Keeping Up with Exchange Traded Funds

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:

Active Bond Funds Underperform

The fact that active mutual fund managers regularly underperform their benchmarks when it come to equities is well known.  Now, evidence points to the same poor performance on the part of active bond managers.

The Wall Street Journal's Tom Lauricella reports that the average intermediate bond fund lost 4.7% in 2008 compared to the benchmark Barclays Capital Aggregate Index which was up 5.2% in the same period.

Turns out that the active managers were betting on low quality bonds as the credit crisis continued to unfold.  In June 2008, the average intermediate fund held 62% of its assets in triple-A rated securities and over 5% in junk bonds compared to 76% in triple-A and

Auto Sector to Spend $47 Billion to Meet MPG Rules

The Obama ETF Portfolio

ETF Investing Alongside the New Administration

With Chrysler in bankruptcy and General Motors trading under $2 per share, the Obama administration ordered stricter fuel goals that will require the ailing industry to invest $47 billion that it doesn't have.

The new rules require auto makers to increase the fuel economy of automobiles sold in the U.S.

Plans for Medicare Pressure Health Care Sector

The Obama ETF Portfolio

ETF Investing Alongside the New Administration

Medicare changes announced by the Obama administration caused a significant decline in health care stocks.

The new approach calls for elimination of private sector participation in medicare plans, effectively eliminating $175 million of revenue for the industry.  Plan management will move to government bureaucrats who can administer "more efficiently".

In reaction, the Health Care Select Sector SPDR Fund (XLV) has declined 17% since the Obama budget speech.

XLV's top holdings include Johnson & Johnson, Pfizer and Abbot Labs.

Dollar Stays Strong Against World Currencies

Amid a slowing global economy and an uncertain outlook for the future, investors have piled into the dollar as a safe haven investment.

Year-to-date, the dollar is up relative to almost every world currency including up 10% against the Euro and up 4% against the Yen.

The strength against the Euro continues a trend from 2008 as the global recession has hit Europe hard and uncertainty about economies in Eastern Europe threaten to weaken the Euro further.

The Yen strengthened against the dollar in 2008 when it looked as if Japan would bypass the problems in the U.S. economy.  The unwinding of carry-trade positions also contributed to the Yen's strength.  Since then, the Yen has weakend against the dollar as the U.S.