Investors have routinely watched the volatility indicators like the VIX to measure investor “fear” in the market via the implied volatility of the underlying index options.  In recent years, they’ve been able to partake in spikes in volatility as a portfolio hedge via the exchange traded notes, otherwise known as ETNs (VXX) and (VXN) which track volatility futures in the broader market and the NASDAQ.  But what about when the VIX runs up in spectacular fashion and it’s evident to you at least, that there’s nowhere to go but down?  In the past, you’d have to either short an existing long VIX ETF or buy puts, neither of which are appealing.  Novice investors are often duped by the futures roll effect in the options, not to mention that most options expire worthless.  Now though, there’s an inverse volatility ETF which allows you to buy when there’s blood in the street, if you will.

Ticker: XXV
Expense Ratio: 0.89%
Yield: n/a
ETF Basics:

Cunningly tickered the inverse of the VXX, as XXV, the ETF will basically benefit from market “calm” or seeing investors more confidently buying put options over call options.  During extreme market declines, VXX and VXN have spike doubled digits in a single day and had nice monthly returns well into the 20% and 30% range.  So, there’s a strong negative correlation with a boost to long market conditions.

When is XXV Useful?

With that in mind, you might be asking, why not just long the market instead of buying XXV if it’s now positively correlated with market indices?  Well, the reason is that the market can somewhat meander along while volatility drops.  It’s really a trading mechanism rather than a long-term hold.

Some investors like to use technical analysis and trade seemingly range-bound instruments by buying at the bottom of a range and selling at the top.  By watching the VIX, some traders discern routine reoccurring patterns that tend to repeat themselves in the absence of extreme exogenous events.  Of course, it’s that Black Swan that can wipe out the position, but eventually, market volatility tends to revert to the mean.  We saw this following 9/11, following the financial collapse of 2008-2009 and we’ll see it during the next panic.  When that happens, rather than going long shares, it may make sense to go long XXV.  Now, just because it benefits from a relaxation of fear in the market, that doesn’t necessarily mean that this constitutes a legitimate safe investments like FDIC backed instruments, hybrid CDs, etc. because given an extreme scenario, volatility could remain at elevated levels for months.  So, it’s not a guaranteed home run, but when investor fear seems overdone, it could certainly make for a good contrarian investment without the need for shorting ETFs which opens the door to unlimited losses.

Where’s volatility Headed from Here?

It’s tough to say, but it isn’t a stretch to assume that excluding deviations occasionally due to exogenous events, the VIX tends to revert to a relatively tight range.  In the news of late, the talk has shifted from hyperinflation to deflation investing and what a European-style US Austerity initiative would do to GDP growth.  Whether or not you believe him, today Barney Frank stated that while they’d target 250K earners with tax increases, there would be no VAT (Value Added Tax) implemented in the US which many were fearing.  Housing and employment numbers have been mixed of late and stronger than expected earnings have buoyed the market of late, leading many to believe that while the picture may not be rosy over the next several months, a relative calm has at least set in, which would be positive for XXV.

Take Thursday’s trading session for instance.  Even though the US broad market indices were all down modestly, XXV actually gained 0.35% on the day.  So, it doesn’t necessarily have to be a zero-sum game between XXV and equities, just a slightly positively correlated relationship that benefits from calm investors seeing through the fog of panic and recognizing that over time, the dust always settles.

It’s important to note that ETNs are subject to the risk of the holding company, which in this case is Barclays.  The solvency of Barclays/parent is not in question at this time, but anything could happen during another financial crisis.  This would be something to keep in mind on top of the fact that you will have lost a bundle on XXV during a precipitous decline anyway, ironically.

Disclosure: No position in any instruments referenced in this article at time of publication.

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During the recent financial collapse, the perpetual bears had their day, crowing about how they were right all along and the US was in for a cataclysmic crash.  Their chorus grew especially loud during the March lows, which in retrospect was the worst time in decades to either sell your long positions or enter into a bear market fund.  Aside from looking at recent history for their failures, let’s consider the broader liabilities of investing in a bear market fund moving forward:

  • You Can’t Time the Market: It’s been demonstrated time and time again that no known investor, let alone retail investor, can predict market direction with any great certainty.  Day traders and quants can exploit instantaneous anomalies in market pricing and momentum, but as far as a buy-and-hold investor being able to pick a particular period where it’s good to be long and good to be short, history has not supported such an ability.  Otherwise, they’d be running a hedge fund generating triple digit returns annually in any market.  For all the progress we’ve made in quantitative modeling, flash trading and hiring the best and brightest minds from MIT to work on Wall Street, the hedge fund industry is actually coming off the worst quarter of the decade (BusinessWeek).
  • The Market Can’t Drop Below Zero: While you can double, triple and quadruple your money over time in any investment if you hang on to it long enough and it follows a historical uptrend, let’s say you pick the pivot top of a market for a given time period and invest in a bear fund.  The best you can ever do is approach a 100% return.  You can never exceed 100%.  So, what then?  If you believe the Dow is going to drop to below 1,000 in a total economic apocalypse, what then?  Mortgage the house and bet that it will drop further to Dow 100?  It’s basically the end of the road, aside from the fact that it will not happen short of a nuclear holocaust.
  • You Could Do This Yourself: If you’re intent on being short the market, or even hedging a broader portfolio, why would you rely on a higher-priced fund with no real-time disclosure rather than just taking up short positions yourself.  There’s everything from using put option strategies to shorting stocks to shorting leveraged ETFs for the most aggressive of risk seekers.  There are some very aggressive leveraged short ETFs as well.  For maximum volatility, there are the following 3X daily reset leveraged variety: Direxion Financials Bear 3x ETF (FAZ), Direxion Small Cap Bear 3x ETF (TZA), Direxion Technology Bear 3x ETF (TYP), Direxion Emerging Markets Bear 3x ETF (EDZ), and Direxion Real Estate Bear 3x ETF (DRV) – not only do these combine 3X daily leverage, but the underlying sectors are more volatile than broad market indices like the S&P500. But you can do these tailored to your own needs and without annual fees (albeit commissions), as opposed to banking on the right calls being made by fund managers.
  • Performance Isn’t Impressive: Let’s consider a prominent bear fund – Federated Prudent Bear (BEARX).  While it got clobbered coming off the March 2009 lows and stands at -32% vs. a gain of 57% for the S&P500 (SPY), that is to be expected.  However, in looking at periods where you would have expected strong performance, it’s just not impressive either.  This year for instance, SPY is down for the year by about 3% – well so is BEARX – down 2% as well.  So, what are you paying for?  For a fund that’s supposed to thrive in a down market, with the flexibility to shift in and out of various assets and cash, you’d think it would at least be positive on the year.  And don’t even get me started on holding leveraged ETFs for long periods of time.  Even holding a bear market ETF while the market declines doesn’t guarantee you’ll make any money due to the mathematical certainty of value decay I routinely warn about.

While many of the bear funds will purport to have asset class diversification, know when to get in and out of cash vs. shorting stocks, etc., I just haven’t seen evidence that these funds can or will outperform the market in the long-term.  And if the thinking is that they will outperform in a down market (which they’d better with a name like that), then what are the odds you, as a retail investor, can time when to enter and exit the fund?  As I mentioned above, it’s almost 90% in the timing of entry/exit and a small portion of what the actual short positions are that will dictate success or failure.  Investing for income vs. capital appreciation is one thing, but trying to distinctly time the market by entering and exiting a bear fund, on top of anticipating that the fund manager will time it right as well…is an exercise in futility.

This is not to say that the only direction for the market is up, and frankly, I’m surprised it’s held up as well as it has with credit availability unlikely to improve in the face of the worst FICO Score report we’ve ever seen indicating now fully 1/4 of all Americans are below 600, but who’s to say that’s not already baked into current equities prices and from here, we’re just as likely to move up as we are down?  The point is that over the long term, you’re much more likely to make money long then you are short.  If you’re that concerned over the direction of equities, perhaps stocks aren’t for you and safe passive investments should be the sole components of your portfolio.

Disclosure: No long position in any investments covered in this article. Author is short multiple leveraged ETFs in pairs trades including: FAZ, TYP and DRV.

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It’s been a busy couple weeks for new ETF launches so I thought I’d highlight some of the newest to the crowd:

Leveraged ETFs

Direxion has launched 4 new leveraged ETFs focusing on natural gas and retail.

  • Direxion Daily Retail Bull 2X Shares (RETL)
  • Direxion Daily Retail Bear 2X Shares (RETS)
  • Direxion Daily Natural Gas Related Bull 2X Shares (FCGL)
  • Direxion Daily Natural Gas Related Bear 2X Shares (FCGS)

Each of these ETFs carries a 0.95% expense ratio and will act similarly to the myriad other daily reset leveraged ETFs out there.  As far as retail, the sector could really swing dramatically one way or the other in the coming months given what’s going on with home prices, unemployment, the upcoming election cycle and US Austerity which is ultimately heading our way, all of which will have an impact on consumer sentiment to be sure.

I love to hear about new ETF launches, not because they’re good investments, but because they’re bad investments long term.  What?  Due to the mathematical certainty of value decay over the long term stemming from daily resets, I short 2x and 3x ETFs as an alternative investment asset class in my own portfolio.  The returns are generally non-correlated with the broader market because I short them in pairs.  The performance on the long side is so abysmal that they routinely require reverse splits to boost their share price out of the single digits.  See more about reverse splits and why they all go to zero.

ETF of ETFs

Taking a page out of the fund of funds approach, the Mars Hill Global Relative Value ETF (GRV) actually takes a long-short approach to various areas around the world.  The fund seeks to exceed the average annual return of the MSCI World Index by overweighting areas they view as attractive, while underweighting areas that are unattractive.  Based on the long-short approach, the fund will seek to capitalize on the spreads between the long and short positions.  As this is an active approach and requires insight into which way particular markets are going to head, I’m a bit skeptical as to whether the fund can deliver above-market returns.  I’ll have to wait and see.

India

Emerging Global Shares Indxx India Small Cap ETF  - This small cap India ETF (SCIN) seeks to replicate the returns of the Indxx India Small Cap Index which has 75 publicly traded small caps all in India. IT and banking are the predominant sectors in the fund which carries and expense ratio of 0.85%.

For London Exchange Investors

RBS will be launching a series of new ETFs on the London exchange covering a both countries/regions and commodity indices:

Dax Russia
Dax Bric and Dax
Asia indices
Jim Rogers Commodity Index
Jim Rogers Metal Index
NYSE Arca Gold Bugs Index

That’s just a few of the ETFs coming our way this summer.  Make sure to check out the New ETF Review thread for more as they come.

Disclosure: No position in any ETFs covered in this article.

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It was a tumultuous week in the market with events ranging from the Goldman settlement and disappointing earnings elsewhere in Financials to Apple’s mea culpa to less than stellar jobs numbers.  Broader indices ended the week slightly down with the S&P500 (SPY) losing 1.2% and the NASDAQ (QQQQ) losing 0.6%.  Volatility picked up and the Euro started to pare back losses as fears over a dissolution of the Euro started to subside in the face of various Austerity Measures (EU country by country comparison) moving forward.  With that backdrop, I always like to highlight both the best conventional ETFs and Leveraged ETFs of the week so as to realistically portray the happenings in the market on an unleveraged sector basis:

Hottest Non-Leveraged ETFs:

TZA – Direxion Daily Small Cap Bear 3X Shs – Up 7% – Given that small caps are notoriously more volatile than the broader market, it stands to reason that in a down market week, TZA should have a strong showing. Small cap investors are still concerned over the lack of access to credit, what impact the health care reform mandates will have on small businesses and the return of the consumer. So, any bad news sends TZA spiking.

SMN -ProShares UltraShort Basic Materials – Up 7% - Given the similar theme of negative market sentiment during the past week, it didn’t bode well for basic materials prices. With housing stagnant and various stimulus programs winding down, investors are fearing stagnant materials prices for everything from concrete to copper wiring demand.  If concerns over housing and economic growth persist, it may be worthwhile to consider high yield utility stocks for lower volatility and high dividend payouts to ride out further volatility.

FAZ - Direxion Daily Financial Bear 3X – Up 7% – FAZ is a common participant on this list alongside its counterpart, FAS (Long). Financials have been incredible volatile from 2008 onward given the precipace of collapse and then the stellar recovery off those lows in 2009. This week was a volatile one given Goldman’s (GS) settlement over its behavior related to mortgage backed securities sales that many analysts and pundits alike hailed as surprisingly low. While Goldman rallied 6% on the week, Bank of America (BAC) tanked 8% due to lackluster earnings, taking much of the banking and investment house sector down with it.  Even in the face of astounding low mortgage rates including a shrinking jumbo spread (current best rates in your area), housing just isn’t moving the dial and many investors fear with the expiration of the new homebuyer tax credit and a recent report outlining a massive drop in credit scores of Americans this year, we’re looking at a new leg down in housing, which could crush Financials again, especially in the loan loss bucket.

Hottest Leveraged ETFs:

VXX – iPath S&P 500 VIX Short Term – Up 7% – The “fear index” was up this week on investor sentiment, especially with a big down day on Friday where most of the gains from the week came from (up over 6%).  VXX can spike upwards of 20% on a given day, but this is really an inverse play on the market at large.  In general, VXX will surge in a down market, and as investor complacency sets in, VXX will gradually dip lower as the market rises.

GXG – Global X InterBolsa FTSE Colombia20 – Up 4% - Colombia, one of the Frontier Markets (see next ETF reviewed below) has been performing quite well year to date, at a 28% gain vs. a 4.5% loss for the S&P500. Investors view the country as pro-growth, pro-business and conditions have improved dramatically over the years from the cliche crime, kidnappings and drug trade. Business is strengthening and Colombia doesn’t have the same debt woes as the developed nations.

FRN – Claymore/BNY Mellon Frontier Markets - Up 1% - With the backdrop of a small loss in US equities, this Frontier Markets ETF was able to squeeze out a gain.  Unlike past debt implosions, rather than the emerging markets (and in this case, the further removed frontier markets) acting as a catalyst for a global panic due to debt problems, this time around, it was developed markets.  Investors aren’t ignoring that the balance sheets of many of these countries actually look healthier than those of the US, Europe and Japan.  Year to date, FRN has returned over 4% while SPY has lost over 4%.  See full review of the Frontier Markets ETF for more background on holdings and performance.

Disclosure: Author is long GXG as a long-term hold. Author does have a market neutral short leveraged ETF position in FAS/FAZ.

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I was a bit skeptical when I started to see “actively managed ETFs” popping up over the past couple years, so I thought I’d take a look at one of the larger ones and see how it’s performed vs. the broader market.  In looking at the PowerShares Active AlphaQ (PQY), I was actually surprised by what I found.  The fund invests in 50 NASDAQ-listed securities using proprietary methodology for weighting and trading.  With the NASDAQ as its benchmark, I found that the fund beat out (QQQQ) in all recent time periods both up and down – and the S&P500 (SPY) as well incidentally.

Actively Managed ETF Key Statistics

Ticker: PQY
Expense Ratio: .75%
Assets: $21 Million
Return 1 month (vs. QQQQ): -2.2 vs. -2.9
Return 3 month (vs. QQQQ): -8 vs. -9.5
Return 6 month (vs. QQQQ): 0.5 vs. -1.1
Return 12 month (vs. QQQQ): 29 vs. 23

Actively Managed ETF Top Holdings:

Millicom International Cellular S.A.   2.82%
Citrix Systems Inc.   2.82%
DIRECTV   2.60%
Netflix Inc.   2.57%
NetApp Inc.   2.46%
Ross Stores Inc.   2.46%
O’Reilly Automotive Inc.   2.44%
priceline.com Inc.   2.42%
Express Scripts Inc.   2.40%
SanDisk Corp.   2.35%

Impressive Returns

This actively managed ETF is doing something right.  In all time periods evaluated, both up and down, PQY exceeded its benchmark index.  In looking for a dividend yield, the fund has not payed out any dividends to date.  When comparing the .6% dividend yield offered by QQQQ and the lower expense ratio, as long as the fund is outperforming by 1% annually, it appears to be paying off.  At this point in time, the 1 year difference in performance is 6%, making a strong case for consideration of PQY.

Words of Caution

I couldn’t help but notice the ETF has very little trading volume, so little in fact, that sometimes hours go by without a single trade.  So, what you run up against there is a lack of liquidity when you’re trying to unload shares and also the possibility of a wide bid-ask spread.  So, you’ll want to proceed with caution if entering into a sizable position.  Additionally, since the fund is comprised of NASDAQ stocks, it will tend to more more volatile than a broader market index like the S&P500 and of course, other safe investments with lower volatility that rely on income for net returns rather than capital appreciation.  You’ll find no AAA Companies in this mix, but over time, the S&P500 and the NASDAQ don’t tend to diverge too much, just more of a Beta issue than anything else.  Finally, the fund is relatively new and unproven and of course the mantra regarding past performance vs. future returns applies.  However, based on several data points in both up and down markets, as it stands now, PQY makes the list of the Hottest ETFs beating the benchmarks.

Disclosure: No position in PQY

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LikeAssets Review

July 12, 2010

Making stock and mutual fund picks is big business. Financial websites and magazines offer individual investors great ideas every day – and plenty of bad ones, as well. Unfortunately, there are few tools helping investors sort out the good ideas from the bad ones. LikeAssets is a new website highlighting the wide range of returns [...]

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Sector Review: Utility ETFs for High Yield and Stability

July 9, 2010

Investors are starting to pay more attention to Utility Stocks and Utility ETFs of late given the low interest rate environment that doesn’t seem to have an end in sight.  With the 10-year Treasury hovering around 3% and the prospect of loss of principal one bonds when rates do rise eventually, the prospect of equities [...]

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Significant Factors Impacting Financials – ETF Plays to Consider

June 30, 2010

Financial ETFs have been among the most volatile sectors over the past few years, with the sector swinging from near complete collapse to euphoria over year over year comps for earnings (any positive earnings announcement compared to a year ago multi-billion dollar loss looks great).  With the the investment banks especially, able to borrow from [...]

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2 Income ETF Approaches: High Yield vs. Dividend Growth Rate

June 21, 2010

There are two main schools of thought in dividend investing and for whatever reason, investors tend to be polarized into one camp or the other.  On one hand, investors tend to be drawn to juicy dividend yields of 8% or more given that this matches the long-term return on equities over long periods of time [...]

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8 New 300% Leveraged ETFs Coming to Town

December 2, 2009

Direxion, currently the only outfit offering 3X daily return ETFs, is launching 4 new ETFs with the following ticker symbols already registered: Daily China Bull 3X Shares (CZM) Direxion Daily China Bear 3X Shares (CZI) Direxion Daily Latin America Bull 3X Shares (LBJ) Direxion Daily Latin America Bear 3X Shares (LHB) In addition to these, [...]

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18 ETFs up over 100% This Year

December 3, 2009

With US equities up over 60% from their lows in March 2009, there are several ETFs out there that have more than doubled those returns.  Of course, leveraged ETFs performed in stellar fashion during this period due to an unprecedented upward bias with very little downward volatility (see how leveraged ETFs can lose 90% even [...]

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ETF Review: New China Tech Fund Looks Promising

December 9, 2009

This newly launched ETF will be extremely volatile for two reasons: Tech and China, each of which carry high Beta on their own in contrast to US equities at large.  This fund will perform well as long as the long term economic growth and prosperity in China continues, coupled with rising speculative stock purchases in [...]

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ETF Tracking Spinoffs Routinely Beats S&P500

December 14, 2009

The Claymore/Beacon Spinoff ETF (CSD) seeks to replicate an index called the Beacon Spin-off Index, which is comprised of roughly 40 companies that have been spun-off within the past two years.  The ETF is rebalanced twice per year. For varying reasons, spin-offs tend to outperform their former parent companies and the market as a whole.  [...]

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ETF Review: Frontier Markets

December 30, 2009

The Claymore/BNY Mellon Frontier Markets seeks to replicate the Bank of New York Mellon New Frontier Index. What makes this ETF especially unique is the country holdings. The top 5 Holdings are: Chile, Poland, Egypt, Colombia and Kazakhstan. With BRIC ETFs getting all the attention in international funds for years, as investors seek the next [...]

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ETF Returns for All Countries 2009

January 5, 2010

I’ve reprinted this from Darwin’s Finance, my other broad-based finance/investing blog.  Since this article covers all ETF returns for 2009, certainly relevant here: Following the most tumultuous investment environment many have seen in their life, it’s worth reviewing the 2009 stock market performance for equities globally. Interestingly, the US (ticker SPY) ended up toward the [...]

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Commodity ETF Inflows More than Doubled in 2009

January 6, 2010

Wednesday, the National Stock Exchange (NSX) announced that commodity ETF inflows totaled $30.1 billion in 2009, up from $13.4 billion in 2008.  This portends a trend of retail investors plowing money into commodities via ETFs given wider availability and constant bombardment from the media on the ever weakening US dollar and its impact on commodity [...]

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Platinum ETF Begins Trading – Finally, the Real Thing

January 8, 2010

Investors can finally rejoice in the ability to invest in the first real Platinum ETF that will hold the underlying commodity and remove tracking error, solvency risk and other detriments that accompany exchange traded notes (ETNs) that cover platinum currently.  The existing ETNs tracking platinum relied on futures contracts, which often insert tracking error due [...]

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Leveraged ETF Decay Explained

January 13, 2010

While the leveraged ETF can fill a need in the day trader’s arsenal or be utilized for a once in a blue moon trend trade, they are certainly not suitable investments for an investor with a time horizon any longer than a week.  Due to the decay in share price value that occurs as a [...]

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Preferred ETF Delivers High Yield and Rally Simultaneously

January 14, 2010

The iShares S&P U.S. Preferred Stock Index ETF (PFF) has been delivering strong share price appreciation of late while delivering outsized dividend distributions.  Over the prior 1 month period, PFF is up 5% compared to a 3% return for the S&P500.  If utilizing Financials as a proxy, the ETF XLF is also up 5%, but [...]

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2009 New ETFs – A Look Back at Performance

January 19, 2010

With hundreds of ETFs being launched annually, the inevitable question is whether we’re getting quantity over quality.  As such, it is instructive to review some new ETF launches from 2009 and how they’ve done to date since launch.  I’ve intentionally selected various sectors and strategies.  I’ve included ticker, launch date and performance relative to the [...]

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New ETF Review: Wildcatters Exploration & Production ETF

January 24, 2010

Jefferies has brought forth an ambitious Wildcatters Exploration & Production ETF that will likely provide investors with a unique niche opportunity to play the small cap energy sector in a diversified manner without having to pick stocks individually.  The can, however, expect more volatility than holding a broader market or large cap energy ETF. Name: [...]

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Why ETFs are So Much Better Than Mutual Funds and Stocks

January 29, 2010

The benefits of ETFs over traditional investment vehicles like stocks and mutual funds have not gone unnoticed by investors and advisers alike. With inflows into ETFs exploding annually while hedge funds and other actively managed funds were brought back to earth during the financial meltdown, it’s worth considering just what makes ETFs so much better [...]

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16 New Proshares 3X Return ETFs Coming

February 11, 2010

Proshares, the company that initially brought us several 2X daily return ETFs, is launching 16 new ETFs that will now return 3 times the daily return of the underlying indices.  The new launches will be comprised of both long and short 300% daily returns for major US indices, emerging markets and US Treasuries.  Not all [...]

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Lumber Stock Breakout – This Timber ETF is on Fire

February 16, 2010

Timber prices have been on fire over the past year more than doubling the return of the S&P500.  The most direct play on lumber prices without trying to buy forests yourself is the ETF based on the Claymore Beacon Global Timber Index, which goes by the ticker (CUT) and invests in stocks that benefit from [...]

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Impressive Muni ETF Yields 7.4% Tax-Free and Pays Monthly

March 8, 2010

The high yield muni market in general has been a stellar performer following the trough of the 2009 financial collapse but there are some striations depending on just which municipalities are covered in a particular holding. Many view California as being on the risk of declaring bankruptcy for instance, while much of the midwest remains [...]

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1 Year Post-Crash: Biggest Winners and Losers by Country, Sector

March 9, 2010

It was one year ago today that the complete capitulation of retail and institutional investors alike ended and on March 10, 2009, the money started pouring in again.  During that time, virtually all asset classes rocketed up with annual gains that haven’t been seen in decades.  For investors savvy enough to either stay the course [...]

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6 Precious Metals ETFs to Play a Weak Dollar Secular Trend

March 12, 2010

Precious Metals ETFs may play an important role in this environment.  After years of a slowly deteriorating US dollar, the greenback found some footing during the financial crisis and is now benefiting from the financial woes in Greece which may well boil over into other Euro-zone countries.  However, this near term calamity doesn’t address the [...]

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ETFs on the Move – Last Week’s Top Performers

March 14, 2010

With US equities continuing their ascent in the face of uncertainty over a major healthcare initiative, unrest in Greece and mediocre employment developments, the following ETFs performed quite strongly given the circumstances.  For the week ended 3/12/2010, here’s a snapshot of some of the best performing ETFs of both the traditional and leveraged sort: Hottest [...]

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Hedge Fund ETF – Main Street’s Ticket to Performance or Marketing Hype?

March 15, 2010

The first Hedge Fund ETF launched in 2009.  While even many of the most popular hedge funds took it on the chin during the financial collapse, the lure of double-digit market returns with low correlation to conventional asset classes makes the sound of a “Hedge Fund ETF” appealing.  In 2009, IndexIQ launched the IQ Hedge [...]

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Beating the S&P500 with Equal Weight ETF

March 16, 2010

Over the years, there has been much debate in the investment community over an equal-weighted index vs. weighting by market cap or share price.  There are pros and cons to each method of weighting.  For instance, while the S&P500 is comprised of 500 stocks representing a broad swath of sectors in the US, the top [...]

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The Week’s Hottest ETFs (3/21/10)

March 20, 2010

While broad market indices continued their ascent for the week, stocks took a breather on Friday in anticipation of the historic healthcare vote this weekend.  Since it’s unclear specifically whether the legislation will even pass and if so, exactly what it will mean for equities, markets could continue to be choppy while this plays out.  [...]

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High Yield Junk Bond ETF: Risk/Reward Spectrum Favor Buying?

March 24, 2010

Given the current low interest rate environment and the seemingly unchecked momentum in common equities since last March, investors may want to consider parking some portion of their allocation in high yielding vehicles in the event the market takes a breather.  There are some decent ETFs out there that combine high yield, sustained dividend payouts [...]

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Dividend ETFs to Rally Next?

March 29, 2010

ETFs holding dividend-paying stocks trailed the broad market since the implosion in early 2009 primarily because of the rebound in technology shares which tend to not pay out dividends given the nature of the industry.  It’s generally the more mature cycle Industrials, Telecoms, Utilities and Financials that tend to pay dividends over time.  However, analysts [...]

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ETFs on the Move – 5 Top Performers from Last Week

April 4, 2010

Broad market indices enjoyed another up week in the context of a decent jobs report, a surprise decision to lift the ban on offshore drilling, and no new damaging news markets haven’t already digested.  Emerging markets were especially strong, as well as commodities in the face of a declining US dollar for the week.  There [...]

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Biotech ETFs Hitting New Highs – Which Fund is Best?

April 5, 2010

Biotech is back – and Biotech ETFs are breaking records, with one up over 30% YTD.  So are many other sectors like Tech, as well as the return of beaten down financials, insurance and real estate, so perhaps that explains the relative lack of coverage of the Biotech resurgence in comparison to some of these [...]

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Playing Emerging Markets – Without Stocks

April 7, 2010

CNBC published an article today outlining how investors can take advantage of the rampant growth in emerging markets without investing directly in individual stocks and taking on individual company risk.  However, they left out what the instruments are to do so, so I’ll fill in the blanks: Currencies: As the US and Europe continue to [...]

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New Leveraged Biotech ETFs Combine Biologics Revolution with Supercharged Returns

April 8, 2010

ProShares, the originator of dozens of other leveraged long and short ETFs has now launched a Daily 2X Return ETF for both the long and short Nasdaq Biotechnology Index.  I highlighted earlier in the week how there are several non-leveraged Biotech ETFs with varying returns due to their composition, but many of them are breaking [...]

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6 Hottest ETFs to Watch This Week

April 11, 2010

Again, markets advanced, taking some of the year’s hottest performing ETFs with them.  We saw the same theme of rebounding real estate and financials while China showed strength and in the non-leveraged segment, commodities rallied even in the face of a mildly stronger dollar index for the week. For the week ended 4/11/2010, here’s a [...]

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Investors Continue to Pile Into High Yield ETFs – When Does the Music Stop?

April 14, 2010

The risk trade is on. Investors sitting idly by on the sidelines watching everyone else make 70-100% since the March lows are resolved to the fact that risk-free investment returns are going to be negative in terms of even modest inflation for years to come.  As such, investors in the income arena are increasingly shifting [...]

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Bond King Gross Declares Real Estate to Beat Stocks and Bonds – How to Play It

April 15, 2010

On CNBC today bond king Bill Gross said that real estate is nearing a bottom and eventually could be a better bet for investors than stocks or bonds.  Given the run we’ve seen in stocks since the March 2009 lows, it’s not a stretch to say that perhaps other asset classes will outperform from here.  [...]

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Profiting from Innovation with the Patent ETF

April 19, 2010

With the seemingly endless imagination of ETF inventors, the aptly focused Patent ETF is certainly interesting and may hold promise as a market-beating ETF moving forward based on both past performance and the reasonable thesis that innovation translates into comparatively stronger financial performance for shareholders.  The CLAYMORE/OCEAN TOMO PATENT ETF (OTP) focuses on companies that [...]

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6 Hottest ETFs to Watch This Week

April 25, 2010

Markets continued their advance this week in the face of a potentially damning SEC inquiry into Goldman’s practices.  This news was countered by surprisingly strong housing data which showed the biggest jump in new home sales since 1963.  Elsewhere in China, there is continued sentiment that there may be a housing bubble brewing there which [...]

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EURO Hits 1 Year Low vs. US Dollar – How to Play continued Greek Contagion

April 27, 2010

With today’s downgrade of Greece’s credit rating into junk territory by Standard & Poor’s, ripples were felt globally, as equity indices tumbled from the latest multi-day rally.  This weakening Euro trend has continued for some time now, but as a Greek debt resolution loses legitimacy and as shorts pounce, it’s unlikely there will be a [...]

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3 Protective Trades to Combat Volatility Now

May 4, 2010

With investors spooked by suspicions that the Greece bailout will be inadequate and the Euro zone debt crisis may spiral into Spain, Portugal and perhaps further, indices worldwide tumbled substantially for the first time in months, reminiscent of the 2%+ losses we were seeing daily during the financial meltdown of 2008-2009.  Seeing as how investors [...]

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How Various Gold ETFs Stack up Against the Price of Gold Itself

May 5, 2010

With Greece burning (literally) and the Euro zone under increasing pressure, volatility is spiking and investors are looking for alternatives to traditional equities.  With every major government debasing their currency, it’s tough to find a particularly attractive currency at all (some cite Canada and Australia as being a bit more responsible, but no guarantees there).  [...]

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How to Trade ETFs for FREE: 79 and Counting

May 6, 2010

Evidently, there’s a race to the bottom in trading commissions seeing as how there are new discount brokers popping up with various free/low-fee commissions and now, multiple large names are offering trading on ETFs they manage or have relationships with absolutely free.  Given that ETFs are Better Than Mutual Funds in virtually all aspects and [...]

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See the 6 ETFs that Rallied during Thursday’s Selloff

May 6, 2010

With global indices tanking on the notion that there’s no stopping further implosion in Europe regardless of the austerity measures approved by Greece on Thursday, investor panic set in and an alleged fat finger trader mistake on a single Proctor & Gamble (PG) trade sent the US majors down 10% instantaneously.  While markets recovered to [...]

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Pairs Trade to Exploit NAV Premium in Physical Gold Fund vs. GLD

May 10, 2010

There’s an intriguing anomaly forming between two gold exchange traded products that should, in concept track virtually simultaneously with the spot price of gold bullion save for minor fluctuations in NAV and management fee differences.  While (GLD) is most familiar to many retail investors looking to mimic changes in the price of gold bullion, there [...]

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Deflation Investments to Consider with Inflation Fears Out the Window

May 18, 2010

Deflation Investments are getting a lot of press this week.  Many experts are now shifting their sites from fears over inflation to a deflationary environment.  While the rampant printing of money and devaluation of currencies had been front and center since the financial crisis, there are now indications that we may be entering a period [...]

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Pairs Trade in Gold Funds Works Out Beatifully – Sprott PHYS vs. GLD

May 26, 2010

Today, the Sprott Physical Gold Trust (PHYS) completed a follow-on offering of trust units at $11.25 per unit.  This was performed in order to acquire physical gold bullion in accordance with the Trust’s objective and subject to the Trust’s investment and operating restrictions.  In other words, the big selling point of this closed-end fund is [...]

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ETFs to Watch – May’s Hottest ETFs

May 31, 2010

After one of the most tumultuous months in stocks investors have seen since the financial collapse, it’s instructive to take a look back and see which ETFs fared well through the flash crash, an imploding EU, an environmental disaster in the gulf unfolding before our eyes and a possible war brewing in the Koreas.  For [...]

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ETFs on the Move: Winners in the Down Market

June 6, 2010

With the S&P500 losing over 3% on the week on a poor jobs report, further implosion of the Euro zone (check out country by country EU Austerity Measures) and the realization that the disaster in the Gulf is likely going to start to have long term implications outside the scope of whatever legal bills BP [...]

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Reverse Splits: Why Leveraged ETFs All Go to Zero

June 17, 2010

I couldn’t help but notice the press release today on the reverse splits announced for 4 more leveraged ETFs: Direxion Daily Energy Bear 3x Shares (ERY) Direxion Daily Real Estate Bear 3x Shares (DRV) Direxion Daily Small Cap Bear 3x Shares (TZA) Direxion Daily Technology Bear 3x Shares (TYP) Some Details on the Reverse Splits: [...]

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