Keeping Up with Exchange Traded Funds

Netflix Shorts

Hedge fund managers who like to short overvalued stocks have their sights set on Netflix (NFLX).  

Whitney Tilson of T2 Partners makes the case in his article Why We're Short Netflix, pointing out the company's lofty valuation and competitive vulnerabilities.

Tilson is in good company.  As of November 30, there were 11.13 million shares sold short.  That's 22% of the stock's 50 million share float, making it one of the most heavily shorted stocks.

If the shorts are right, vulnerable ETFs include the PowerShares Nasdaq Internet Portfolio (PNQI) which has 4.6% of the portfolio allocated to NFLX as of December 16, 2010.

Up on a Down Day

On big down days like today, one of the things we like to do is to screen for securities that are moving up while most other assets are declining.

While stocks were down 4% and bonds, oil and gold were also in the red, the SPDR Barclays Capital International Treasury Bond ETF (BWX) was up about 0.5% today.  The $1.0 billion ETF tracks fixed-rate local currency sovereign debt of investment-grade countries outside the United States.

As you might guess, BWX has been hurt by the European debt crisis, declining over 7% year to date.  However, today's move likely indicates a flight to safety as investors choose government debt over volatile equities and commodities.

About 30% of the BWX portfolio is invested in Japanese and German treasuries.  The fund carries an expense rat

Natural Gas Data Overstated

The Wall Street Journal is reporting that the Energy Department has discovered that it has been overstating U.S.

SmallCap Stocks on a Winning Streak

The WSJ's Kristina Peterson is reporting that the S&P SmallCap 600 index finished higher again on Friday, exending the streak of positive runs to 10 days. That marks the measure's longest streak since Aug.

Going Long (or Short) on the Euro

Whether it's debt concerns in PIIGS (Portugal, Italy, Ireland, Greece and Spain) or anemic eurozone GDP growth, recent news about the euro has been negative—but maybe that's a positive for you.

Whatever your view, Market Vectors Double Long Euro ETN (URR) and Double Short Euro ETN (DRR) let you trade your view on the euro's direction.

Other ways to gain exposure to the Euro:

WisdomTree Dreyfus Euro Fund (EU)

CurrencyShares Euro Trust (FXE)

More Hidden Costs of Mutual Funds

Trading costs for mutual funds are typically not disclosed and higher than you might think.  That's the finding of two recent studies profiled in the WSJ article That Fund's Total Expenses Area Higher Than You Think.

A study of the top 100 mutual funds found that the median trading costs were 0.66% and the highest quintile averaged 1.99%.

A much larger study of U.S. stock funds found average trading costs of 1.44% overall and 2.96% in the top quintile.

The trading costs are in addition to the management fees, marketing expenses, sales loads and exit fees that funds charge investors.

Closed End Funds and the Yield Trap

Jason Zweig warns investors against chasing high yields offered by some closed end funds in the column High Yields Aren't Always a Good Thing.

Problem number one arises from the fact that the yields posted by the funds can include both income and return of capital.  Income, of course, is a good thing, but return of capital simply means that you are getting back a portion of what you have already paid for -- why get excited about that?

The second issue Zweig highlights is that investors are paying a premium over net asset value (NAV) for high yield funds. Turns out that 11 of the roughly 650 closed-ends tracked by Lipper Inc.

Swine Flu, Drugstores and ETFs

The Wall Street Journal recently ran a story on how drugstores might benefit from the upcoming swine flu season.  We take the question one step further and ask which ETFs might benefit if the H1N1 virus returns this fall.

The Dow Jones newswire story, Drug Stores Poised To Benefit From Potential H1N1 Resurgence, quotes several analysts and money managers as predicting that drugstores such as CVS, Walgreen and Rite Aid may see a lift in traffic, revenue and profits if the Swine Flu becomes more widespread.  Industry watchers expect more consumers to buy hand sanitizer, get prescriptions filled and even receive their flu shots at the drug stores.

Several Exchange Traded Funds have a concentrated position (3% or more) in CVS and W

Put the Brakes on the CFTC - Reach out to Washington

We are not a political organization, but we are pro-investor, pro-markets and pro-ETFs, so we hate to see one regulatory agency do so much damage in such a short period of time. (The commission issued nine press releases last week alone - what happened to August vacations?)

Please help put the brakes on the CFTC by reaching out to your representatives in Washington.

Considering leveraged or inverse ETFs? Ask these questions

As part of a recent warning to retail investors, the Financial Industry Regulatory Authority (FINRA) and SEC included a list of questions to consider before investing in leveraged or inverse ETFs: