Fall 2017 ETF Update

SYNOPSIS

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There was a time when we earned amazing profits from companies who shovelled coal out of the ground. There are two kinds. The softer stuff is great for burning to generate electricity. There was a time not long ago when 75% of all electricity in the US came from burning coal. That meant that every electric car was in fact a coal-powered car! The harder variety of coal is used to make steel worldwide. Demand for coal for electricity has fallen dramatically since less environmentally threatening sources have come online, but coal is nonetheless still a profitable commodity. Should you invest? No, probably not. The leading coal ETF, VanEck Vectors Coal ETF (KOL), has a trend value of just 0.3% with 23% consistency. There is an underlying message here, however. Ethical issues should not play a role in your investments. If coal were the best place to invest your money right now, you should take advantage of that.

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Last Week in the Major Indexes… The Russell 2000 Index finally lost it’s leading spot in the major index rankings to the good old Dow Industrial average again. Both the S&P/TSX Small Cap Index and S&P/TSX Venture Index declined over 1% last week, while the other indexes had one week gains.

Last Week in the Sectors… Health Care declined from the top of the trend rankings to #9, while #5 Industrials took on the #1 trend position. Utilities improved from #10 to #5.

PTA Perspective… Fall 2017 ETF Update

While we’re inclined to be stock pickers rather than ETF investors, the same relative trend analysis™ (RTA) methodology can be applied to both. This week we review the state of the ETF industry and offer some guidelines on how to use them. We stick with equity ETFs this time, rather than the more esoteric exchange traded products (ETPs), but with 2000+ of them available in North America, that should be enough!