Tag Archives: ETF

February 2020 Podcast Video, Financial Planning and Capital Market Update – By John Kvale

Hello and Welcome to our February 2020 Financial Planning and Capital Market Update!

If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast audio format as well as Video!

Break In – Cool New Feature – In the past we have done our videos on YouTube and this video will also be on our Channel there, however, we have added new features to our site here, that allows us to embed the video here, AND you will not get hit with tons of advertising after the video…. hope you enjoy!

Newbies –

We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets and current events!

Hope you enjoy!

February – 2020 Video

Financial Planning Tip (s) –

All About the ETF (Exchange Traded Fund)

In an abbreviated three part series, a preview to our extended Q2 Newsletter Article, we discuss the origination of the very first Index ETF called SPY nick named the Spider and then the proliferation, and finally in part 3 of our series the dangers of non liquid ETF’s during stress,… never knowing stressful times were just around the corner.

Here are links to each post:

Capital Market Comments

This is a year to date graph of the S&P 500, Dow Jones and the Russell 2000 (Small Companies) indexes.

A silly but true Wall Street Saying comes to mind…

“Markets Go Up on an Escalator and Down on the Elevator!”

We left a different chart off because it looks more dramatic and there is enough drama around the Virus and Market Reactions.

Couple of Interesting Statistics for you to keep the perspective

  • So far this season, 60 Million people in the US have contracted the flu (CDC)
  • So far this season, 14 thousand people in the US have died from the flu (CDC)
  • There are 22 – yes TWENTY TWO confirmed cases of Corona Virus infections at this time
  • One death from the Corona Virus
  • Capital Markets are where they were just 4 months ago – We got back there fast… see saying above

3-1-20 YTD Index Returns

Possible Chance – All time 10 Year Treasury Low

The chart below is of the 10 year treasury yield, which loosely correlates to Mortgage rates…

This is an all time low! 

We would wait a little before actually taking action, as the swift movement down in rates is likely not reflected yet- but get ready….

Touch base with your Mortgage Professional or us –

Consider Lowering and Locking any fixed rate mortgages or loans!

Here is a Detailed Article on our Thoughts

3-1-20 Treasury 10 year all time low

Have a Great Day – Talk to you at the end of March!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

All About the ETF (Exchange Traded Fund) The Dangers (Part 3)

Earlier here in the first part of our ETF Post from our coming Q2 Newsletter, we spoke of the creation and massive growth.

In the Second Part here of our ETF Post we showed the large number of different asset classes the ETF’s are now available …. and growing fast….

Here is a reminder, of just how many Assets ETF’s now encompass..


The NAV or Net Asset Value – Discount, Premium and Mismatch

NAV Or Net Asset Value is the true value of the underlying assets… recall the ETF is a basket of assets, originally the first, SPY or “Spider” the S and P 500 Stocks (US large company stocks)….

The SPY is easily tracked, rarely deviates from the underlying value (NAV) and trades very liquid (constantly).

Far away from core indexes, there are now ETF’s that currently trade instantly but have holdings that in some cases may take days, weeks, or even months to liquidate the underlying asset.

Logically… A mismatch of this magnitude can lead to a miss pricing of the asset, especially during stress.

Examples include, floating rate funds, high yielding (low quality) or synthetic types of ETF’s.

As a best practice, staying away from unique and small ETF’s is a good idea.

Have a Great “Which ETF’s to Avoid” Day!

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

All About the ETF (Exchange Traded Fund) The Proliferation (Part 2)

Earlier here in the first part of our ETF Post from our coming Q2 Newsletter, we spoke of the creation and massive growth.

The original Index ETF, was called by its ticker, SPY AKA Spider!

If They Buy, Wall Street Will Build – Beginnings of a Problem

Wall Street is just like many other businesses, in that if someone will buy it, they will build it. Recall the rush to bring “.com” companies public in the late 90’s, due to the insatiable appetite by investors, who were also experiencing the newly minted power of the internet itsself.

The following, again from IShares and Visual Capitalist shows the proliferation of various types of ETF’s.


Dangers in the Making

Once a single Index ETF, now a plethora of over 6000 and counting different ETF assets.  Given the fact that investors do not need duplicate index ETF’s, many new ETF’s do not track anything, and can even get into the woods in uncharted, unique and illiquid types of assets.

US Exchanges are currently logging a shrinking number of public companies due to cost, liability, red tape, and mega mergers.

There are only about 5000 US Traded companies on the exchanges, with a much larger, but very small capitalization of international companies. With this in mind, there must be tons of overlapping ETF holdings.

There are also fledgling ETF’s that will likely never gain traction.

Next Up, The Dangers and What To Avoid…

Have a Great “Proliferation of ETF’s” Day!

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

All About the ETF (Exchange Traded Fund), The Creation and Growth (Part 1)

(Those on the edge of your seats… this post accidentally set for 10:30 PM… such the delayed email today… carry on)

Working on the Q2 Newsletter and with a fabulous article about ETF’s (Exchange Traded Fund) in the making, as promised from last week, wanted to share in short version, here in this format, in advance….

ETF Index SPY is Born

This first Index ETF, traded (s) on the exchanges as SPY can be purchased just like a stock, during market hours and even after market hours in the much less stable and liquid extended market hours. Today just like when it was established, trades at 1/100 of the actual index value.  I.e. Index 3300, SPY 330.

This Index ETF allowed investors the ability to purchase one asset, under the ticker SPY, just like an individual stock, but hold 500 stocks, in this case the Standard and Poor’s 500, generally known as the largest US public companies in the world all at once and have throughout the day ability to buy or sell.

Prior to the SPY, there were certainly Mutual Funds (and still are today) that represent the same index, but were only tradable at the end of each day, also called end of day settlement.

In an ever faster moving world, the ETF has gaining appeal and continued money flows through low cost purchase.

Time Flies When We Are Having Fun – National Quote 1.5 Decade Ago Still Pertinent

Oddly, the following quote in 2006, actually still hits to the heart of an important topic of this article today…

Managers Look Ahead To Era Of Rate Declines



Posted 10/6/2006

“The interim period while we’re not raising or lowering rates is a time to build ETF watch lists,” said John Kvale, a Dallas- based adviser. “If it’s a soft landing for the economy, then our belief is that we’ll gravitate much more toward higher-quality stock funds.” He’s moving clients away from small-cap ETFs. The funds he favors now include S&P 500 tracker SPDRs. (SPY) “We’re holding off right now on investing in more sector-specific ETFs,” Kvale said.

Fast Forward to the Growth of ETF’s

From Ishares/Black Rock and Visual Capitalist

HIstory of ETF

As long as there is demand, Wall Street will Build!

Next up, beginnings of Danger!

Have a Great “ETF Creation” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

Leveraged ETF’s, Not For Us, and Maybe Not for Much Longer!

Since the introduction of leveraged ETF’s we have been a very strong critics of the use of such instruments, now the SEC is opening an opinion period, which we intend on voicing our concerns.

Recall, ETF’s are mostly baskets of investments, mimicking indexes, that trade during the day, very similar to stocks. When these instruments began to attract investor attention we championed some of them as the liquidity, tax efficiency, and pure investment focus, was, and still is, in some cases, very appealing to us.

Here is a chart of the elder statesman of ETF’s, the SPY, with its target twin index, the S&P 500. There are two lines on the chart, however they are so closely related it is hard to tell.

S&P 500 V SPY

Not Very Many James Bond Sequels!

Excluding one of my favorites, James Bond’s 20 plus, rarely does even a second generation sequel produce the quality of it’s parent. ETF’s are not much different, as leveraged ETF’s are, in our opinion, the flop sequel to their parent.

The following is a chart of a leveraged 3 x ETF, versus the Russell 2000, it’s target base twin.

Direxion 3X V Russell

Of course a 3X levered ETF should not exactly match it’s twin index, however, is should nearly replicate it, except with 3 x the movement, which in this chart you can see, is not happening. In addition to bad matching, and possibly most importantly, these products, we believe, are adding to the volatility of the capital markets.

Bottom line, we fear more investors are being hurt than helped by these leveraged ETF’s, and as such, are happy the SEC is opening a comment period.  We will let you know if our comments are posted by the SEC.

Have a Great Day!