Stoddart's model ETF portfolio 2nd October 2012

Good afternoon,
Below is an update of the ETF model portfolio, as of close of US markets 1st October 2012.
I have put the MSCI world for reference, but ideally, this is a multi-strategy fund, that aims for absolute return.
Inception was 2nd July 2012

ASSET CLASS	TICKER	WEIGHTING	PERFORMANCE %
EQUITY	RWL US	0.05	6.22
	SPY US	0.05	5.74
	FXI US	0.02	3.85
	EWY US	0.02	9.97
	EEM US	0.07	6.68
	BRIC LN	0.03	6.16
	VGK US	0.07	6.12
	SX7EEX GY	0.03	13.09
	EWP US	0.01	10.29
	EWI US	0.01	7.54
	EWG US	0.01	8.55
	EWQ US	0.01	4.76
	GDXJ US	0.02	29.64
DEBT	EBMMEX GY	0.05	1.60
	IBGS LN	0.05	3.43
	IBGX LN	0.15	4.41
	EMB US	0.15	5.22
	HYG US	0.15	0.87
	LQD US	0.05	3.30
		PERCENT	6.014
		MSCI WORLD	6.356
		PERFORMANCE	-0.341

The correction in high yield has hurt my portfolio, however, with annualised distributions of 6.3% for HYG and 3.8% for LQD, I will continue to keep these in the fund. There are fears that with rates currently low, there will be a large amount of higher grade companies coming to market, putting even greater pressure on the high yield market. Despite this, I feel global credit markets will improve over the next 12 months, increasing return of the high yield investments.

European equities, I will continue to added to this position. I expect Spain, and in turn Italy, agree on taking support from the EFSF, easing tensions and improving sentiment. Dont get me wrong, the data is UGLY, but this is now priced in. The market needs to avoid looking at Price to Earnings, we know these have taken some rather heavy writedowns and mutliples look expensive. This is not the case. With credit markets set to improve, analysts will start to revise up their forward earnings.

US equities, I'm looking to reduce. After such a strong outperformance and investors rushing for the defensives again, its time to sell into the strength, in favour of higher beta.

Asian equities have seen some mixed results. Malaysia, Indonesia and Thailand have all been strong, whilst China continues to lag. Time to increase the weighting in China.

Junior gold miners, up 30%, and I will still continue to hold. My view on the US$ is that it continues to weaken, as European credit markets defrost. It will also be aided by supply chain distruptions in Africa, causing physical prices to increase. Junior miners is the leveraged play.

I will look to reweight this fund over the next week, inline with the release of the monthly macro note.
Stoddart

Morning note, events and data 14th September 2012

Good morning,

Wont ramble on too much about the FOMC, you've read the headlines and that tells the story. My 3 main thoughts:
1. Buying housing or Asset Backed Securities (ABS) does not increase jobs, it just reduces the burden on banks
2. The US will make an absolute fortune in 2014 - 2017 when they "job these out"
3. Get ready to short the hell out of US 10yrs in 2013/14
This whole exercise was about making nice happy numbers and headlines. The FOMC wanted to highlight that stimulus is unlimited, and it will stop at nothing to encourage growth, in this case, using near zero interest rates till mid 2015.

How did the markets react?
Europe closed before the announcement, with equity markets mixed.
CAC -1.2%, DAX -0.45%, IBEX -0.7%, UKX +0.7% all on roughly average volumes.
Sector performance saw defensives stronger and profit taking in materials and financial, not surprising after such a strong run.
Markets have rallied on the headlines and now, as reality sets in and Greece unemployment higher, fears start to creep back in. However, the market is hugely short the European region, inflows will continue as investors take a more neutral weighting. There is also more short squeeze to come, when the markets take the next leg up. Technicals out early next week will show this.
Greece unemployment came in at 23.6% vs last quarter 22.6%
US markets rallied aggressively on the FOMC meeting, with the S+P up 1.6% and market volumes up 20-70% across all indices. The weaker jobs data, with initial claims of 382k vs expected 370k was explained by the recent tropical storm - I think is just another excuse used to justify a weaker number.
Sector performance highlights aggressive inflows to growth names, out of defensive.
Outerperformers: Basic materials, financials and oil & gas
Underperformers: Health, industrials and telecoms
The NASDAQ also underperformed the S+P and industrials for the first time in quite a while.
Expect further inflows to growth. The market has rather large positions weighted in government debt and defensive equities. Outflows will now be looking at improving growth and corporate credit/high yield.

Markets today:
Going gang busters for the laggeds. With the US$ weakening, physical metal prices have stabilised, some have even started to rebound. This looks like it has more to go but please note, inventories are huge and we have yet to see a pick up in demand... this will run out of steam. Oil, now 98.75 WTI, finally seeing inflows, which although the US$ had moved, up until last night, oil hadnt reacted and was trading around the $95 level. This has more to go and is an alternative hedge to gold, with the kicker of improving growth.

Trading.
I am looking for a pull back in the defensives. This throws up huge opportunities to pick up quality assets, on improving yields. It might take a month to get to these levels, but they are now being watched closely.
Basic materials are all at breakout levels, which I will highlight in next weeks technicals. They still have room to run, but I would not be paying up just yet, we will see fast money outflows next week as the hype dies down and everyone goes back to looking at the data.
We could see China over the weekend, following in the footsteps of the US giving the markets a "triple macro boost". Some plans have already been realised but am watching for support on the industrial side. We already have infrastructure in road and rail projects.

Events:
SEC meeting on price stability, G27 finance ministers meeting and announcement of Greek stimulus measures.

Data: In Singapore time (GMT +7 hours)
12.30 Japan industrial production and capacity utilisation.
14:30 India whole sale prices
15:00 Spain labor costs and house prices - some negativity expected
15:30 Thai foreign reserves
17:00 Eurozone CPI and employment
17:00 Italian current accounts
20:30 US CPI and retail sales
21:15 US industrial production and capacity utilisation
21:55 U. of Michigan confidence
22:00 US business inventories - watch for follow through from the wholesale inventories strong number earlier this week.

Earnings - top securities
Suntor(US), Nexus(AU), Kagara(AU), Norilsk Nickel(RU), JD weatherspoon(GB), Swisher Hygiene(US), Virco Manu(US), Marcus(US)

Have a great weekend.... expect some heavy news papers over the weekend, with all the data this past week.
Stoddart