Trader Vic's "Up" At The Commodity ETN Rodeo
Victor Sperandeo is a legend for many current and former futures traders. Trader Vic, as he is known affectionately, was one of the earliest real traders to teach methods of trading in public as opposed to publishing or popularizing indicators or technical analysis methods. Check him on Google for his many books and other accomplishments.
A new commodity ETN (LST) started trading today which owes its existence to some of Trader Vic's trading methodologies. In about 2000 Sperandeo and his company, Alpha Financial Technologies, LLC, developed some of his ideas about asset diversification into a 50% physical commodities and 50% financials (US Treasury notes and bonds plus the major world currencies) index. What it comes to is a way to hold all major trade-able asset classes, except stocks, in one package. We all know that we are supposed to own stocks and bonds and some real estate because they do not always move together, so that when one is down the other may well be up. This was certainly the case from 1999 to 2003 when bonds trended strongly up while stocks went up at first and then waaaaay down. Physical commodities which trade as futures on major US exchanges are another asset class which hasn't been readily available to investors as opposed to traders. Now of course we can all buy gold and silver and copper and oil ETFs and ETNs and many others including GCC, my favorite multi-commodity long fund. Most of these are always long, and there are also some which are always short.
What Trader Vic did was to anticipate the trade-able index ETF by a few years and add to it the ability for the vehicle itself to trade long and short. By a rules-based methodology, Trader Vic's index could be long some futures contracts and short others at the same time, as a skilled trader or a commodity fund could be. He licensed his 50-50 Index to Standard & Poors in about 2004. As best I can tell at this moment, the only investment vehicle available to the retail investment public utilizing the S & P 50-50 DTI isRydex's Rydex Managed Futures Strategy Fund (RYMFX). Rydex implements the index by operating as a fund of funds holding a number of ETFs and ETNs long or short to match the index. Since March 5, 2007 when they began trading, RYMFX have an annualized total return of 13.39%. The chart shows RYMFX compared to a variety of equity and bond funds. The only two close to RYMFX are Permanent Portfolio's PRPFX and Hussman's HSTRX. RYMFX is less volatile in this time span. If you have only a stock portfolio, this might be a good "one stop" addition to give the diversity of both currencies and bonds and physical commodities. Look at Rydex (http://www.rydexfunds.com/ourproducts/Productdetail.htm?csp=78356A491&showpage=holdings) and at S&P (http://www2.standardandpoors.com/portal/site/sp/en/us/page.family/indices_ai/2,3,4,0,0,0,0,0,0,0,0,0,0,0,0,0.html ).
