Sy Harding: In 2008 it was a sure thing the bursting of the real estate bubble (NYSEARCA:IYR), the collapse of the sub-prime mortgage market, the freeze-up of the banking system (NYSEARCA:XLF), the ravages of the ‘Great Recession’, collapse of the auto industry, bailout of mortgage- insurance Read more…
Tom Eidelman, vice president of Eidelman Capital Management, came out with a video yesterday detailing why his company is chosing the UltraShort 20+ Year Treasury ProShares (TBT) as a hedge against inflation.TBT seeks daily investment results, before fees and expenses, which correspond to twice the inverse of Read more…
Leveraged exchange-traded funds that short U.S. Treasury bonds got a nice pop last week from a jump in yields, and the ETFs could see further gains if investors lose their thirst for government-backed debt.
In a dramatic sell-off Wednesday in government bonds, yields on 10-year notes surged above 3.7% at one point to their highest levels since November. That upheaval in the bond markets, which some traders said was exacerbated by mortgage-related selling, ignited fears that inflation is on the horizon as a result of the government’s efforts revive the ailing financial system. Read more…
Until recently, investors had more than enough money for financial firms on and off Wall Street to earn monster profits. In the midst of this major recession, however, money managers have started fighting for every penny they can get.
The latest evidence of how the fight for assets continues to intensify comes from recent announcements from Charles Schwab (Nasdaq: SCHW) and the Pimco unit of Allianz (NYSE: AZ) that they both intend to offer exchange-traded funds. Schwab’s offering will use the Dow Jones U.S. Total Stock Market Index as its benchmark, while the Pimco fund will track an index of Treasury bonds.
The move may seem relatively innocuous, especially since both firms have only registered a single fund with the SEC. Yet the decisions could have ripple effects throughout the industry.
Currently, a few firms dominate the ETF scene. Barclays (NYSE: BCS) has its iShares line of ETFs, with $254.7 billion under management as of Dec. 31, 2008. State Street (NYSE: STT), meanwhile, has its well-known SPDR offerings, which make up $159.5 billion. Those two firms make up more than three-quarters of the ETF universe.
Smaller competitors, such as Vanguard, ProShares, and Invesco‘s (NYSE: IVZ) PowerShares, have found niches of their own to fill. Vanguard focuses on low-cost offerings, while PowerShares has tried to use less traditional indexes to track. ProShares has had great success from its leveraged funds, especially on the bear-market side.
Where Schwab and Pimco will fit into the picture remains unclear. Of course, a single ETF is unlikely to do any lasting damage to their competitors. But the move could represent an opening salvo in a much larger war.