Here’s an interesting observation regarding this month’s commodity sell-off.
It comes from short-selling data firm, Data Explorers, and it concerns commodities ETFs:
The other theme running through this week has been further drama in some of the commodity markets, led by a pricking of the bubble in silver. As can be seen from the attached chart, investors saw a correction coming and shorted many of the commodity related ETFs. Unfortunately, their timing was slightly off since many of these positions were reduced around April 20th just before the slump in sliver and oil.
It’s an interesting point because it’s not the first time that ETF investors have turned out to be very bad market-timers. It was, for example, also the case with positions built into United States Oil Fund around the time of the 2008 crash.
In fact, it seems to be turning into somewhat of a consistent trend.
The fund-flow research firm Trimtabs conducted some extensive analysis of the phenomenon last year.
Their conclusion, as Reuters pointed out, was:
“Stock prices fall after equity ETFs rake in huge sums of money, and they rise after ETFs post heavy outflows,” said Vincent Deluard, global equity strategist at TrimTabs, in a release. “Simply put, ETF investors are impressively wrong in both directions.”
To us, it all seems too weirdly consistent a pattern. Why are ETF investors always the ones missing out on the big market moves? Especially since the industry proclaims they’re used just as much by professional and institutional investors, as they are by retail?
ETF investors make poor stock mkt timers -TrimTabs – FT Alphaville
If we build it, they will come -FT Alphaville
Commodity hedge funds upbeat after mauling – FT