Under most circumstances, an investor offered an asset worth $432 would refuse to pay $800 for it. Such a premium is difficult to justify, especially for an asset with a transparent, easily determinable value. Yet when mania is mixed with other compounding factors, logic can be tossed out the window.
The Bitcoin Investment Trust (GBTC) is such an example. Speculators have let greed get in way of good old-fashioned facts. The absurd market price highlights the importance of paying attention to the net asset value (NAV) of an exchange-traded fund, a trust or a closed-end fund. It also reflects what can happen when obstacles to arbitrage may exist.
First, a bit of background. The Bitcoin Investment Trust trades like an exchange-traded fund. Shares are a beneficial interest in a grantor’s trust whose sole investment is the cryptocurrency bitcoin. Each share of the trust is equivalent to 0.093 bitcoins. Add in the annual sponsor’s (meaning management) fee of 2% and it’s easy to determine the price that shares of the trust should be trading at. (Various financial websites will automatically do the calculation for you.) As of last Friday’s close, the net asset value of each share of the trust was $432.33. The market price, meaning what investors were paying to own a share, was $800. Continue Reading »
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The AAII.com website is a treasure trove of investment knowledge and tools that are all geared toward making you a smarter and more profitable investor. The site offers a full archive of AAII Journal articles, our library of stock screens, investor classrooms, discussion boards, investment guides and topical areas covering investing basics, stocks, mutual funds, bonds, research and much more.
Please note, this small description doesn’t do justice to our website. It houses almost every imaginable investment tool, resource and service you might need. Once you dig into the AAII website, you’ll have a difficult time signing off! As a brief example of the power of AAII.com, let me take a moment to share with you a little bit about the free members-only stock screens we provide online. Tom D. from Pittsburgh, Pa., says, “The AAII.com stock screens are awesome!” We tend to agree.
The Stock Screens area allows you to quickly tap into the investment philosophies of popular professional investors as well as to see the resulting stock picks. As a user, you’ll be able to pick a name (or investment strategy) from our online menu and see the resulting companies that meet the criteria of each specific stock screen.
and their impressive 2017 returns:
MAGNET Complex up 80.7%…
Fisher (Philip) up 44.1%…
O’Neil’s CAN SLIM Revised 3rd Edition up 39.7%…
Driehuas up 24.6%…
MAGNET Simple Revised up 23.9%…
More on AAII.com
- ETFs and ETNs: Knowing What You Own – When a fund’s price diverges from its net asset value, the fund’s returns can differ from what an investor expects them to be.
- Shorting: A Strategy for Profiting From Price Declines – A co-manager of the Grizzly Short Fund (GRZZX) discusses some of the considerations short sellers have to take into consideration.
Highlights from this month’s AAII Journal
- Using Reverse Mortgages to Mitigate Periods of Poor Returns – Properly used, reverse mortgages can both increase retirement withdrawals and reduce cash allocations.
- Investor Professor: Reverse Mortgages – An overview of these complex financial products, including the terminology you need to know.
AAII Sentiment Survey
- Bullish: 29.3%, up 4.3 points
- Neutral: 35%, down 0.1 points
- Bearish: 35.7%, down 4.2 points
- Bullish: 38.5%
- Neutral: 31.0%
- Bearish: 30.5%
Take the Sentiment Survey.
AAII Asset Allocation Survey
Cash allocations rebounded last month after having set a 17-year low in August. More about the latest results.
- Stocks and stock funds: 66.8%, down 1.1 percentage points
- Bonds and bond funds: 17.3%, down 0.4 percentage points
- Cash: 16.0%, up 1.5 percentage points
August AAII Asset Allocation Details:
- Stocks: 28.2%, down 5.5 percentage points
- Stock funds: 38.5%, up 4.5 percentage points
- Bonds: 3.5%, down 0.4 percentage points
- Bond funds: 13.8%, unchanged
Take the Asset Allocation Survey.
The Week Ahead
Only one member of the S&P 500 is scheduled to report earnings: Oracle Corporation (ORCL) on Thursday.The week’s first economic report will be the July Job Openings and Labor Turnover Survey (JOLTS) report, released on Tuesday. Wednesday will feature the August Producer Price Index (PPI). The August Consumer Price Index (CPI) will be released on Thursday. Ending the week, August retail sales, the September Empire State Manufacturing Survey, August industrial production and capacity utilization, July business inventories and the University of Michigan’s preliminary September consumer sentiment survey will be released on Friday.
The Treasury Department will auction $24 billion of three-year notes on Monday, $20 billion of 10-year notes on Tuesday and $12 billion of 30-year bonds on Wednesday.
Local Chapter Meetings
AAII Local Chapter Meetings offer you a variety of presentations from expert speakers who will give you their view on the world of investing. A bonus of attending a Chapter Meeting near you is the opportunity to meet other AAII members who share your interest and enthusiasm for investing. You can even share the Chapter experience with your family and friends by inviting them to attend Chapter Meetings with you! Upcoming Meetings »