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Keeping Up with Exchange Traded Funds

Swine Flu, Drugstores and ETFs

swine flu and etfsThe 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

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Put the Brakes on the CFTC - Reach out to Washington

put the brakes on the CFTCWe 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.

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Considering leveraged or inverse ETFs? Ask these questions

active bond fund managers underperformAs 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:

  • How does the ETF achieve its stated objectives? And what are the risks? Ask about—and be sure you understand—the techniques the ETF uses to achieve its goals. For example, engaging in short sales and using swaps, futures contracts, and other derivatives can expose the ETF—and by extension ETF investors—to a host of risks.
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    Active Bond Funds Underperform

    active bond fund managers 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

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    Auto Sector to Spend $47 Billion to Meet MPG Rules

    Obama orders $47 billion of new rulesThe 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.

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    Plans for Medicare Pressure Health Care Sector

    medicare-changes-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

    strong-dollar

    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.

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    Positioning for a 3 Year Downturn

    three-year-downturn

    After 6 straight quarters of declining earnings for the S&P 500, a downturn of 3 years in length is a real possibility.  To find another large downturn that lasted for that long, go all the way back to the 1930s.

    That's what the WSJ's Jason Zweig did in asking the question, in the worst of times, which are the best stocks? in the article 1930s Lessons: Brother, Can You Spare a Stock?

    Zweig found that logging was the only sector that gained ground in the period 1930 to 1932.

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    Brazil on the Rise

    brazil-on-the-rise

    Currently in 3rd place in terms of Latin American oil production, Brazil promises to soon overtake regional leaders Mexico and Venezuela.

    According to the Wall Street Journal, Goldman Sachs and the International Energy Agency, Brazil's state-run energy company PetroBras has recently increased capital investment plans with a goal becoming one of the world's five largest oil producers.

    Mexico continues to lead Latin American in oil production but output is declining at a rate of 7 to 8% a year as the country's main oilfield becomes less productive.

    Venezula's production is suffering from insufficient investment, billions of dollars of unpaid bills to suppliers and mandated cuts as a member of OPEC.

    Meanwhile, Petrobras plans to double current prod

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    Nuclear Options

    nuclear-options

    Sweden recently rolled back a longstanding ban on nuclear power as concerns over climate change and energy security are causing European countries to rethink their nuclear power policies.

    According to the Wall Street Journal, Slovakia and Bulgaria recently sought EU permission to restart old reactors of Soviet design after a dispute between Russia and Ukraine brought supplies of natural gas to Eastern Europe to a halt. Italy, Poland and the U.K.

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