UPS Deliveries as a Leading Market Indicator

December 30, 2013

UPS's Quarterly Earnings Rise 48 Percent

Other than this current year, UPS has historically been quite decent at predicting seasonal shipping volume. But is seasonal shipping volume good at predicting other things? Let’s find out.

Here we have UPS’s average US daily volume by quarter and the year-over-year change. Every year, during Q4, delivery numbers jump due to holiday shipping.

ups avg daily volume

The last data point for 2013 Q4 is made up by me — In a late-October press release, UPS predicted that daily volume would increase by 8% this year. The fact that package volume exceeded their shipping capacity over the holidays implies that the daily volume in fact increased by more than 8%. Let’s guess, I don’t know, 8.5%.

And now we have the UPS year-over-year percentage change overlaid with the S&P500 year-over-year percentage change. UPS quarterly data points are shown as x’s because the data are less frequent.

sp500 vs ups

The S&P500 is quite a broad index, however. Here we look at just the consumer discretionary sector, as indexed by SPDR in their ETF (XLY).

xly vs ups yoy

Does one track the other? I don’t know, but I need to get back to work before I get fired.

UPS will release 4th Quarter results on January 30, 2014.

Source: UPS Quarterly Results

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Basics: Fun with Exchange-Traded Funds (ETFs)

February 21, 2008

Exchange-Traded Funds (ETFs) are relatively new to the US market, having been introduced only in 1993. ETFs allow investors to follow the performance of key indices and sectors while providing the flexibility and instant liquidity lacking in traditional mutual funds.

There was a time when mutual funds were the most accessible entry to professionally-managed diversification. However, professional management has a price, and after the active managers have collected their paychecks, approximately 80% of mutual funds underperform the average stock market return. (Index funds, which are automated mutual funds that track a stock market index, have lower annual fees – but that is an article for another day.)

ETFs differ from mutual funds in that they can be traded like a stock. ETFs allow intraday trading, unlike mutual funds, which are only traded for the net asset value at the end of the day. The fact that ETFs are traded like stocks also means that they can be shorted, bought on margin, or placed on limit orders. Options are also available.

Finally, ETFs have tax benefits over traditional mutual funds. Actively managed fund shareholders pay taxes on all the capital gains that the fund owns while they hold their shares, as opposed to just paying taxes on their personal capital gains.

Now, onto the ETFs. There are more than 300 of them, and here are some of the most popular ones:

  1. SPDRs State Street Global Advisors (SPY) – tracks the S&P 500
  2. PowerShares QQQ (QQQQ) – tracks the NASDAQ-100 index
  3. iShares Russell 2000 Index Fund (IWM) – tracks the Russell 2000 index

Here are a few that I am partial to:

  1. streetTRACKS Gold Shares (GLD) – invest in gold without the risk of buying gold futures or the hassle of storing gold bricks in your home
  2. SPDR S&P Metals & Mining (XME) – tracks the S&P Metals & Mining index
  3. iPath S&P GSCI Crude Oil Tot Ret Idx ETN (OIL) – tracks the Goldman Sachs Crude Oil Return Index

Lately, it has been easier to target sectors to stay away from than ones to invest in. These bear-market ETFs can do the shorting for you:

  1. UltraShort Financials ProShares (SKF) – corresponds to the inverse of the Dow Jones US Financials index
  2. UltraShort Real Estate ProShares (SRS) – corresponds to the inverse of the Dow Jones US Real Estate index
  3. UltraShort FTSE/Xinhua China 25 Proshare (FXP) – corresponds to the inverse of the FTSE/Xinhua China 25 index
  4. Rydex Inverse 2x S&P 500 (RSW) – corresponds to the inverse of the S&P 500

All of these can be traded an AMEX, NYSE, or NASDAQ.