6 Hottest ETFs of the Week

by ETF Base on August 22, 2010

With broad market indices showing a moderate loss of less than 1% on the week, it’s starting to look as though the next bubble may be in the Bond Market (Bloomberg).  We did survive the first week out of the Hindenburg Omen intact, but with investors continuing to flood into bonds, if and when that bond bubble deflates, where to then?  There would be few alternatives left outside of cash and high yield ETFs tied to equities and preferreds. Gold investing may have run its course, although there’s been a slight run in the past week – but battling a growing chorus deflationary hawks is going to be difficult.

With this backdrop, here are the top traditional and leveraged ETFs across various asset classes for the prior week:

Non-Leveraged ETFs:

THDiShares Trust iShares MSCI Thailand – Up 6% – Thailand has been a top performing country with its own listed ETF, up 26% YTD.  Shares were under some pressure of late with concerns over riots and protests within the country, but with some of those tensions easing, the flood gates opened last week.

MOOMarket Vectors Agribusiness ETF – Up 5% – The aptly tickered MOO had a strong week, with much benefit derived from the surprising BHP bid for Potash (POT) which has turned hostile, so shares may continue to rally.  This has in turn driven up shares of some other players in the sector like Mosaic (MOS), up 11%, anticipating more merger or acquisition announcements.  Prior to the announcement, Potash had comprised roughly 7% of MOO’s holdings and it spiked 35% on the week.

ECHiShares MSCI Chile – Up 3% – With a major mining cave-in drawing international attention this weekend, it just illustrates Chile’s developing world struggles in trying to achieve the industrial output of its competitors and the safety and environmental downside that accompanies such aspirations.  Chile has been one of the top individual country ETFs thus far this year, up 25% YTD.

Leveraged ETFs:

TMFDirexion Daily 30 Yr Trs Bull 3X Shares Up 11%Treasuries were very strong, again, as mentioned above with the possible formation of a the next major asset bubble.  On one hand, rates could continue to decline if we are truly facing a deflationary future.  Even some corporate bonds are seeing historical low rates like the 1% bond issue from IBM, companies are also sitting on record cash hoards, and seeing dividend increases might spur a move out of Treasuries and into high dividend stocks.  Some contrary indicators include a moderately steep yield curve and gold staying at a stubbornly high price though.

FAZDirexion Daily Financial Bear 3X Shares – Up 4% – Financials declined on the week, but given the higher beta the sector has seen since the financial collapse and the 3X leverage employed by this fund, there’s nothing out of the ordinary here.  They were the rebound story of 2009 and now in 2010, new questions are being raised over whether they continue to mint the profits they did in the past few quarter and what surprise they could possibly have in store next.  The inevitable loss of prop trading and increasing liquidity requirements combined with stubborn unemployment and no near-term home price rally in sight add up to questionable prospects for the sector in the intermediate term.

SCOUltraShort DJ-UBS Crude Oil ProShares Up 5% – Oil has been range bound for months now, highly correlated with equities returns, so this negative 2X leveraged oil fund rose slightly for the week.  I always caveat leveraged ETF mentions with the leveraged ETF decay in value that occurs as a mathematical certainty in choppy markets that can’t sustain a constant trend.

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