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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

The Logical-Invest monthly newsletter for July 2018

Logical Invest Investment Outlook July 2018 Our top 2018 investment strategies, year-to-date : The NASDAQ 100  strategy with +13.13% return.   The 3x Universal Investment strategy with +3.03% return.  The Universal Investment strategy with +0.72% return SPY, the S&P500 ETF, returned +2.52%. Market comment: General investor sentiment is quite bearish. The most recent AAII Investor Sentiment survey shows only 28% of investors believe the markets will do well in the next 6 months, while 40% are bearish and 30% are neutral.  No wonder, as the topic of upcoming tariffs and trade wars dominated media. Furthermore, the Federal Reserve raised its target for the federal funds rate to a range of 1.75%-2.00% and upgraded the anticipated number of future rate hikes to four for 2018, reflecting a hawkish bias. Both events caused the dollar to surge further as investors fled emerging markets for the safety of interesting bearing U.S. cash. It was not a good month for foreign markets. Current central bank interest rates. Anyone tracking pre and post crisis rates will find this picture quite odd with Australia and New Zealand offering lower returns than the dollar. Table courtesy of fxstreet.com China (FXI) fell by -6.7%, Brazil (EWZ) by -8.5% while the broad emerging markets ETF (EEM) was down -4.53%. Gold fell again this month by -3.6% while TLT, the 30 year Treasury ETF was slightly up at +0.64%. The big winner for this month was Mexico at +6.8% probably due to positive expectation for the newly elected president. ZIV, which we use at our MYRS strategy, was up +6.9 percent by June 15th only to loose as much in the second half, finishing the month at -0.56%. SPY was slightly up at +0.56%. The month's best strategy was the Nasdaq 100 which held two winners, namely NTFLX (+11%) and Amazon (+4%). The two Universal Strategies, did not track each other [...]

2018-07-01T06:02:50+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: https://www.interactivebrokers.com/en/index.php?f=1170 If you have any comments or feedback please post them at the forums: https://logical-invest.com/forums/topic/european-markets/

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

The Logical-Invest monthly newsletter for June 2018

Logical Invest Investment Outlook June 2018 Our top 2018 investment strategies, year-to-date : The NASDAQ 100  strategy with +9.81% return.   The Universal Investment strategy with +3.15% return.  The Global Sector Rotation strategy with +2.73% return SPY, the S&P500 ETF, returned +1.93%. Market comment: In May we saw both U.S. equities and U.S. Treasuries rise,  returning +2.43% (SPY)  and +2.01% (TLT) respectively. This was partly due to investors running away from Europe and into the safety of Treasuries, as Italy is once again in a political crisis. The dollar index (ETF:UUP) rose +2.6%, which partly explains why Gold, even though a safe heaven, lost 1.2% for the month. Same for emerging markets: Strong dollar causes weak foreign equity and the Emerging market ETF (EEM) lost 2.6%. Those affected the most were the southern Europeans: Spain -8.2%, Greece -14.1%. Some Latin American countries also went into crisis mode:  Mexico -13.4% on fear of tariffs and Brazil -15.7% on a continued union strike. Volatility on the other hand behaved as expected and ZIV gained +6.74% for the month. The Euro, lost another -3.2%. Most notable for this month is the continued flattening of the Treasury Yield.  In other words interest rates on short term Treasuries are rising faster than longer dated ones. This does not mean a recession is imminent. Historically an inverted curve (ie, a shorter term treasury bill/note  yielding more than longer dated one) may signal a recession, but when it has, it has taken an average of 12 months* for it to materialize. Date 1 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 5 Yr 7 Yr 10 Yr 20 Yr 30 Yr 05/01/18 1.68 1.85 2.05 2.26 2.50 2.66 2.82 2.93 2.97 3.03 3.13 The SP500 (blue line)  vs the 10 Year - 2 Year Treasury yield  spread (red line). Shaded areas [...]

2018-06-01T07:43:14+00:00 By |0 Comments

The Logical-Invest monthly newsletter for May 2018

Logical Invest Investment Outlook May 2018 Our top 2018 investment strategies, year-to-date : The NASDAQ 100  strategy with +6.49% return.   The Global Sector Rotation strategy with +1.28% return  The Universal Investment strategy with +1.04% return. SPY, the S&P500 ETF, returned -0.48%. Market comment: Spring is coming and so is the beginning of the challenging part of the investing year. There is a reason people say "Sell in May and go away". Historically, on average,  it has been easier to make money investing from November to April than from May to October. Seasonality does not predict price action but it does reveal a historical tendency of the market to underperform during the spring and summer months. Of course this applies to U.S. equities while the opposite holds for treasury returns. A revival of volatility is also pointing to a choppy market. After the unprecedented February spike in VIX, volatility has bounced back and forth a few times. It seems to want to settle in the 14-20 mid-range range rather than the 9-14 extreme low-levels of 2017. There is a wide-spread expectation that this levels will be the new norm going forward. Yields are up. Expectations are that the Fed will hike interest rates 3 more times this year. Unemployment is down at the 4.1% level for the 6th consecutive month. Wages are rising but at a slower pace than expected, meaning there is room to grow. Official (i.e., underestimated) inflation is at 2.4%. The 10-year Treasury touched the 2.96% mark, while the curve has flatten considerably. A 2-year note will give you a worry-free 2.49% yield while a 30-year 3.13%. Interestingly, just next door in Europe, the 2-Y German Government Bond will yield 0.58%, while investing in Bulgarian Gov. bonds will pay you less (1.25%) than the U.S. full-faith-and-credit backed 2Y Note. Surprisingly the EUR/USD rate has not [...]

2018-05-01T05:38:09+00:00 By |1 Comment

The Logical-Invest monthly newsletter for April 2018

Logical Invest Investment Outlook April 2018 Our top 2018 investment strategies, year-to-date : The NASDAQ 100  strategy with +8.02% return.   The Universal Investment strategy with +2.64% return.  The Global Sector Rotation strategy with +2.01% return. SPY, the S&P500 ETF, returned -1.00%. Market comment: In the beginning of March, most of our strategies allocated large amounts to TLT,  the Treasury ETF. Subscribers using multiple combined strategies ended up with Treasury exposure north of 70%. This was quite difficult to digest considering the current sentiment towards rising rates. And yet TLT was one of the few assets that were positive for the month returning +2.86% vs SPY at -2.74%. To the right you can see the performance table sorted by 1-month return as all strategies outperformed SPY due to the treasury hedge. The biggest winners for the month were the 3x UIS, adding 5% and the Nasdaq 100 adding 3.32% to reach a respectable 8% for the year. Worst performers were the two BUG strategies losing -0.58% and -0.79% and the MYRS losing -1.50% and remaining at a large drawdown year-to-date. We wish you a happy Easter and a healthy and prosperous 2018. Logical Invest, April 1, 2018 Strategy performance overview: Visit our site for daily updated performance tables. Symbols: BRS - Bond Rotation Strategy BUGST - A conservative Permanent Portfolio Strategy BUGLEV - A leveraged Permanent Portfolio Strategy GMRS - Global Market Rotation Strategy GMRSE - Global Market Rotation Strategy Enhanced GSRLV - Global Sector Rotation low volatility NASDAQ100 - Nasdaq 100 strategy WORLD-TOP4 - The Top 4 World Country Strategy UIS - Universal Investment Strategy UIS-SPXL-TMF - 3x leveraged Universal Investment Strategy AGG - iShares Core Total US Bond (4-5yr) SPY - SPDR S&P 500 Index TLT - iShares Barclays Long-Term Trsry (15-18yr) Follow my blog with Bloglovin

2018-03-31T09:29:18+00:00 By |4 Comments

The Logical-Invest monthly newsletter for March 2018

Logical Invest Investment Outlook March 2018 Our top 2018 investment strategies, year-to-date : The NASDAQ 100  strategy with +4.55% return.   The Universal Investment strategy with +1.45% return.  The Global Sector Rotation strategy with +0.58% return. SPY, the S&P500 ETF, returned +1.79%. News: Strategy update: Our updated hedge now allocates to Treasuries, Gold or to a short US sector position. The hedge does not use currency ETFs anymore, which were conflicting with common 401k / IRA guidelines. Market comment: February proved to be a difficult month. Although our last newsletter started with a word of caution, we were surprised by the unprecedented move that followed: The volatility index spiked in such a way that caused massive losses to some of the industry's most popular volatility ETFs. Three major volatility ETFs were halted and two of them (XIV and SVXY) were permanently de-listed. We experienced the move first hand as we were trading VIX futures at the time. Our MYRS strategy, which is based on the ZIV ETF (VIX mid-term futures, 4th-7th month) took a large hit at -25%. The more popular XIV ETF (VIX front-term futures) lost more than 80% of it's value and was withdrawn from the market (see Frank 2013 article : Why we invest in ZIV and not in XIV). The SP500 experienced a quick 10% fall but has partially recovered. Our strategies, except MYRS, have somewhat recovered, the worst showing a year-to-date performance of -3.92%. This number of course does not reflect what happened in reality as many investors considered exiting the market. And for good reason: UIS 3x saw a -25% drawdown from it's all time high (-11.8% for the month) on February 8th. Today's -3.92% YTD number seems manageable but only in hindsight. The return (with a vengeance) of volatility has somewhat obscured the continued weakness of the most important [...]

2018-03-01T05:54:29+00:00 By |4 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

The Logical-Invest monthly newsletter for February 2018

Logical Invest Investment Outlook February 2018 Our top 2018 investment strategies, year-to-date : The Leveraged Universal strategy with +8.93% return.   The NASDAQ 100 strategy with +8.59% return.  The U.S. sector strategy with +4.39% return. SPY, the S&P500 ETF, returned +5.64%. News: QuantTrader Light is available to all subscribers, even to single strategy ones. Just download a copy and login with your LI username/password. Depending on your subscription level you will be able to access the corresponding strategies. This gives you the opportunity to update your portfolio during the last day of the month. Major strategy update: Leveraging on our multi-strategy framework, Frank created a new Hedge strategy that includes Gold. The new Hedge is included in most of our strategies and helps decrease Treasury exposure. Read more in our detailed article. QuantTrader version 510S has a new backtester build into the consolidation tool. You can now check how a portfolio of strategies would have performed in the past. 4 new videos will guide you on how to use the portfolio builder and the QuantTrader consolidation tool to issue signals as well as use the Interactive Brokers portfolio rebalancing tool. We hope to publish more videos in the coming months. Feel free to tell us your preferences. Market comment: This month's newsletter comes with a word for caution. The S&P 500 has risen in a parabolic fashion this past month. Sentiment has turned highly positive and most market players are sitting on profits. This is all good but we think we need to prepare for a new, slightly inflationary environment that may prove challenging to navigate through. Rising inflation is already reflected in the 10-year Treasury yield reaching 2.7% . The question is how will higher borrowing costs affect small to medium businesses, some of which rely on cheap credit. Loss of profitability for these companies could trigger a correction [...]

2018-02-01T10:42:15+00:00 By |3 Comments

The Logical-Invest monthly newsletter for January 2018

Logical Invest Investment Outlook January 2018 Our top 2017 investment strategies: The Maximum Yield strategy with 64.84% return. The Leveraged Universal strategy with 49.13% return.   The NASDAQ 100 strategy with 28.30% return. SPY, the S&P500 ETF, returned 21.70%. News: All-Strategy subscribers will be able to use QuantTrader 'Light' at no additional charge. Market comment: As we mentioned in our year-end review, the past year was characterized by large returns in U.S. and foreign markets and sustained low volatility despite an increase in geopolitical risk. The S&P 500 (ETF: SPY) returned 21%, Europe (ETF: FEZ) 24% and emerging markets (ETF: EEM) 37%, It is also the year where the U.S. Federal reserve stopped it’s 10-year balance sheet and increased short-term interest rates. Long term treasuries (ETF: TLT) as well as emerging bonds (ETF: PCY) managed a +9% while U.S. corporate bonds (ETF: AGG) barely touched 4%. Despite the announced tightening, the U.S. dollar lost ground: -13% against the Euro and -12% against gold. The most exciting financial event of the year is the attempt to include cryptocurrencies as a new asset class into the mainstream financial system. Looking at our strategies, our top performers were our riskier strategies: MYRS, UIS 3X and the Nasdaq 100. This is in line with the market being almost ‘perfect’ for 2017 and having very few corrections which benefits pure risk taking. This may or may not continue in 2018 as there are signs of caution: Central banks are slowing down or reversing stimulus programs and real world costs of goods, especially outside the U.S., are rising. 2017 was characterized by the astounding rise of cryptocurrencies, which we have been tracking since May. Bitcoin futures are now available to mainstream traders through Interactive Brokers (via CBOE and CME). Interestingly you need a whopping $50,000 margin to short 1 Bitcoin. For longs, the margin is [...]

2018-01-02T04:16:16+00:00 By |0 Comments