Tag: ETF Investing 2021

Are You Concerned About Inflation?

Posted on by Matt Thalman

Twitter and Square CEO Jack Dorsey is the most vocal and alarming figure in the finance world who is not just raising the alarms on the potential coming inflation issues but is banging bells and yelling from the towers about the possible coming problem.

Dorsey said in a tweet, "Hyperinflation is going to change everything. It's happening." When replying to another tweet about inflation, he went further to say, "It will happen in the U.S. soon, and so the world."

While there have been other big-name investors, bank c-suite members, Federal Reserve members, and even the Treasury Secretary indicate that inflation will happen. Some have even said it is a little higher than what they expected. However, not many have said Hyperinflation was coming and would happen soon in the U.S. and then the world.

While some have and will continue to dismiss Dorsey's claims, we all need to remember that he is the CEO of Square, the payment company. So theoretically, Dorsey has access to information that others may not have, which could give him a better insight into how fast prices are increasing and what products are seeing big increases, which would undoubtedly help guide the thinking that higher than expected inflation is on its way. (Just a thought). Continue reading "Are You Concerned About Inflation?" →

ETF Investors Should Know Their Tesla Exposure

Posted on by Matt Thalman

Shares of the electric car manufacturer Tesla (TSLA) have undergone a meteoritical rise over the past few years, a move that very few investors have ever seen or experienced. Since late October 2019, Tesla has been up more than 1,680%, compared to the Vanguard S&P 500 ETF (VOO), which is up just 59% over the same timeframe. The move Tesla has made is nothing but incredible, and congratulations to all those investors who had the foresight and fortune to have owned Tesla stock, either directly or through, and some sort of fund and have benefited from the move.

However, as with all investments, what goes up, can come down. And Tesla has undoubtedly seen this story play out over time as a publicly-traded company. Several times throughout its time, including this week, it has seen massive pullbacks and corrections, of course only to go even higher longer term. But that doesn't mean another move lower, like the 36% drop during a six-week period earlier in 2021, should be dismissed by investors.

Both long and short-term focused investors need to understand that stocks of even the best companies move higher and then lower, only to move higher again. And understanding this movement and knowing what the risk of an investment is and the potential return an investment has, is extremely important can help you invest smarter. Continue reading "ETF Investors Should Know Their Tesla Exposure" →

Bitcoin ETFs Aren't Going To Produce Same Returns As Bitcoin

Posted on by Matt Thalman

Bitcoin and other cryptocurrencies have once again hit new all-time highs over the past few weeks; many believe this was largely due to the hype surrounding the inception of the first Bitcoin Exchange Traded Funds in the United States.

The hype around the Bitcoin ETFs, like the ProShares Bitcoin Strategy ETF (BITO), was largely due to the idea that now the average investor or fund manager can easily garner access to Bitcoin through their standard investment platforms. The ETF would allow them to invest in Bitcoin without relying on the Coinbase's of the world or setting up a digital wallet and transferring funds into those accounts. It may sound like a small thing, but most investors prefer all their investments in one clean place.

The Grayscale Bitcoin Trust (GBTC), which many considered the first fund that gave the average investor access to Bitcoin in an easily tradable way and is a fund that actually holds bitcoins. BITO and the other newer Bitcoin ETFs, hold ‘futures’ contracts on Bitcoin, not the actual asset itself and this causes some issues with these new ETFs accurately tracking the price movements of Bitcoin. That is not to say that BGTC tracks Bitcoin price movements perfectly either, but it doesn’t have to deal with the same issues the newer ETFs will be facing. *(see footnote)

This type of investing is different from actually holding the asset itself because, in order to gain exposure to the asset through futures contracts, you spend more money to gain that exposure. Plus, you spend it each and every month when you'll roll' from one month's futures contracts into the next. Continue reading "Bitcoin ETFs Aren't Going To Produce Same Returns As Bitcoin" →

Truly Out Of This World Investing: Space ETFs

Posted on by Matt Thalman

In the 1960s, the so-called 'Space Race' was between the United States and Russia. Today we are once again in the midst of another space race. However, this time around, it's not two superpower countries battling it out; it's businessmen. In the 60's the battle for space was in most ways geared around bragging rights, military power, and nationalism. Today, it still is in many ways about bragging rights and as a way to make money. And let's be honest, the billionaires shouldn't be the only ones getting weather from this battle.

To many people, the current battle for space is still seen as a lot of science fiction. But, what a lot of these companies are doing today, could pave the way for the next generation's technological advancements. So, what is taking place just outside our atmosphere is really going to change the way we live, not in 20 or 30 years from now, but just a few years from now.

For example, Elon Musk's SpaceX company offers satellite internet service through its "Starlink" program. The Starlink program is an internet provider that uses satellites floating around Earth to make an internet connection. This is very similar to satellite radio from SiriusXM or satellite TV service through someone like DISH Network. At the time, Starlink is not a huge success, but some predict that it will become more and more popular in the coming years due to the worldwide availability of the internet that Starlink offers. Continue reading "Truly Out Of This World Investing: Space ETFs" →

Real Estate ETFs React To Rising Mortgage Rates - Part 2

Posted on by Chris Vermeulen

As the Real Estate market shifts away from super-low interest rates and skyrocketing home prices throughout the COVID-19 crisis, we are starting to see the Real Estate ETFs weaken in trend and start to move lower. The recent rising Mortgage Rates will likely continue to weaken sales trends and push home prices a bit lower over the next few months. The Real Estate ETF, IYR, is already reflecting a roughly 10% decline in valuation since early September 2021.

In the first part of this research article, I shared a historical chart of the US Average Mortgage rate and some data suggesting the average US consumer is somewhat bound to certain home price constraints based on Average Income. Typically, mortgage payments should stay below 50% of the borrower’s total take-home income. Depending on the borrower and the home price, many US borrowers may already be priced out of the market – even with 3.25% interest rates.

Peak Home Price Affordability Was Reached In Early 2021

Peak affordability appears to have peaked in December 2020 & January 2021 – just after the COVID-19 crisis. This likely correlates to the lower interest rates, at one point below 2% in most of the US, for home buyers while home prices were 20% to 40% lower than they currently are in most areas.

Housing - Home Sales

(Source)

Case/Shiller National Home Price Index Has Skyrocketed 30% Higher Since May 2020

A great measure of the National Average Home Price is the Case/Shiller US National Home Price Average Index. From the chart below, you can see the almost parabolic rise in home prices after the March 2020 COVID-19 event. This incredible rally represents a 30%+ increase in home average US home prices in a little over 13 months. Continue reading "Real Estate ETFs React To Rising Mortgage Rates - Part 2" →