Monday, July 23, 2012

ETF Tracking Errors

Barron's recently ran a piece on ETF tracking errors.  In other words, you buy an ETF to track a particular index and the ETF does not closely match the performance of the index it is supposed to track.  There are various reasons for the error, including fees, trading costs, and failure of the ETF to match the indices' holdings closely enough.  The article generally notes that tracking errors are small on US indices.  Frankly, this wasn't my understanding, at least with respect to triple short and triple long ETF's, but this isn't the point of my entry.  The article also suggests that foreign index ETF's have greater tracking errors.  Is there an arbitrage opportunity here, e.g. can you sell short one of these foreign index ETF's and then perhaps go long all or many of the underlying holdings of the ETF.  The idea being that your direct holding of the components of the index will outperform the ETF?  This one's not for me, it's a purely institutional trade I think and the devil would be in the details.  Trading costs might simply be too high with respect to buying the index's components.   

Friday, July 20, 2012

Some Tidbits Buried in the Facebook Class Action Settlement

Facebook has recently agreed to settle a class action alleging that Facebook users' likenesses and names were used in connection with the site's Sponsored Stories ad program, without obtaining the users' prior consent.  No money will be paid to Facebook users as a result of the settlement because, as the papers filed in support of settlement attest, Facebook made almost no money per capita on the sponsored stories program and, thus, it makes no economic sense to distribute such minimal amounts to class members.  My takeaway from the case:  Facebook is really skirting the privacy line to extract minimal revenues from each of its users.  Of course, Sponsored Stories is only one program and, if you have enough users, even miminal revenue from each adds up.  Still, if Facebook is willing to risk alienating its users in this rather overt way to increase revenues, this suggests some desperation on the company's part.  Here is a link to a Wired article which discusses the settlement and links to a copy of the papers filed in support of the settlement, should you care to delve deeper.

Tuesday, July 10, 2012

Steady Is the Head That Wears The Crown

I like the way that Crown Media is weathering the market volatility lately.  I own Crown, so let me be upfront about that.  I've watched the stock go down, way down, from where I bought it at $1.60 or so.  Now it's in the $1.70's.  It seems to have won some investors over or, perhaps, "some folks" have sensed that it is a cheap acquisition target.  I ask myself, which is more likely?  While it has posted decent performance numbers of late, nothing that would suddenly make it overly seductive in a very dangerous market like the current one.  Here are some thoughts from a fellow who agrees with me that Crown should be an acquisition target: