All ETF Daily News Articles

The Other Shoe; Commercial Real Estate (IYR)

pooAMERICANS IN THE PAST TWO YEARS have been closely watching residential real estate, as TV commentators breathlessly relate each downward tick in home prices and upward move in foreclosures. But all the while, another important part of the real-estate market has been quietly cratering, all but ignored by the general press. Since peaking in early 2007, the value of the nation's commercial property has fallen an estimated 30% to 40%. You can get a good idea of the pain being suffered by looking at an index of real-estate investment trusts, the publicly traded entities that investors use to play the commercial real-estate sector. The MSCI REIT Index fell 77% from a high of 1233 in February 2007 to the low of 287 hit in March. Since then, it has rebounded 45%, to 420, as investors seek opportunities and the economy seems to be improving. But the commercial-property sector remains fraught with peril. Some REITs will be strong enough to snap up buildings at bargain prices, while other REITs may go bust or need to raise gobs of new equity to bolster their debt-heavy balance sheets. The commercial real-estate problem has become a focus of federal regulators in recent weeks as they stress-tested the 19 largest U.S. banks to see where losses could pop up if the economy, rather than recovering, worsens. Why has the value of REITs tumbled an average of 65%, while the value of their properties has slid more like 35%? REITs tend to rely on borrowed money. That boosted profits in the good times, from 2002 to 2007, but has magnified problems ever since. Full Story:
NYSE:IYR May 13, 2009 11:46am

Data, and dilution weigh on financial sector (XLF, KRE, KBE)

downNEW YORK (MarketWatch) -- Shares of U.S. financial stocks fell on Wednesday as the latest data from the government showed that consumer spending continues to fall. Analysts had expected a small boost in consumer spending in April. Retail sales dropped a seasonally adjusted 0.4%, the eighth decline in the past 10 months, the Commerce Department estimated Wednesday. The Financial Select Sector SPDR (XLF) shed 3.5% on Wednesday morning. Rising home foreclosures and a report that the government is looking to take a more active role in regulating financial services firms also spooked investors who have driven up financial stock prices sharply over the last six weeks. And, a flood of new bank shares headed to the market after the recently concluded stress tests also weighed on the sector. The KBW Bank ETF (KBE) and the KBW Regional Banking ETF (KRE) both fell. U.S. foreclosure filings in April rose to a record, affecting one in every 374 housing units, and bank repossessions in particular may spike in the next few months, RealtyTrac reported. Foreclosure filings -- defined as default notices, auction-sale notices, and bank repossessions -- were reported on 342,038 U.S. properties in April, up less than 1% from March and up 32% from April 2008, the Irvine, Calif., real-state consulting firm reported. RealtyTrac began issuing its report on foreclosures in January 2005 Full Story:
NYSE:KBE May 13, 2009 11:37am

Tech Funds: What the Pros Are Buying Now

techAlthough financial services stocks have taken much of the credit for the broad-based market rally that began more than two months ago, technology names may be the safer bet for all kinds of economic scenarios that might lie ahead. After all, banks and other financial names still have a host of unresolved issues around capital levels and distressed assets -- and remain vulnerable to another batch of grim economic data. All 15 broad technology sector exchange-traded funds, as well as 17 subsector ETFs, are trading between 25% and 40% higher since the Standard & Poor's 500-stock index hit its bear-market low on Mar. 9. But the gains by tech stocks aren't merely tracking the rally in the broader equities market. In fact, they have significantly outpaced the Nasdaq composite index, known for its tech-heavy focus, since the year began. Safe from Collapse, Tech Thrives Indeed, technology stocks reached their lows in November. The rebound in the sector has been driven less by fundamental considerations than by the realization that the worst-case scenarios involving the collapse of the financial system were not going to come to fruition, says Ryan Jacob, manager of the $30 million Jacob Internet Fund (JAMFX). Once the federal government decided to throw its full support behind the financial services industry, most of those scary scenarios came off the table, and Jacobs says he can't imagine the market returning to that extreme level of fear again, whatever may happen in the economy. What's made tech stocks so attractive over the past four to five months? The fact that most of these companies still have an opportunity to show growth within their industries even if there's no growth in the economy as a whole, according to Jacob. With so much cash and minimal or no debt on their balance sheets, these companies have the means to continue investing in internal growth initiatives and acquisitions, which is important since access to capital is likely to remain tight for the rest of this year and possibly longer, he adds. Full Story:
ETF BASIC NEWS May 13, 2009 10:21am

Where Next For Leveraged ETFs?

backfireHartmut Graf, head of the index team at the German stock exchange in Frankfurt, gave a fascinating talk on the performance of leveraged indices at yesterday's "Investing in ETFs" conference. Graf started his presentation by recalling the basic fact about these indices - that they do not track the "equivalent" multiple of the underlying index return if held over long periods.  Why?  Because the simple effect of compounding and rebalancing on a daily basis leads to significant tracking error. There are several good explanations on the internet of how this occurs, but one of the first and best was given by Tristan Yates and Lye Kok, here. Essentially, what is called the "constant leverage trap" forces the fund to buy high and sell low, a strategy that goes against common sense.  The higher the volatility of the underlying market, the more likely that leveraged indices will lose ground, as well.  Furthermore, there's absolutely no way of telling, given  a certain period return on the underlying index, what the leveraged, or leveraged index's return will be.  What these derivative indices actually produce as a return is path-dependent; how you get to the end point is more important than what start and end levels of the "base" index actually are. Graf reminded the audience that the expected ultimate value of an index that maintains constant leverage through daily or monthly rebalancing is zero.  And the higher the underlying market volatility, the sooner you eat up all your capital. Essentially, holders of leveraged and leveraged index ETFs are the ultimate gamblers.  While these funds can deliver outsize returns for investors who get their market timing right, they are still playing a form of Russian roulette. Full Story:
ETF BASIC NEWS May 13, 2009 10:06am

ETF Billion Dollar Club For May 2009

clubThe ETF Billion Dollar Club shrank this month.  This exclusive club, consisting of ETFs and ETNs with more than $1 billion of Average Daily Value Traded (ADVT), now has only 15 members based on the most recent month’s trading, down from 19 for the prior month. The four members on last month’s list that didn’t make the cut were SPDR Select Sector Energy (XLE), iShares FTSE/Xinhua China 25 (FXI), HOLDRS Oil Services (OIH), and ProShares UltraShort QQQ (QID).  There were no new members this month. ETF trading declined more than 20% in April from the prior month, as only $1.59 trillion worth of ETFs and ETNs changed hands - down from more than $2 trillion in March.  April ETF trading averaged $75.9 billion per day. The 15 members of this club, just 1.8% of the ETF population, accounted for 71.4% of the ETF trading in April.  With so few funds grabbing the lion’s share of the action, there are valid concerns about the other end of the spectrum - the funds on ETF Deathwatch.  These include many products with severe liquidity issues such as days with zero volume and/or outrageous bid/ask spreads.  See full story for list. Full Story:
ETF BASIC NEWS May 13, 2009 9:18am

Claymore Introduces Three Actively Managed Commodity ETFs

etf-newsClaymore Advisors has filed a request with the SEC to introduce three new ETFs, each of which would be actively managed. Among the proposed funds is the Claymore Delta Global Hard Assets ETF, which would be the first actively-managed commodity ETF. The filing with the SEC states that the Hard Assets ETF will invest in "securities that derive their revenues from the mining, processing and sale of hard commodities." While this will likely include the usual suspects - gold, silver, platinum, copper, zinc, etc. - the fund will also invest in stocks of companies representing various commodities from three broad categories: industrials, material, and energy. Full Story:
ETF BASIC NEWS May 13, 2009 9:04am

A Dividend ETF Disappoints

stocksThe case for owning high-yielding stocks during hard times runs something like this: Consistent dividend payers are, by definition, financially stable or they wouldn't be able to sustain their payouts. Plus, owning high yielders means you get paid while you wait for better times to return. But over the past year and a half, the lure of dividends proved to be a siren song. The main problem: Financial stocks represented a disproportionately large percentage of big dividend payers. Nothing better exemplifies the pitfalls of a payout-oriented strategy than iShares Dow Jones Select Dividend Index (symbol DVY). The exchange-traded fund tracks an index of the 100 highest-yielding U.S. companies that have maintained or boosted their dividend over the past five years. In addition, eligible companies cannot have paid out more than 60% of their profits, on average, over the previous five years. DVY, which we labeled the best ETF in our November 2006 "Best of Everything" issue, dived headfirst into financials from the outset. At its inception, in late 2003, the fund allocated 43% of its assets to financial stocks. Going into 2008, by which time storm clouds had already gathered over the financial sector, the allocation had risen to 49%. That outsize stake in financials played a major role in the fund's crummy performance of late; it lost 46% over the 12 months ended April 9, trailing Standard & Poor's 500-stock index by six percentage points. Full Story:
NYSE:DVY May 12, 2009 2:20pm

Oil and Gas ETFs Are Jumping, But Why?

gas-tankHave we somehow traveled back in time to this time last year? Rising gas and oil prices are the talk of the town, and related exchange traded funds (ETFs) are moving skyward. What’s going on? Oil has hit $60 a barrel for the first time in six months. While that’s a far cry from the record $147.27 hit last July 8, the price spike is getting attention because inventories are still very high. The prices are also rising in part because of the U.S. dollar, which has been weak, Reuters says. China also plays a part - the country is the world’s second-largest energy user. They said that crude imports in April rose to their second-highest daily rate on record. Full Story:
NYSE:UNG May 12, 2009 2:09pm

ETF Securities long oil ETC holdings surge to record

oil3LONDON, May 12 (Reuters) - Investors have bet more than twice as much money on rising oil prices via Exchanged Traded Commodities (ETCs) this year than in the whole of 2008, pushing holdings to an all-time high, ETF Securities said on Tuesday.  Inflows into London-based ETF Securities' oil ETCs increased by $954 million between January and April as investors bet on a rebound in oil prices from near 5-year lows hit at the end of December.  Total bets on prices rising overshadowed bets on further falls by $1.5 billion.  U.S. crude prices CLc1 hit a 6-month high above $60 a barrel on Tuesday, having risen from a low of $32.40 a barrel in December. Prices remain well below the all-time high of $147.27 a barrel hit in July 2008 before the economic crisis cut demand around the world. Full Story:
ETF BASIC NEWS May 12, 2009 1:58pm

Hedging Tips for ETF Traders

hedging2Fans of exchange-traded funds are, by and large, a pretty risk-averse group. By using ETFs, they're buying bigger chunks of the market, enjoying low fees, and generally riding Wall Street's larger, more stable waves rather than less predictable ripples in individual stocks. More and more, though, active traders are using ETFs to jump in and out of the market. They're also adopting some of Wall Street's tried-and-true risk management strategies to hedge against the market's wilder swings. Below, we look at a few popular hedging strategies that fit nicely with ETFs, including tools like options, sector funds, and one popular and unique instrument, the leveraged ETF. Let's start with options. Today, options are available on only about 40 percent of exchange-traded funds and exchange-traded notes, although the percentage is higher for most popular equity indexes. Aside from limited availability, options on ETFs operate in much the same way as stocks. A word of caution: Options aren't for everyone. If you're unfamiliar with the concepts, check out options basics from Investopedia, including definitions of some key terms like call options and put options. Options 1: "Covered call" or buy/write strategies. Among the most common options strategies used by ETF traders, the buy/write strategy works like this: You buy shares of an ETF and then sell (or write) "call options" on the same shares at a higher price (as with stocks, one option is sold in blocks of 100 shares). Full Story:
ETF BASIC NEWS May 12, 2009 12:47pm

Claymore Files To Launch 1st Active Commodity ETFs

claymoreClaymore Securities has filed a request with the Securities and Exchange Commission to launch three new exchange-traded funds, each of which would be actively managed.  The proposed ETFs would be advised by Claymore Advisors and subadvised by Huntington Beach, Calif.-based Delta Global Advisors. Rather than following an index and using a quantitative type of stock picking process, the portfolios would be created using more traditional actively managed styles similar to how mutual funds now operate.  Depending on the ETF, Delta Global would implement a bottom-up fundamental approach or rely on more technical analysis to evaluate companies included in the funds. In some cases, both methodologies would be used to select stocks.  The ETFs in which Claymore is asking regulators to approve are the:  •Claymore Delta Global Infrastructure ETF. •Claymore Delta Global Hard Assets ETF. •Claymore Delta Global Agribusiness ETF. Delta Global's indexing arm has already created the benchmark that's used for the Claymore/Delta Global Shipping ETF (NYSE: SEA).   Play On Infrastructure In Emerging Markets The new infrastructure ETF would include stocks its managers believe are best-positioned to benefit from growth of infrastructure projects in emerging markets. As explained in the filing, those would include: utilities, ports, airports, roads, railroads, water infrastructure and telecom build-outs. The portfolio would also invest in expansion relating to rising demand for basic materials and general engineering projects along more general infrastructure levels. Full Story:
ETF BASIC NEWS May 12, 2009 12:42pm

Five ETFs Most Investors Don’t Understand

stress The majority of ETFs on the market follow the traditional ETF model - tracking an underlying equity or bond index. But as the benefits of the ETF structure become more widely accepted, inflows from increasingly sophisticated investors have created a demand for increasingly complex funds. Here are 5 of the more complex ETFs available to investors today.  Read the full story for explanations of their objectives and strategies.
  • PowerShares S&P 500 BuyWrite Portfolio (PBP):
  • S&P Developed Ex-U.S. Property Index Fund (WPS):
  • SPDR Barclays Capital Mortgage Backed Bond ETF (MBG):
  • iPath Optimized Currency Carry ETN (ICI):
  • MacroShares $100 Oil Up (UOY) and $100 Oil Down (DOY):
Full Story:
NYSE:DOY May 12, 2009 9:35am

CEW ETF Goes Deeper Into Emerging Markets

emergingmarketsThe WisdomTree Dreyfus Emerging Currency Fund(CEW Quote), WisdomTree's newest exchange-traded fund, may help investors outperform markets more than some stock-and-bond mutual funds. WisdomTree sells seven single-currency funds. WisdomTree Dreyfus Emerging Currency Fund is a basket of currencies equally weighted to the Mexican peso, Brazilian real, Chilean peso, South African rand, Polish zloty, Israeli shekel, Turkish new lira, Chinese yuan, South Korean won, Taiwan dollar and the Indian rupee. The fund rebalances quarterly. The fund's function is to provide access to the currency fluctuation of a diversified emerging market basket along with money market yields from those countries. It will have small positions in the requisite currencies via swaps contracts, which will be collateralized by U.S.-denominated money market instruments. The swaps will provide the foreign exchange exposure. Emerging market currencies is a relatively new asset class for access in a brokerage account. Currencies typically don't offer the potential growth of individual stocks, but, used properly and in moderation, offer excellent diversification by reducing a portfolio's correlation to the broader market and enhancing performance. Full Story: See our previous story:
NYSE:CEW May 12, 2009 9:32am

ETF Traps For Short-Term Investors

trap......Thinly Traded Funds. One of the most important things to check before taking a flyer on an ETF is the average daily trading volume. The well-known SPDR, which tracks the S&P 500 index, recently has been trading 280 million shares a day. Buy into the SPDR, and you'll be able to unload your shares throughout the day with a miniscule bid-ask spread. Then there are funds like First Trust Global Wind Energy, which goes by the cutesy ticker FAN. It's bad enough that the fund tucks carbon-belchers like Royal Dutch Shell into its portfolio. It's also hard to get out of once you buy in. The fund has had average daily volume of 97,000 over the past 10 days, according to Charles Schwab. If the fund's value drops quickly, there may not be someone willing to buy it from you at a price you think fairly reflects the underlying market. FAN has lost 65% since its inception, which leaves little surprise as to why some investors have given up on it. But because the shares aren't actively traded, the bid/ask spread has crept above 1%, meaning you'll pay a premium to get out. Other ETFs that have low trading volumes include the SPDR S&P Emerging Markets Small Cap fund, which has daily turnover of only 12,000 shares, and the iShares FTSE NAREIT Ind/Off Capp, an ETF that tracks the industrial and office real estate sector and trades a skinny 5,000 shares a day. Full Story:
ETF BASIC NEWS May 12, 2009 9:28am

ETF Securities silver holdings up 3.9 pct to record

silverThe company's Physical Silver ETC (PHAU.L) added more than 700,000 ounces to its holdings on Monday, which now stand at a record 18.702 million ounces. This silver-backed exchange traded commodity rose more than 3.9 percent to a new all-time high on May 11. Full Story:
ETF BASIC NEWS May 12, 2009 9:12am

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