VentureCapital.Org

Read more: Venture Capital - entry Heard Off The Street Real Assets – Private or Public

Read more: Venture Capital - Heard Off The Street High Frequency Trading Is Ruining the Market

Read more: Venture Capital - entry WellDog completes successful coal seam gas tests in China

The Investment Strategy Group of Contango Capital Advisors provides regular updates on economic and financial conditions. This week, we look at some of the benefits and drawbacks of exchange traded funds. 

We frequently use exchange traded funds (ETFs) in implementing our portfolio strategies. They give us access to targeted segments of the market at a reasonable cost and allow us to be nimble when we’re interested in making tactical bets. Because they offer less likelihood of buying into existing capital gains, they can be tax efficient relative to open-end mutual funds. When ETFs are large enough, they can provide good trading liquidity, very low cost, excellent diversification, and favorable tax characteristics all in one very convenient package. 

Of course we don’t use ETFs exclusively. They are an excellent tool for investing in an index of very liquid instruments like the S&P 500. On the other hand, where liquidity is limited, as in some bond markets, or where the nature or underlying integrity of the investment is questionable, as in some emerging market securities, we prefer to work with active managers whose skills we have vetted and trust. We also manage some portfolio components – the bond portion in many cases, for example – in-house, so that so that we can better tailor income, maturity and creditquality characteristics to client goals. 

Buyer Beware 

As much as we like the convenience and other characteristics of ETFs, there are a number of potential pitfalls that any current or potential ETF investor should be aware of. 

First, it is important to understand the index that a particular ETF attempts to track. For example there are well over 150 ETFs that track emerging markets. Some are narrowly focused while others are broad. Some are market-cap weighted while others are equally weighted. Some use local shares while others use US-listed American Depository Receipts. What sliver or broad swath of emerging markets do you want? Are you getting it with the fund you’ve chosen? How do the expenses stack up with other funds offering similar market access? (For example, the expense ratios of emerging market ETFs range from about 20 basis points (0.20%) to 95 bps. 

Second, although you can trade an ETF when your market is open, if the ETF represents claims on a market in another time zone, trading when the underlying market is closed can lead to illiquidity and wider bid-offer spreads. For example, Asian markets are typically closed by the time that New York trading begins and the European markets close shortly thereafter. So, if the ETF you’re trying to get into (or out of) is an international ETF that uses local shares and trades when these markets are closed, the bid-offer may widen up as those firms that create and redeem shares are less willing to make a tight offer to you. Thus, we prefer to trade foreign ETFs early in the morning. 

Third, investors should understand that while most ETFs trade at or very near to their true net asset value (NAV), some trade at a premium or discount to NAV. This is especially likely to be the case with bond ETFs, which reflect a relatively illiquid underlying market. Some bond ETFs even traded below NAV for an extended period during the financial crisis. Today, many of them trade at an ongoing premium. Before you buy a bond ETF, you should understand the underlying liquidity characteristics of the market you are trying to access and decide whether you can live with the potential illiquidity and premium and/or discount that the investment would pose. 

But Wait, There’s More 

Although we can’t address all aspects of ETF investing here, we can call your attention to several other considerations. For example, an exchange traded note (ETN) is not an exchange traded fund, but rather is a financial claim on an index created by a bank. Thus it bears the credit risk of the bank that created it and, as we saw with Lehman, this bank may fail, leaving the “investors” as general creditors of a failed institution. 

Keep in mind, too, that a few ETFs – such as SPDR® Gold Shares (GLD) – are physical precious metals trusts, entailing different tax treatment and other important concepts to consider. In addition, over the years, weak demand has prompted a number of ETFs to close. Check the market value and trading volume of exchange traded funds that you intend to purchase to make sure that they’re not on “death watch.” 

Finally, ETFs are still relatively new, and not as time-tested as other types of investments. Things can and may go wrong as kinks are worked out and market mechanisms developed. Indeed, we’re likely to see a more regulated ETP (exchange traded product) market in the years ahead. 

Please feel free to contact us with further questions or to obtain our recent white paper, “Exchange Traded Funds: What You Don’t Know Might Hurt You.” 

The opinions expressed above are solely those of Contango Capital Advisors and do not necessarily reflect the views of Zions Bancorporation, its affiliates or its management. 

IMPORTANT NOTE: Wealth management services are offered through Contango Capital Advisors, Inc. (Contango), a registered investment adviser and a nonbank subsidiary of Zions Bancorporation. Investments are not insured by the FDIC or any federal or state governmental agency, are not deposits or other obligations of, or guaranteed by, Zions Bancorporation or its affiliates, and may be subject to investment risks, including the possible loss of principal value of the amount invested. Some representatives of Contango are also registered representatives of Zions Direct, which is a member of FINRA/SIPC and a nonbank subsidiary of Zions Bank. Employees of Contango are shared employees of Western National Trust Company (WNTC), a subsidiary of Zions Bank and an affiliate of Contango.

Read more: Venture Capital - entry Heard Off The Street ETFs The Good The Bad and The Illiquid

Read more: Venture Capital - entry Heard Off The Street Now What 

The Investment Strategy Group of Contango Capital Advisors provides regular updates on economic and financial conditions. In this commentary, we examine the likelihood – and the impact – of a wholesale writedown of mortgages. 

The drumbeat for a wholesale write-down of mortgage principal is getting louder. Somewhere between 20 percent and 30 percent of US mortgage holders are underwater. Many will default, leaving their homes to be dumped on the market in foreclosure sales. Others can’t qualify to refinance into a lower rate loan, even though rates are now at historic lows, because of negative equity and higher credit standards. Those trapped in high rate loans are scrimping by and, in many cases, prevented from moving to job opportunities elsewhere. The swelling supply of defaulted homes drives all home prices lower. As one’s house is the principal component of personal net worth, many people feel – and indeed are – poorer, and so spend less. Hence the economy is weighed down by a giant anchor that, if left untended, will take several more years to loosen. 

In earlier cycles, government demand via increased deficits offset lower consumer demand. However, that well has run dry, at least for the foreseeable future. There seems virtually no prospect of greatly increasing federal government spending while state and local expenditures, and so employment, are declining. There is more and more talk about mortgage principal reduction as the only feasible way to kickstart the economy. We take it seriously. 

One Man’s Liability Is Another Man’s Asset 

It’s Accounting 101: Balance sheets have two sides. The homeowner’s mountain of debt is the saver’s mountain of assets – safe bond assets, what is more. So, when the great write-off comes, there will be a dollar-for-dollar amount of investor losses. Much of the mortgage debt now resides with our government, via Fannie Mae and Freddie Mac guarantees as well as in the mortgage-backed bonds the Fed purchased in huge amounts to drive down interest rates. The rest is held by insurance companies, pension funds and mutual funds in the US and in Europe. 

So we, as taxpayers, will bear probably the bulk of the loss while we, as holders of life insurance policies and pensions, ought to look very carefully at the assets of our insurance carriers and pension funds. The investment implications of this are clear. There isn’t much you can do about a life insurance policy but you certainly can look deeply into the portfolios of all the other investment funds that you own. In particular, high-coupon mortgage-backed bonds are likely to be relatively old, and the most likely to be written down. Not only will principal be lost, but because rates have fallen so much, the odds are that you or your fund purchased such bonds at premiums, meaning that resulting losses will be even greater than the face amount of the write-down. 

The Silver Lining 

There’s no way to recoup the entire write-down on the mortgages. But there may be a way to recover in part. The most palatable means of performing the mortgage balance evisceration is via the shared appreciation concept. To illustrate, a mortgage is written down from 120 percent to 80 percent of a house’s current appraised value. Initially, the investor loses one-third of the value of his asset. But, the investor would be entitled to half of the appreciation of the house above the new mortgage value. So, even if the house sold only for its appraised value, the investor would get back another 10 percent of the original loan. And if home prices rose once these changes were in place … 

Playing out this scenario will likely entail bruised feelings and uncertainty for the first year or so, but then something very interesting is likely to happen. Institutions will want to sell some or all of their shared appreciation rights. It would be possible to assemble a geographically (and otherwise) diversified portfolio composed of these rights, and thereby create a new security. So far, it has been possible to buy into apartments, via real estate investment trusts (REITs), but otherwise it has been impossible to invest in a diversified way in the core of the housing market – owner-occupied houses. Over the long term, such housing has been a very effective inflation hedge. We look forward to this opportunity. 

A Real Innovation for Retirement 

Even more interesting, the establishment of a market for shared appreciation rights based on reset mortgages would only be the beginning of what would be possible. Once such a market is established, consider the opportunity open to an existing homeowner, especially one close to retirement. To date, getting equity out of your house has required either selling it or taking out a reverse mortgage. The first option puts you out on the street, or at least away from your neighborhood and friends. The second is a loan that accumulates interest, even if you can’t be evicted. 

Suppose that you could sell shared appreciation rights in your house, while you continue to live in it? That possibility already exists in Australia. The Australian product is designed for retirement, and the buyer of shared appreciation rights is paid when the property is sold or the owner dies, whichever comes first. In this way, actuarial analysis of the pool underlying the security can provide a reasonably predictable timing of cash flow (subject, of course, to average rates of home appreciation). 

If the concept of shared appreciation rights is indeed introduced in the US in response to the mortgage crisis, we believe that a new class of investment and retirement funding opportunities will be created, constituting some balm for those write-off wounds – as well as some intriguing possibilities for investors. 

The opinions expressed above are solely those of Contango Capital Advisors and do not necessarily reflect the views of Zions Bancorporation, its affiliates or its management. 

IMPORTANT NOTE: Wealth management services are offered through Contango Capital Advisors, Inc. (Contango), a registered investment adviser and a nonbank subsidiary of Zions Bancorporation. Investments are not insured by the FDIC or any federal or state governmental agency, are not deposits or other obligations of, or guaranteed by, Zions Bancorporation or its affiliates, and may be subject to investment risks, including the possible loss of principal value of the amount invested. Some representatives of Contango are also registered representatives of Zions Direct, which is a member of FINRA/SIPC and a nonbank subsidiary of Zions Bank. Employees of Contango are shared employees of Western National Trust Company (WNTC), a subsidiary of Zions Bank and an affiliate of Contango.

Read more: Venture Capital - entry Heard Off The Street Mortgage Forgiveness – And an Unexpected Silver Lining 

By msnbc.com staff

The National Association of Realtors is just out with its third-quarter median prices by metro area, and the news is not good.

Nationwide, the median price for an existing home is down 4.7 percent from a year ago and nearly 14 percent since 2008.

But in many markets, the decline is far worse. Realtors said prices fell in 111 of 150 metro areas tracked by the group, according to the Associated Press. Phoenix, Miami and Salt Lake City are among the markets where prices are declining at a double-digit rate.

Here are the 10 markets where prices are declining the fastest:

• Mobile, Ala., median price $98,800, down 17.7 percent from a year ago.
• Phoenix, Ariz., $113,700, -17.6 percent
• Allentown, Pa., $193,800, -17.5 percent
• Salt Lake City, $182,600, -15.3 percent
• Gulfport, Miss., $103,100, -12.7 percent
• Miami, $187,600, -12.7 percent
• Rockford, Ill., $96,900, -12.5 percent
• Virginia Beach, Va., $190,000, -12.5 percent
• Tucson, Ariz., $131,100, -11.5 percent
• Akron, Ohio, $93,600, -11.4 percent

And here are five markets where prices are rising:

• Grand Rapids, Mich., $111,200, up 23.7 percent
• South Bend, Ind., $94,800, 19.8 percent
• Palm Bay, Fla., $109,600, 17.7 percent
• Youngstown, Ohio, $68,300, 13.1 percent
• Green Bay, Wis., $135,700, 12.6 percent.

Click here for links to the full report with data on all 150 metro areas.

By msnbc.com staff

The National Association of Realtors is just out with its third-quarter median prices by metro area, and the news is not good.

Nationwide, the median price for an existing home is down 4.7 percent from a year ago and nearly 14 percent since 2008.

But in many markets, the decline is far worse. Realtors said prices fell in 111 of 150 metro areas tracked by the group, according to the Associated Press. Phoenix, Miami and Salt Lake City are among the markets where prices are declining at a double-digit rate.

Here are the 10 markets where prices are declining the fastest:

• Mobile, Ala., median price $98,800, down 17.7 percent from a year ago.
• Phoenix, Ariz., $113,700, -17.6 percent
• Allentown, Pa., $193,800, -17.5 percent
• Salt Lake City, $182,600, -15.3 percent
• Gulfport, Miss., $103,100, -12.7 percent
• Miami, $187,600, -12.7 percent
• Rockford, Ill., $96,900, -12.5 percent
• Virginia Beach, Va., $190,000, -12.5 percent
• Tucson, Ariz., $131,100, -11.5 percent
• Akron, Ohio, $93,600, -11.4 percent

And here are five markets where prices are rising:

• Grand Rapids, Mich., $111,200, up 23.7 percent
• South Bend, Ind., $94,800, 19.8 percent
• Palm Bay, Fla., $109,600, 17.7 percent
• Youngstown, Ohio, $68,300, 13.1 percent
• Green Bay, Wis., $135,700, 12.6 percent.

Click here for links to the full report with data on all 150 metro areas.

WellDog and tQ Automation sign MOU to bring coalbed methane technical services to Indonesia

Alliance is directed at providing best-in-class technical services to emerging Indonesian CBM market

Laramie, Wyoming and Houston, Texas (27 October 2011) - WellDog and tQ Automation announced that they have signed a Memorandum of Understanding under which tQ Automation will support introduction of WellDog's suite of technical services to the fast-growing coalbed methane (CBM) market in Indonesia.

"We are very excited about this partnership as it allows us to bring a broader array of quality services to our CBM clients in Indonesia," said Iqbal Latheef, Managing Partner of tQ Automation. "Moreover, we are especially excited to bring US technology to Indonesia that will help accelerate the development of their CBM initiatives and more efficiently reach their production goals."

The MOU covers all of WellDog's business lines, including its award-winning pre-production gas testing services, its established pressure monitoring sales and installation services, its new permeability testing services, and its reservoir engineering services, as well as its business line based around a sustainably-focused downhole water/gas separation and re-injection technology.

"The Indonesian CBM industry is being asked to not only supply energy for domestic use but to help support the energy needs of the rest of the Asia, as well," said John M. Pope, Ph.D., president and CEO of WellDog. "Our technical services can enable operators to produce more natural gas with less environmental impact. We expect formalizing our alliance with tQ Automation will provide the local support necessary to initiate full operations in country."

tQ Automation acts as a well optimization consultant and technology transfer agent for a number of established oil and gas service companies in Indonesia. They are currently serving customers in CBM and traditional oil & gas projects throughout Indonesia. tQ Automation also operates locally in Jakarta via its Indonesian subsidiary, PT. Lintas Masa.

According to the US Department of Energy, Indonesia is the world's second largest exporter of coal, and the third largest exporter of liquefied natural gas. It is also the world's third fastest growing economy. Recent entry by BP, Exxon and Total has been widely heralded as initiating a growth phase for the Indonesian CBM industry.

About tQ Automation 

tQ Automation was formed in 2009 by a small team with long experience in automation systems and process improvements for oil and gas operations. tQ principals have worked in the energy and chemicals industries since 1993 and have experience in upstream, midstream and downstream operations. tQ team members have designed and implemented automation equipment throughout the world including Southeast Asia, North America and the Middle East.

tQ's team has delivered projects for the world's leading energy companies and executed some of southeast Asia's largest and most successful projects, including the Trans Java Gas Pipeline, Hunan Field - Unocal Thailand, Well Surveillance projects with CPI, and others. Members of tQ's management and sales teams have been directly involved in projects for the major oil and gas companies including Chevron Pacific Indonesia (CPI), Medco Energy, ConocoPhillips, Shell Brunei, Pertamina E&P, and PGN. More information is available at www.tQAutomation.com.

About WellDog 

WellDog (trade name of Gas Sensing Technology Corp. and WellDog Pty Ltd) is a privately held company that applies a diverse set of innovative technologies to address the numerous critical needs of the unconventional oil and gas, mining and alternative energy industries in a high volume, low cost manner. Its flagship gas testing technical service has identified more than half a billion dollars worth of natural gas in hundreds of coals around the world over the past ten years, while enabling resource producers to preserve more than a billion gallons of water. WellDog now provides five business services to the coal seam gas, shale gas and coal mining industries including gas testing, permeability testing, permanent monitoring sales and installations, downhole water/gas separation and re-injection, and reservoir engineering services. The company has offices in Laramie, Wyoming and Brisbane, Queensland. More information is available at www.welldog.com. 

Read more.

Read more: Venture Capital - entry WellDog and tQ Automation sign MOU to bring coalbed methane technical services to Indonesia 

The Investment Strategy Group of Contango Capital Advisors provides regular updates on economic and financial conditions. In this commentary, we offer a perspective on why the protests are happening and what they might mean for investors. 

It’s hard to turn on the news these days without seeing the “Occupy Wall Street” (OWS) protests drag on in New York, or pop up in yet another US city or via solidarity protests in other countries. To some, they’re scarily like the Arab Spring uprisings, with investors perhaps playing the roles of Ghadafi or Mubarak. To others they are the ultimate expression of the First Amendment. To most Americans, however, they are simply confusing – what’s going on?

No Coherent Message Yet; No New Party Yet 

You’re on the right track if you’ve noticed that the OWS movement hasn’t produced a coherent message or even an agenda. Its supporters cite a laundry list of gripes. They are against everything from income inequality to global trade and, more broadly, globalization to, well, Wall Street itself: banks and securities firms and the fat cats (their words) who run them and these firms’ purported responsibility for the Great Recession. 

We wouldn’t be the first to point out that some of these folks bear many of the marks of “professional” or perpetual protesters. Many have no doubt held signs up many times before for many different causes, and they seem to have included past causes in the current OWS protests as well. 

In many ways, OWS is the left’s mirror of the Tea Party. Like OWS, the Tea Party has a broad catalog of views– some more radical (e.g., disband the Fed) and some more traditionally Republican (e.g., less government spending). But the Tea Party has been able to coalesce into a proto-party because its main messages – smaller government and less regulation, supply-side-oriented economic policies, and in-sourcing (of manufacturing and minerals extraction) – seem to resonate with most of its members. The Tea Party also appears to have mainstream Republican Party support. 

In contrast, the OWS-ers have more heterogeneity of views within their ranks, little mainstream party support, and a younger, seemingly less serious, demographic. It appears unlikely to coalesce into a Tea-Party-like force or a new party of its own. But we still think it matters. 

The Great Divide 

First, the rise of the OWS is no accident but is consistent with other recent trends – in particular the increased ideological chasm between Republicans and Democrats and the public’s dissatisfaction on the part of the public with mainstream political parties. The GOP is splitting or blurring into traditionalists and the Tea Party and the Democrats may be splitting into centrists (like, say Bill Clinton) and OWS-ers – a more “radical” branch – even if a proto-party along the lines of the Tea Party doesn’t develop. The radical edges control the debate and draw the mainstream toward them via bold and perhaps “sexy” messages. They are the bad boys and girls on the playground where everyone wants to hang out, if only for a while. 

Because the trend away from the mainstream has momentum, the political divide is likely to stay large and perhaps even widen. In 2011, you’re no longer a wild-eyed radical if you’re sympathetic with the Tea Party. But all of this makes political consensus less likely, notwithstanding the urgent need to get things done in the context of taxes, regulation and stimulus. 

Second, the one message that seems to be rising to the top of the Occupy Wall Street cacophony is income inequality. This is potentially even more serious than the widening party divide. “Us versus the bankers” has morphed into the 99% versus the 1%; the “middle class versus the rich.” The lack of real wage growth among the US middle class in over the last forty years was ameliorated first by movement to the two-worker family and, in the last decade, by exploding levels of personal debt. But there is no more where that came from. The financial crisis has led to high unemployment, a rising cost of living, falling home prices and declining value of financial savings – and there appears no way out. 

There’s a statistic invented by (and now named after) an Italian statistician and sociologist, Corrodo Gini, that measures income inequality. The higher the number, the more inequality there is. Comparing globally, the US is on par with Nigeria and Iran, not Germany or France. Ouch! 

The divide between the “haves” and the “have nots” is particularly large in the US, larger than in any other developed economy. Looking at it another way, real family income for the bottom 99% of earners has stayed virtually stagnant since the early 1970s at roughly $45,000, while it has tripled for the top 1% of families ($400,000 to roughly $1.2 million over the period). By contrast, between 1945 and the early 1970s, the fastest growing family incomes were in the middle of the income distribution. 

The America Dream: Obsolete? 

So we are potentially dealing with a whole class of Americans who have become disenchanted; who have come to believe that the “American Dream” is an anachronism. The OWS crowd can be thought of as the vanguard of the disenchanted, along with the Tea Party on their right. 

Bill Clinton once said: “We need a new spirit of community, a sense that we are all in this together, or the American Dream will continue to wither. Our destiny is bound up with the destiny of every other American.” 

Perhaps this is what both the Tea Party and the OWS-ers want: more of a sense of shared sensibility and accountability. Many people have commented that, for the “1%,” their community is a global one of like individuals rather than a geographic/political one; that the 99% live in traditional countries while the 1% live in “Richlandia.” 

One conclusion can be easily drawn from all of this: If you’re rich, watch out; the “rest” will increasingly be– after you. It’s hard to imagine that some form of income redistribution will not become a feature of the future. It could be direct, like the “Buffett Tax” you’ve heard the President talk about, or via higher costs imposed by labor-sheltering trade protectionism as suggested by Senator Charles Schumer. Or it could occur through the investor losses created by mortgage principal forgiveness – a topic we are confident that you will hear more about in the months ahead. 

In any case, like the Tea Party’s backers, OWS supporters reflect a pervasive dissatisfaction with the status quo – with politicians, with the economy, with the state of the world and with the state of their wallets. Not all agree with each other as to what’s broken, or – at least –what’s the most broken. Nor have they articulated any pragmatic solutions to the problems they protest. Still, this widespread discontent – from both the left and the right – is a commentary on the state of our society that the remaining (place your number here) percent of us cannot. 

The opinions expressed above are solely those of Contango Capital Advisors and do not necessarily reflect the views of Zions Bancorporation, its affiliates or its management. IMPORTANT NOTE: Wealth management services are offered through Contango Capital Advisors, Inc. (Contango), which operates as CB&T Wealth Management in California. Contango is a registered investment adviser, a nonbank affiliate of California Bank & Trust and a nonbank subsidiary of Zions Bancorporation. Some representatives of CB&T Wealth Management are also registered representatives of Zions Direct, which is a member of FINRA/SIPC and a nonbank subsidiary of Zions Bank. Employees of Contango are shared employees of Western National Trust Company(WNTC), a subsidiary of Zions Bank and an affiliate of Contango. Investment products and services are not insured by the FDIC or any federal or state governmental agency, are not deposits or other obligations of, or guaranteed by, Zions Bank, Zions Bancorporation or its affiliates, and may be subject to investment risks, including the possible loss of principal value or amount invested. CCA1111-0184

Read more: Venture Capital - entry Heard Off The Street Does ‘Occupy Wall Street’ Matter