there is a lot of reason to believe we see 3000 on the S&P 500. 

Oil prices have fallen the past month. This is not strictly supply and demand driven. With oil, there is far more that impacts spot prices.

Oil is impacted by oligopolies (America), cartel (OPEC) and Russia are protected by policy, capital and collusion. If oil were a free market, it would indeed be $50ish in price long-term.

This column should be read after: Two Weeks Until Oil Begins Rally To $80

It is very rare that I use levered ETFs. The opportunity has to be striking. In most cases I greatly prefer options to levered ETFs due to the expenses related to levered ETFs and other structural issues.

Right now however, there is a compelling argument to use a levered oil fund.

As you know, I believe President Trump is going to end the Iran nuclear deal. That in conjunction with supply constraints on oil and the summer driving season are a lining up the perfect storm for oil prices to rip higher to about $80 per barrel. See this article for some of the technicals:

Oil's Technical Path To $80 Per Barrel

Energy has been a top performer for decades. Over the past few years it has seen a volatile road crashing from highs. Recently oil and gas rallied into late autumn, however, there has been a recent correction. This correction is another, maybe the last, excellent opportunity to buy into the "Last Great Secular Oil Bull Market" in my opinion.