Themis Trading Blog
<< Go Back

Heavy Metal Baby!

28

October, 2010

Not ACDC; REMX!

 

This year has seen a plethora of metal ETF’s brought to market and pitched to retail investors.

Today Van Eck begins trading their new Market Vectors Rare Earth/ Strategic Metals ETF: REMX. It was originally named the Minor Metals Fund, but then a focus group got involved, and you now have the Rare Earth Strategic Metals Fund. Think about it. Something that is Rare will go up, and something that is Minor will, errr sink.

Unlike some ETF’s, which are just easy (like SPY, which is a basket of the 500 stocks making up the S&P 500), this REMX is both easy AND complex at the same time! How so you ask? Well, the sales pitch is easy, and the organization and management of the ETF is what is complex. Witness please:

Easy:

What is totally awesome about these ETF’s is that they are just easy! You don’t need to learn anything or do any homework. You just buy it, maybe sell a portion next week, then buy it back, then sell some higher, then buy it lower, then sell it higher. It’s like a caveman could do it. The metals that this ETF is all about are like totally in high tech screens and companies involved in green stuff. Oh and military applications and fiber super conducting superconductors in hybrid cars and whatnot. You need to be represented in this space!

Complex (details from ETF Daily News and the prospectus; I tried to pick the important points, and I left out a bunch)

-               It will list on the New York Stock Exchange under the symbol (NYSE:REMX), and will have a total annual fund operating expense of .57%.

-               The Rare Earth/Strategic Metals Index is a rules based, modified capitalization weighted, float adjusted index intended to give investors a means of tracking the overall performance of publicly traded companies primarily engaged in a variety of activities that are related to the producing, refining and recycling of rare earth and strategic metals and minerals.

-               As of October 11, 2010, the Rare Earth/Strategic Metals Index included 24 securities of companies with a market capitalization range of between approximately $157 million and $370 billion and an average market capitalization of $1.2 billion.

-               Index values are calculated on weekdays and are disseminated every 15 seconds between the hours of approximately 1:00 CET – 23:30 CET.

-               The Rare Earth/Strategic Metals Index is reconstituted quarterly, at the close of business on the third Friday in a quarter-end month (i.e., March, June, September and December) and companies are added and/or deleted based upon the Rare Earth/Strategic Metals Index eligibility criteria.

-               The Fund normally invests at least 80% of its total assets in securities that comprise the Fund’s benchmark index. The Fund’s 80% investment policy is non-fundamental and requires 60 days’ prior written notice to shareholders before it can be changed.

-               The Fund, using a “passive” or indexing investment approach, attempts to approximate the investment performance of the Rare Earth/Strategic Metals Index by investing in a portfolio of securities that generally replicates the Rare Earth/Strategic Metals Index. The Adviser expects that, over time, the correlation between the Fund’s performance and that of the Rare Earth/Strategic Metals Index before fees and expenses will be 95% or better.

-               The Fund may also utilize depositary receipts to seek performance that corresponds to the Rare Earth/Strategic Metals Index.

 

Wait. Depository Receipts? Are those Swaps? Ruh roh.

Think about the sheer number of commodity and metal ETF’s out there today. Do you think that the creation of so many financial products, complex in nature, utilizing creation /redeem mechanisms not widely understood, that utilize swaps, and are handled by trading desks called “Delta One” desks, will have no effect on the demand for the underlying metals? Or will these numerous products fuel speculation and bubbles in the land of 0% interest, causing spikes and inflation pain for regular day folks, like what we all witnessed in 2007 in the oil markets test run? Ask Mike Masters about that; he’ll tell you.

And to celebrate the Metal’s ETF launch, investors have hit the SILVER level, by pulling money from equity funds for a 25th consecutive week since May 6th’s Flash Crash, which is the media’s fault for harping on it frequently.

Also in Market Structure News, we give you Nanex’s DVR recording of XLF yesterday afternoon, where some firm(s) sent 2,800,000 quotes to the NSDQ exchange in the two minute period between 2:25 and 2:27 (NANEX data).

That is 23,000 quotes per second. And why would a firm do this? Possibly to clog pipes? Possibly to get their minimum quote requirement satisfied in one fell swoop to get the good rebate rates? Possibly to generate market data revenue fees to pass back on to investors? We unfortunately are unsophisticated, so we do not know what the Really Good Reason is for the stuffing.

Finally, RLRN, Renaissance Learning, reported after the close and announced a $2 one-time dividend. The stock was strong into the closing bell, rising to $12.35, but when the news of the dividend hit, the stock spiked $9 dollars. Woo Hoo. No circuit breakers or safety net after 3:45pm folks!

 

 

 

Where we left off 4:00pm EST:

DJIA                                             11,126.28                                       -43.18

S&P500                                          1,182.45                                      -3.19

NASDAQ Composite                     2,503.26                                      +5.97

Futures now at 7:30am EST:

DJIA:                                                     +12

S&P500:                                                +2.00

NASDAQ 100:                                     +2.25

Key Data out today:

 

08:30:                                    Initial Jobless Claims (expected 455,000)

08:30:                                    Continuing Claims (expected 4,430,000)

08:30:                                    Jobless who have dropped off the list, or have given up (ignore)

 

 

Since the prior close, some key stories:

 

-          Dollar weakens; stock futures higher again.

-          Bank of Japan cut its forecast for Japans economic growth through March 2012.

-          Confidence in Europe’s Economy Rises on Manufacturing.

-          Fed Asks Primary Dealers How Much QE2 Should Be.

-          European shares opened in positive territory today boosted by a stream of positive corporate earnings.  (Ex. Dassault Systems, Royal Dutch Shell, Bayer, Daimler, etc.) 

-          Potash raises guidance.

-          JP Morgan and HSBC accused of silver manipulation.

-          ORCL fights with HP in the NY Times.

Earnings:

 

  • Pre-open: AN, AVP, BEN, BLL, BMS, CAH, CCE, CELG, CL, CME, CMS, CNP, DOW, DUK, EK, EQT, FO, GT, HOT, IRM, LLL, MCO, MJN, MMM, MOT, NBL, NIHD, PNW, PPL, RTN, TE, WM, WMB, XEL, XOM, XRAY, ZMH
  •  After Market Close: BMC, CEPH, CERN, CLF, EMN, EXPE, FII, FSLR, GNW, KLAC, MET, MFE, MSFT, MWW, MXIM, SUN, SWN, VAR, VRSN

 

 

Significant Movers This Morning:

LVS +10.6%, FLEX +10.2%, USU +7.9%, SYMC +5.8%, ICO +4.0%, AFFX +3.5%, ENTR +2.8%, AKAM +2.6%, LSI +2.5%, AEM +1.9%. FIRE -19.3%, ISSI -14.7%, SKX -13.5%, FLS -10.0%, GSIX -7.7%, QTM -6.9%, ARRS -6.6%, BYI -6.3%, UHS -5.9%, ALL -4.2%, CAVM -3.5%, GMR -3.5%, PLXS -2.7%, HLX -2.3%, V -2.2%, ESRX -1.8%, NSC -0.6%.

Post a Comment

You must be logged in to post a comment.

Home | Who We Are | The Themis Approach | Market Structure Analysis | Newsroom | Blog | Contact
Member FINRA & SIPC | Regulatory Disclosures | Copyrights ® 2014 All Rights Reserved By Themis Trading LLC
wp_footer()