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PRIPPS and KID compliant ETFs for European investors

U.S. based ETFs are still unavailable for E.U. based investors due to the PRIPPS/ KID regulation discussed in the previous note. In this article we will list some alternative European based ETFs that could be used to follow a few of the Logical Investment strategies. So far the alternative ways to trade LI strategies as a EU citizen are: A. Try to qualify for professional status with your broker under MiFID II rules. Guidelines may differ amongst brokers. The Client declares to fulfil 2 out of the 3 conditions set forth below. - Carrying out transactions, in significant size, at an average frequency of 10 transactions per quarter over the previous four quarters; -T he size of the portfolio exceeds EUR 500,000, whereas portfolio is defined as including cash deposits and financial instruments; - To work or have worked in the financial sector for at least one year in a professional position, which requires knowledge of the transactions to be entered into. B. Use CFDs to trade the equivalent ETFs. Downside is cost of borrowing which may eat into long term profits. Upside is you can leverage your position. C. Use E.U. based equivalent ETFs. Here is a list of some useful ETFs trading at the London exchange. Original US ETF E.U. based Equivalent Exchange Currency Full Name SPY CSSPX LSEETF USD ISHARES CORE S&P 500 TLT IDTL LSEETF USD ISHARES USD TRES 20PLUS YR PCY IEMB LSEETF USD ISHARES JPM USD EM BND USD D JNK IHYU LSEETF USD ISHARES USD HY CORP USD DIST TIP IDTP LSEETF USD ISHARES USD TIPS AGG IUAG LSEETF USD ISHARES US AGG BND USD DIST GLD IGLN LSE USD ISHARES PHYSICAL GOLD ETC D. Use options or Futures This is possible for our UIS and GLD-USD strategies. Using Futures may not [...]

2018-07-07T10:35:33+00:00 By |0 Comments

U.S. ETFs unavailable to European investors: PRIPPS and KID

If you are a European investor and using Interactive Brokers (U.K.) as your broker you were in for a surprise this past week: Most major U.S. ETFs like SPY, TLT, GLD are unavailable for trading to retail traders. From justETF:  "The culprit is PRIIPs – a set of EU investment regulations designed to protect consumers (PRIIPs stands for Packaged Retail Investment and Insurance Products). PRIIPs require fund providers (including ETFs) to produce a Key Information Document (KID) that enables investors to compare the risks, rewards and costs of different investment products. European-domiciled UCITS ETFs were ready with their new KIDs when PRIIPs came into force alongside the MiFID II rules at the beginning of 2018. However US-domiciled ETFs did not comply and, as they mostly serve the US market, producing EU-approved information at their own cost is not a priority." We hope that this is a temporary problem and that a solution will be found. Until then we are looking at CFD's as an alternative for Europeans traders using LI strategies. Contracts Of Difference are available at IB U.K. for most major U.S. ETFs. The spreads and commissions are at par with the ETFs themselves ($0.01 spread, $0.05 commission) so they seem like a viable choice although there is a financing charge (current USD rate +1.5%) for holding positions overnight. Here is a snapshot of some major ETFs and their respective CFDs: You can read more about CFD's here: If you have any comments or feedback please post them at the forums:

2018-06-22T12:11:58+00:00 By |20 Comments

ZIV/MYRS – how to go on after the crash

I have been asked in several emails on how to go on with existing ZIV positions, so here is a short note for our subscribers which still hold MYRS/ZIV positions. As you know underlying to ZIV are short positions of the VIX Futures month 4-7. So ZIV moves are about the same as the moves of the medium price of these Futures. As you can see in the above VIX term-structure chart, the medium price for this Futures is about 19.50$. On February 1st, this medium price was about 14.70$, so its up about 4.80$ which should translate in a 30% drop of ZIV. Today's price of 19.5$ however is still quite low, and this price can well go to the region of 25$. If the correction continues or markets go sideways with high volatility, then ZIV can further go down quite a lot. This said I would not recommend to invest in ZIV at the moment. We also already said this in our last monthly strategy post. However if you are not afraid and still want to profit from the volatility spike and if you can trade VIX Futures, then the much safer way is to buy VIX calendar spreads. For this you would for example sell the VIX May Future and buy the September VIX Future. The price for such a spread is - 1.30$. This way you only invest in the price difference of the Futures and if these go up to 25$ you will probability not notice much as the September Future will make up the losses of the May Future. This VIX Future spread price of -1.30$ is a very rare occasion. Normally the curve is in contango which means that the further out a VIX future is, the more expensive it is. We only [...]

2018-02-06T09:02:14+00:00 By |23 Comments

Short Volatility: A short analysis of the actual ZIV performance after the July 2014 stock market selloff

This monthly premium of being short volatility is the only thing which makes the ZIV price go up. Unfortunately there is a second quite strong influence on the ZIV price. This is the market volatility (VIX). In the chart below you see the green VIX chart. Every spike corresponds to a fear spike of the investors. During such spikes we also have smaller market corrections. During these market corrections ZIV is going down, because the ZIV holders play the role of the insurer and they have to cover the losses of the insured investors. The good thing is, that the 3% monthly premium of short volatility investments normally more than covers all possible losses of the investors. 3% per month is 42% per year. In fact we borrow investors money to cover their short term portfolio losses at the enormous rate of 42% interest per year! Continue benefitting from Short Volatility The influence of the VIX short volatility can be considered as a sort of noise which adds to the quite stable premium performance of ZIV. The good thing is, that this volatility is mean reverting, so that even if ZIV has an intermediate drawdown, you know that this is only a temporary drawdown. The last few months, the VIX level was extremely low, therefore also the benefit from being short volatility. Now it is up again at 17 which can be considered as quite a normal average level. So there is no immediate danger because of this VIX level. Only if VIX comes in the region of between 20 to 25, then time comes to exit a ZIV position. Current Short Volatility environment If you look at the 3 month chart below, then you see that ZIV is still up nearly 10% for the last 3 month. Seen that [...]

2017-10-02T20:00:00+00:00 By |0 Comments

Logical Invest Strategy Performance for 2014

Dear investors, In general 2014 was quite a difficult year for investors, so we want to summarize and comment our strategy performance. Apart of the US market, all global markets finished the year with negative performances. SPY 13.46% (S&P 500 US market) FEZ -9.75% (Euro Stoxx 50) EEM -3.89% (MSCI Emerging Markets) EPP -1.92% (MSCI Pacific ex-Japan) ILF -12,29% (S&P Latin America) AGG 5.99% (Core Total US Bond (5-6yr)) Our Strategy Performance See here for a most recent Strategy Performance overview. However, most of the negative performance of these foreign market ETFs is due to the strong US$. The Euro lost 12% on the US$ and the US$ index UUP is 10% higher.  In fact, the USD/EUR hedged DBEU (MSCI Europe) ETF had a +4% performance, which is nearly 15% better than the USD denominated FEZ.  It is very difficult to forecast the influence of exchange rates on our strategies.  All this is driven by the Yellen and Draghi, but longer term, a strong US$ will make European and Asian markets more competitive.  So, we will probably see a rotation away from the US market to some foreign markets at some point. In spite of the global weakness and currency dislocations, the rotation strategy performance came through flat to up nicely for the year, and all had a strong year with hedging.  We had 5 intermediate short market corrections, which typically had a 2 week pullback of up to 10% and then a very fast recovery.  This sort of whipsaw market is not ideal for our rotation strategies.  At least for the old style of rotation strategies which always switched 100% between stock market ETFs and treasuries.  2014 was also a very strong year for treasuries, which again proved all analyst forecasts wrong. The 20% treasury hedge which I promoted since February 2014 had a very positive [...]

2017-10-02T20:00:00+00:00 By |7 Comments

Investment Performance – YTD Logical Invest Helping Investors Win the Battle

The markets have been choppy, investment performance generally also.  It is rough out there . . . currency wars and central bank interventions continue, while global growth is questioned. Investment Performance We are proud to work hard to help investors win the battle.   Our strategies continue to outperform with lower risk.   YTD through Jan 22, an equal weight blend of all of our strategies  performance is up +3.6%. Thanks for your support! Here our Investment Performance Read more about what our best performing strategy, the Bond Rotation Strategy does: Our high yield Bond Rotation Strategy is one of our core investment strategies. The strategy invests on a monthly basis in two of four different bonds. This is the perfect strategy if you are looking for a safe long term investment and if you want to sleep well even during turbulent financial markets. The extremely low volatility (risk) of this strategy is only 7.9% which is about 3-4x less than the S&P500 volatility. The 4 Bonds are: CWB – SPDR Barclays Convertible Bond JNK: SPDR Barcap High-Yield Junk Bond (4-7yr) PCY: PowerShares Emerging Mkts Bond (7-9yr) TLT: iShares Barclays Long-Term Trsry (15-18yr) The strategy is a very conservative approach to maximize your portfolio return and on the same time minimize the risk of losses. During the 2008 financial crisis the S&P500 lost more than 50%. This strategy ended the year 2008 even with a solid gain of 10% compared to a loss of -36.8% for a S&P500 investment. The reward to risk ratio (Sharpe Ratio) of this Strategy is 1.58 compared to 0.27 for a S&P500 investment. Since 2008 you made 3x more money with this strategy compared to an average S&P500 investment and this with much less risk.  

2017-10-02T20:00:00+00:00 By |11 Comments

The end of the turn of the month effect? Strategy and re-balancing during end-of-month

Historically and up to 2013, equities have exhibited a positive bias during the end of the month, called the turn of the month effect. Is the turn of the month effect still effective? Here is an turn of the month effect example of buying the SPY etf on the first down-day after the 23rd and selling on the first up-day of the next month . Trading is at the same day close. Turn of the month effectinvesting has been well documented in academic papers as well as blogs. The main reason quoted for this persistent bias has been turn of the month effect window dressing and rebalancing of big funds. As one of my favorite author/blogger/trader, Mr. Grøtte, has also recently blogged here the turn of the month effect is no more. Turn of the month effect is no more Why is this important to know? A lot of investors re-balance monthly. The day of the re-balance used to be somewhat important as there was an turn of the month effect bias. So it was better to 'buy' at the end of the month rather than at the beginning of the month. As of late (2013) this is less true. What this means in practice is that the specific timing for re-balancing monthly strategies may be less important than it used to be. It does not mean that turn of the month has no effect at all, it is just less relevant than it used to be. Broader Strategy Development Implications from the turn of the month effect Market edges are best revealed by understanding and measuring pattern based human behavior.   For a long time, the money flows supported end of the month as a buying edge but recently market patterns shifted. Market edges are not eternal.   As they are [...]

2017-10-02T20:00:00+00:00 By |7 Comments

Stocks, Bonds and Gold ETF Down

This past Friday (3/6/2015) was a difficult day for most portfolios that are long any major asset excluding the dollar index and volatility. Stocks, bonds and gold ETF declined. SPY was down 1.4%, TLT fell 2.2%, GLD (Gold ETF) also down 2.7%. We got some reactions from some of our subscribers asking if the models are failing, especially regarding the Gold ETF. So let's put things in perspective. Is this common? As you can see this is an outlier. It has only happened a few times in over 12 years that all, including Gold ETF fell.  Well, let's ask another question. Is it often that both SPY and TLT fall the same day? On the other hand, the SPY and TLT declining on the same day is not uncommon. Let's say we panic, we think everything is going down and short on the next open. We cover the next day close.  Over time, we lose money...not a good idea. Top pane: Price of 20 year Treasury ETF: TLT. Lower pane: Bakctest results starting with 100k. Now let's do the opposite. We go against our instinct and actually buy both SPY and TLT at the next day open. We sell the next day at the close. We see that over time this is a better strategy.    Top pane: Price of 20 year Treasury ETF: TLT. Lower pane: Bakctest results starting with 100k. So what does this mean?  Co-movement between equities and bonds are not uncommon. It does not mean that the basic correlation between the two assets has fundamentally changed. History shows that thinking something is wrong and selling is counter-productive.  The idea is to have a long term plan and to follow it while paying less attention to short term movements, news, hype and emotions. It is possible that a model stops working. In this case, that would mean the fundamentals [...]

2017-10-02T20:00:00+00:00 By |5 Comments

Logical-Invest review @ Daily Fintech

With a lot of hype about FinTech these days, we´re happy to have received a positive review from one of the most important FinTech blogs. What is FinTech? Here the definition of FinTech by Investopedia: Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century. Originally, the term applied to technology applied to the back-end of established consumer and trade financial institutions.             A review of Logical Invest by Efi Pylarinou @ Daily Fintech "Logical-Invest offers actionable portfolio solutions: Simple and Intelligent" "They provide you with 100% actionable advise." "You can pick a monthly subscription or an annual subscription to one of their core strategies and pay less than 3 shares of Apple (for the year)." "Financial advisors are natural users of such tools and they typically, subscribe to all the Logical-Invest products. Retail investors are also using the single strategies because they are relatively simple and fit in every portfolio." Read the whole article in Daily FinTech here:   Logical-Invest offers actionable portfolio solutions; Simple and intelligent. By Efi Pylarinou Looking for a quant edge in your investing strategies? Logical-Invest already has 8 off-the-shelf strategies that you can “grab” and use. Logical-Invest is not an investment advisor and will not manage your money. They provide you with 100% actionable advise. You can pick a monthly subscription or an annual subscription to one of their core strategies and pay less than 3 shares of Apple (for the year). Logical-Invest was founded by four partners that bring a lot of experience in financial markets, quantitative fields (engineering), and business. They started by introducing a sharing platform of their own strategies for investing. Logical-Invest sprung out of this, less than six months ago. The team is putting their money where their mouth [...]

2017-10-02T20:00:00+00:00 By |0 Comments

Build Custom ETF Portfolios: Mid Year Review Portfolio Builder

For our „All Strategies“ Subscriber who use the Portfolio Builder to blend their own mix of Logical Invest Strategies, here some updates and a short mid-year review:We have now included the “World Top 4 Strategy” into both the online an offline tool. To keep the charts readable, we opted for replacing the Aggressive Version of our “Global Sector Rotation”. The preconfigured and optimized Markowitz Portfolios have been updated, only slight changes in the allocations occurred – all are <5%, so in most cases these can be neglected due to account size.

2017-10-02T20:00:00+00:00 By |7 Comments