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Blockchain ETF launch
Sara G
Posted: 16 April 2018 20:09:05(UTC)
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May be of interest:

https://www.investmentwe...es-first-blockchain-etf

I like the sound of the 50:50 split between enablers and users.

Index composition here: https://www.indxx.com/indices.php?id=252



2 users thanked Sara G for this post.
Tim D on 16/04/2018(UTC), dlp6666 on 18/04/2018(UTC)
Tim D
Posted: 16 April 2018 21:45:52(UTC)
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Hmmm... top 10 holdings are:

Quote:
MICRON TECHNOLOGY INC
ALIBABA GROUP HOLDING-SP ADR
NVIDIA CORP
INTL BUSINESS MACHINES CORP
TAIWAN SEMICONDUCTOR-SP ADR
BAIDU INC - SPON ADR
COGNIZANT TECHNOLOGY SOLUTI CL A
ACCENTURE PLC-CL A
ASUSTEK COMPUTER INC
INTEL CORP


If someone pointed me at that list with no context and said "guess the ETF domain"... I'm not sure "blockchain" would be my first guess. It'd be something more like "Enterprise IT (HW & SW) providers and users" and/or "something to do with Big Data".

Consider me sceptical... I'm just not convinced you can get much exposure to some niche theme X by buying a basket of big companies who each have no more than 0.001% of their business actually having anything to do with X.

Have to admit to taking a punt on the Augmentum Fintech (AUGM) IPO recently. What they'll do with the cash has yet to emerge... but there were seed holdings in Zopa/Seedrs/Bullion Vault/Interactive Investor. That's more like it for a portfolio focussed on the bleeding edge of a trend... but if they go and start investing in things like IBM, Intel, Accenture because those companies intersect fintech in some way, I'll be most underwhelmed/disappointed.
3 users thanked Tim D for this post.
Sara G on 17/04/2018(UTC), dlp6666 on 18/04/2018(UTC), Jim S on 18/04/2018(UTC)
King Lodos
Posted: 16 April 2018 22:29:49(UTC)
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I get the impression it's dawning on markets that there's no real use for blockchain.

It's been around since the 90s; Mastercard and Visa have trialled using it for bank-to-bank transfers; PayPal can't work out why it's any better than a database; there are suggestions of using it in science, AI and energy – but I still can't find a reason that makes any sense.

For a long time people have been trying to explain to me why it's so revolutionary .. I'm not sure I ever had it wrong
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Sara G on 17/04/2018(UTC), dlp6666 on 18/04/2018(UTC)
Sara G
Posted: 17 April 2018 09:11:56(UTC)
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Tim - I think I agree on reflection... I do think there's an argument that the big players will end up benefiting the most, but there are potentially better ways to access them (FTEK for example). I didn't go for the Augmentum IPO as I felt it was too UK focused.

KL, I think uses are emerging already - and many won't be immediately obvious. Oil trading for example, and property transactions. I understand your reservations, and the risks, but I'm an incorrigible optimist when it comes to technology, so happy to take a punt.

On a (slightly) related note... apparently George Soros has been buying Bitcoin!
3 users thanked Sara G for this post.
King Lodos on 17/04/2018(UTC), Tim D on 18/04/2018(UTC), dlp6666 on 18/04/2018(UTC)
S_M
Posted: 17 April 2018 13:28:49(UTC)
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Sara G;60754 wrote:
Tim - I think I agree on reflection... I do think there's an argument that the big players will end up benefiting the most, but there are potentially better ways to access them (FTEK for example). I didn't go for the Augmentum IPO as I felt it was too UK focused.

KL, I think uses are emerging already - and many won't be immediately obvious. Oil trading for example, and property transactions. I understand your reservations, and the risks, but I'm an incorrigible optimist when it comes to technology, so happy to take a punt.

On a (slightly) related note... apparently George Soros has been buying Bitcoin!


If I was holding bitcoin (and I sold out my ETNs as soon as CBOE/CME started offering futures contracts in December), I would be worried about Soros getting involved. The recent surge in BTC smacks of a bear market squeeze to me, most of the news on BTC this year has revolved around regulation and that has pummelled the price.

Soros is very clever at manipulating markets, he has an army of YouTube commentators jumping on his every word/action. These people are by and large unqualified investment experts, their followers act on their every whim/hunch and given the relative lack of liquidity in crypto currencies this can cause big fluctuations in price.
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Sara G on 17/04/2018(UTC), dlp6666 on 18/04/2018(UTC)
King Lodos
Posted: 17 April 2018 14:35:25(UTC)
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I'm a po-faced pessimist on everything.

It facilitates trading without third-parties .. You can imagine something like Napster, where you exchange contracts for assets directly – stocks and bonds slowly switch to ledgered ownership .. Anyone could set up a trading strategy or hedge fund, anyone could invest, and everything would be instant and frictionless.

Of course if you were to try that with Blockchain today, you'd be waiting days for trades, and it would probably consume half the world's energy – because databases are so many orders more efficient, and efficiency's the bottleneck on everything.

The insurance and fraud prevention on things like Mastercard would be difficult to replicate – and when you haven't got that, you'd expect it to attract more fraud, which would then be competing directly with your cost savings.

I just cannot find a use .. Whatever practical use would have to be small-scale, closed networks, I'd think
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Tim D on 17/04/2018(UTC), Sara G on 17/04/2018(UTC)
Kevin Crane
Posted: 17 April 2018 15:40:11(UTC)
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AT least FTEK is tradeable on HL, HACK and IXM are not (haven't filed the right documents it appears).

I have looked quite closely at blockchain, Ethereum in particular. You can set up your own coin surprisingly easily if you are comfortable with code :-)

BTC is very inefficient, a choice the originator (whoever they were) made at the time. It is part of the approach, not a design flaw as such, but it is a drawback for sure.

There are more effective, if less pure, authentication/blockwriting methods possible that will win out if it goes mainstream.

I got as far as trying to spec a method for handling the authentication (provenance if you like) of luxury watches. They are high value and subject to counterfeiting. I stalled on two things, a foolproof way to link the physical watch to the digital provenance record and second, as others have said, I could do mostly the same thing with a GOFD*

I am looking for a GBP index track equivalent to IXM if someone knows one. I am in XDWT but that is USD.

* good old fashioned database
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Sara G on 17/04/2018(UTC)
Tim D
Posted: 17 April 2018 16:24:39(UTC)
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Kevin Crane;60774 wrote:
I am looking for a GBP index track equivalent to IXM if someone knows one. I am in XDWT but that is USD.


Does UIFS fit the bill? (LSE traded GBP denominated units of iShares S&P 500 Financials Sector ETF; USD units are IUFS). Maybe you're looking at some different IXM though (I'm assuming you mean this).
King Lodos
Posted: 17 April 2018 16:27:48(UTC)
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I usually trade XLF (SPDR Financials) .. I'd just see currency as a display issue.

Very 50:50 on Financials .. The short-term is entirely dictated by whether rate hikes surprise on the up or downside – expectations likely tightly priced in .. Some would say it's the obvious trade at this point – but I think Japan shows these are unusual times .. Likely a long-term debt cycle we're running into, so may not behave like short-term cycles.


The ease of creating new currencies kills comparisons with gold (imo) .. A resource isn't finite when there's an infinite number of planets to mine it on .. You can envisage the chaos such a system would create, once people find ways to deal with debt .. I think one of the big popular delusions is that it's financial institutions that crash the economy – it's human behaviour that drives cycles .. I believe in free markets, but I wouldn't hand out machine guns to toddlers and expect that to solve playground bullying
Kevin Crane
Posted: 17 April 2018 17:50:47(UTC)
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Tim D wrote:
Kevin Crane wrote:
I am looking for a GBP index track equivalent to IXM if someone knows one. I am in XDWT but that is USD.


Does UIFS fit the bill? (LSE traded GBP denominated units of iShares S&P 500 Financials Sector ETF; USD units are IUFS). Maybe you're looking at some different IXM though (I'm assuming you mean this).


Ooops - Sorry team, my typing is terrible, I meant alternatives to IXN (ISHARES TRUST S&P GLOBAL TECHNOLOGY SECTOR INDEX FUND).

King Lodos wrote:
Very 50:50 on Financials .. The short-term is entirely dictated by whether rate hikes surprise on the up or downside – expectations likely tightly priced in .. Some would say it's the obvious trade at this point – but I think Japan shows these are unusual times .. Likely a long-term debt cycle we're running into, so may not behave like short-term cycles. (imo)


KL - Your commentary on Financials went right over my head <g>

King Lodos wrote:
The ease of creating new currencies kills comparisons with gold (imo)


Yes, I find it easier to think of them as 'digital tokens'. Using the currency word gives them an underserved association. Having said that, my tech curiosity led me to buy BTC years ago, then I forgot I had them. Fortunately I still had the wallet access codes and I sold the lot during the frenzy. I am now the proud owner of the leftover 0.000023 BTC


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King Lodos on 17/04/2018(UTC)
Tim D
Posted: 17 April 2018 18:09:28(UTC)
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Kevin Crane;60783 wrote:
Ooops - Sorry team, my typing is terrible, I meant alternatives to IXN (ISHARES TRUST S&P GLOBAL TECHNOLOGY SECTOR INDEX FUND).


Might be worth a dig through the screener of UK ETFs at https://www.justetf.com/...x&sector=Technology to see if anything fits. Note that just because it says the currency is USD doesn't necessarily mean GBP units aren't available... you have to click through to the investment, then check the "Listing" tab to see if it has GBP.

I hold some of the XDWT you mention myself... originally I had the GBP units with a different ticker code, but then at some point those were discontinued and the holding converted to the USD denominated XDWT. However my main passive tech holding is the L&G Global Technology Index fund (but I don't use HL), with a bit of iShares DGIT and RBTX on the side.
Kevin Crane
Posted: 17 April 2018 18:55:45(UTC)
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Tim D;60785 wrote:
Kevin Crane;60783 wrote:
Ooops - Sorry team, my typing is terrible, I meant alternatives to IXN (ISHARES TRUST S&P GLOBAL TECHNOLOGY SECTOR INDEX FUND).


Might be worth a dig through the screener of UK ETFs at https://www.justetf.com/...x&sector=Technology to see if anything fits. Note that just because it says the currency is USD doesn't necessarily mean GBP units aren't available... you have to click through to the investment, then check the "Listing" tab to see if it has GBP.

I hold some of the XDWT you mention myself... originally I had the GBP units with a different ticker code, but then at some point those were discontinued and the holding converted to the USD denominated XDWT. However my main passive tech holding is the L&G Global Technology Index fund (but I don't use HL), with a bit of iShares DGIT and RBTX on the side.


Gosh, great minds. I have L&G Tech on an old platform it has done very well for me. I have DGIT and RBTX (and DRDR) in HL. I intend to boost DGIT and RBTX. I will look for a similar theme around security.

Nothing like a bit of confirmation bias to help the pinot go down :-)
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Tim D
Posted: 17 April 2018 22:58:45(UTC)
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Kevin Crane;60787 wrote:
I will look for a similar theme around security.


If USD-only HACK isn't available, GBP-denominated ISPY is the only other option I think.
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Kevin Crane on 18/04/2018(UTC), dlp6666 on 18/04/2018(UTC)
King Lodos
Posted: 18 April 2018 01:36:38(UTC)
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[quote=Kevin Crane;60783KL - Your commentary on Financials went right over my head <g>[/quote]

Tactical trading.

This is worth a look:

https://i.imgur.com/WoNzj2h.jpg

Sector returns from 1963 to nearly today.

What's surprising is how companies with such different business models cluster around these 11% returns .. It shows how good the market is at pricing in expectations .. That drugs makers and banks would have such similar returns, over such long periods.

What's also surprising is that Tech lags every sector .. This tells you nothing about the future, but it may suggest tech companies have a tendency to attract optimistic valuations.

Consumer Staples being top is unsurprising, because people don't get excited about toothpaste and cleaning products in the same way they do CPUs, fibre optics and now blockchain.

Really what it says is it's a lot easier to buy the market .. But if you do go for sectors, they tend to act like bets on certain macroeconomic conditions .. Banks, for example, tend to make more money when rates are high .. So if you want to bet on rising rates, a Financials ETF could be a reasonable idea .. Rates tend to move with inflation, and inflation with growth.

Something I predicted a while back (based purely on my own habits) was that Tech may start to behave more like a consumer staple, as kids don't stop buying Apps on the App Store just because we're in a recession
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Harry Trout on 18/04/2018(UTC), Kevin Crane on 18/04/2018(UTC), Tim D on 18/04/2018(UTC)
Kevin Crane
Posted: 18 April 2018 06:42:34(UTC)
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KL - that is useful and informative. Thank you. The volatility is interesting too.

I had thought to choose some banks to hold individual shares, for some reason I had not thought of a financials index, but I will now.
Tim D
Posted: 18 April 2018 09:25:46(UTC)
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That's an excellent chart!

Before piling into any sector specific ETFs, it's worth considering them in the context of what a straight all-of-market investment gets you (well at least for those of us who's core holdings are global trackers it is).

For example MSCI World's sector breakdown is

Quote:
Financials 17.93%
Health Care 11.72%
Materials 5.08%
Information Technology 17.61%
Industrials 11.64%
Real Estate 3.01%
Consumer Discretionary 12.66%
Consumer Staples 8.67%
Energy 6.06%
Utilities 2.96%
Telecommunication Services 2.66%


so if I had say £500K in a MSCI World tracker or similar, I already have £90K in Financials... I'd need to buy quite a lot of Financials ETF to make any material difference to my exposure. On the other hand if I fancied doubling my real estate exposure for some reason I only need to invest £15K.

Technology's proportion of global indices has increased quite a bit since the 1990s I think. Can't find any non-paywalled historic data for MSCI World, but here's how it's changed for the S&P500:
S&P500 historic sector weights
Buying the index these days gets you a lot more tech exposure than it used to (2001 insanity excluded... but who knows what that chart will look like in another 10 or 20 years).

Update: just occurred to me to wonder if there's some goofy ETF equal-weighting sectors... yup of course there is (in the USA anyway): EQL (and that page has some info showing sector weights in the S&P back to 1975).
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Kevin Crane
Posted: 18 April 2018 12:40:28(UTC)
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Another useful chart.

I know this is thread drift, apologies to the OP, but I am in the process of re-balancing my investments to account for a) it has been a while since I did it and b) I am selling a commercial property held in my SIPP so I have more cash and due to the sale c) the value of the fund increases significantly and d) I have grown a little nervous about the almost 100% equity/growth profile I have had for the last 5 years.

So I am re-planning from the ground up to potentially include investments I haven't had before, such as bonds.

This thread (and other occasional comments in others) have made me wonder if I can really cut back on the number of investments I choose. I want a sensible level of diversification and then add my own flavour (e.g. over-weight in tech areas, in a nod back to the reason for this thread <g>).

I will look at how MSCI World splits on geography.

Update : IWRD is 60% USA. I will work out what my outline portfolio would end up with in USA, 60% feels high though.

Maybe IWRD or similar would be a good base choice, and then add on additional tech, some property ITs to replace the commercial property etc.
Tim D
Posted: 18 April 2018 15:41:55(UTC)
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Kevin Crane;60812 wrote:
I will look at how MSCI World splits on geography.

Update : IWRD is 60% USA. I will work out what my outline portfolio would end up with in USA, 60% feels high though.


Yes this is something I struggle with a bit; you'll find pretty much any global market-cap weighted fund is at least 50% USA I think.

VanguardLifestrategy80 and then 60 used to be my "default" buy-all-the-things investments for a while, but they are still quite exposed to the US despite a certain amount of "home bias" built in... and then I started getting nervous about all the "but US valuations are really high" doomster predictions. Happy to sit on what I've already got (and VLS80 has done pretty well), but newer cash has been going into the middle-risk-range L&G multi-index funds instead which is more like 30% US (of the equity component anyway).

Another way to bias away from US would be a value factor smart-beta ETF...e.g the iShares MSCI World Value Factor one is 35% USA, 27% Japan, 9% UK... needs a certain amount of contrarian guts to buy what's basically all the most hated unfashionable stuff in the market though.
King Lodos
Posted: 18 April 2018 16:10:29(UTC)
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Commentary on 'expensive' and cheap tends to be extremely crude.

As Robert Shiller says, at the extremes of fear and exuberance (bubbles and crises) you get cheap and expensive .. But the vast majority is correctly priced .. If it weren't, trading would be a whole lot easier, and US companies are the most scrutinised in the world.

They're also fantastic businesses .. It's quite possible the old cycle of value vs growth was down to people having access to much less information .. Ben Graham thought the edge has disappeared by the 1970s; Buffett abandoned oldskool value investing around then for an approach more like Phil Fisher, where buying a great company at an okay price beats an okay company at a great price.

Looking at the US index today, I know what companies I'd rather own for the long haul – and they're very global businesses.

Short-term tactical trading is a different game – and it's one very smart people (like Crispin Odey) can lose at
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Kevin Crane
Posted: 18 April 2018 16:27:56(UTC)
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I can (and sometimes do) talk myself into investing in nothing... US is over-priced, UK has BREXIT, EM's are volatile, Japan is only just recovering etc etc.

I had a look at IWRD top ten, and it was Apple, Microsoft, Alphabet, Amazon, Facebook. I like the first 4 <g>

Also J&J, JPMorgan, Exxon and BoA.

So, pretty solid companies, and they are only top 10% in value, so there is another 90% lurking in the background. On other hand it suggests IWRD will have quite an overlap with a general tech holding.

I'm certainly not going tactical, other than a quick foray into MicroFocus of course :-)
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