Financial ETFs Still Face Major Hurdles From An Overvalued Housing Market (XLF, IYF, IYR)

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May 19, 2010 3:05pm NYSE:IYF NYSE:IYR

“A 2008 study from the Congressional Budget Office (CBO) estimated taxpayer losses from the Fannie Mae and Freddie Mac bailouts to reach $25 billion. This month, the Associated Press


 reports that the Fannie and Freddie rescue is turning out to be one of the most expensive after effects of the financial meltdown. Late in 2009, the Obama administration lifted an earlier $400 billion cap and pledged to cover unlimited losses through 2012. Fannie Mae reported another $8.4 billion loss last quarter,” Simon Maierhofer Reports From ETF Guide.

Maierhofer goes on to say, “According to a trade publication, government backed institutions (like Fannie, Freddie and the FHA) supported nearly 97% of liens in the first quarter of 2010. How come the private financial sector (NYSE:XLF) doesn’t even touch the mortgage market? It’s a losing proposition. Why? Housing is still overvalued.”

“The chart below shows housing valuations according to Robert Shiller’s Real Estate Index. Prices are still 30% above their historical average. If we are in a Great Depression-like cycle, real estate (NYSE:IYR) is about 50% overvalued. Unlike income statements and balance sheets of financial corporations (NYSE:IYF), real estate prices are transparent and can’t be massaged by crafty financial engineers,” Maierhofer Reports.

See more to his article: HERE

We have put together a quick snapshot of the ETFs mentioned in the article below:

Financial Select Sector SPDR Fund (NYSE:XLF)

The Financial Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Financial Select Sector Index (ticker: IXM). Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.

Fund Top Holdings
As of05/18/2010
Name Weight Shares Held
Bank Of America Corporation 9.80% 38,585,916
Wells Fargo & Co New 9.71% 19,926,572
Jpmorgan Chase & Co 9.50% 15,281,422
Berkshire Hathaway Inc Del 7.65% 6,365,103
Citigroup Inc 4.49% 75,587,890
Goldman Sachs Group Inc 4.43% 2,024,634
American Express Co 2.92% 4,602,841
Us Bancorp Del 2.86% 7,360,669
Morgan Stanley 2.29% 5,377,004
Bank Of New York Mellon Cor 2.16% 4,646,976

Chart forFinancial Select Sector SPDR (XLF)

U.S. Dow Jones U.S. Real Estate Index Fund (NYSE:IYR)

The iShares Dow Jones Real Estate Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, to the performance of the real estate sector of the U.S. equity market, as represented by the Dow Jones U.S. Real Estate Index.

Top Daily Holdings*
as of 5/18/2010
 
SIMON PROPERTY GROUP INC 8.59%
VORNADO REALTY TRUST 4.97%
EQUITY RESIDENTIAL 4.37%
PUBLIC STORAGE 4.20%
BOSTON PROPERTIES INC 3.80%
HCP INC 3.35%
HOST HOTELS&RESORTS INC 3.26%
ANNALY CAPITAL MANAGEMENT IN 3.15%
AVALONBAY COMMUNITIES INC 2.87%
VENTAS INC 2.60%
Total 41.15%
*Holdings are subject to change.

 

Chart foriShares Dow Jones US Real Estate (IYR)

Dow Jones U.S. Financial Sector Index Fund (NYSE:IYF)

The iShares Dow Jones U.S. Financial Sector Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the financial and economic sectors of the U.S. equity market, as represented by the Dow Jones U.S. Financials Index.

Top Daily Holdings*
as of 5/18/2010
BANK OF AMERICA CORP 8.00%
JPMORGAN CHASE&CO 7.83%
WELLS FARGO&COMPANY 7.56%
CITIGROUP INC 3.88%
GOLDMAN SACHS GROUP INC 2.99%
BERKSHIRE HATHAWAY INC-CL B 2.95%
US BANCORP 2.35%
AMERICAN EXPRESS CO 2.12%
BANK OF NEW YORK MELLON CORP 1.76%
MORGAN STANLEY 1.67%
Total 41.11%
*Holdings are subject to change.

 

Chart foriShares Dow Jones US Financial Sector (IYF)


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