A smidgen of good news came with the release of the S&P/Case-Shiller Home Price Indices Tuesday morning. Although single family home prices continue to fall at an 18.8 percent rate across the country, the decline seems to be stabilizing. For the first time in 38 months the 10-City Composite index’s year over year performance improved from the previous month’s report. While “one robin” does not make it spring, let us hope this “robin” is soon joined by more friends.
I suspect this news will embolden housing Bulls, but there is plenty of data in the report for the Bears to snarl that investors should not be fooled by a slight up-tick. For instance, while the large California cities have shown improvements for a few months, New York had its first year-over-year double-digit decline since 1981 and is headed in the wrong direction.
Up until now, these confrontations between housing Bulls and Bears have been mostly academic, but that is about to change. On May 11, a new product will start trading allowing investors to wager on where these indexes are headed in the longer term. The housing index space has seen new products fail before, and this new entry is complicated, but I think the MacroShares have a decent chance of success.
In very simple terms, there are two shares: the Major Metro Housing UP and Major Metro Housing DOWN (Toronto: DMM.TO - News). When the product was designed each share was worth $25 and together the pair is worth $50. Based on yesterday’s Index of 154.70, the UP shares now have an underlying value of $21.55 and the DOWN shares $28.45.
Full Story: http://finance.yahoo.com/news/MacroShares-Major-Metro-etfsa-15064588.html?.v=1 MacroShares Major Metro Housing ETFs: Changing the Housing Game
A smidgen of good news came with the release of the S&P/Case-Shiller Home Price Indices Tuesday morning. Although single family home prices continue to fall at an 18.8 percent rate across the country, the decline seems to be stabilizing. For the first time in 38 months the 10-City Composite index’s year over year performance improved from the previous month’s report. While “one robin” does not make it spring, let us hope this “robin” is soon joined by more friends.
I suspect this news will embolden housing Bulls, but there is plenty of data in the report for the Bears to snarl that investors should not be fooled by a slight up-tick. For instance, while the large California cities have shown improvements for a few months, New York had its first year-over-year double-digit decline since 1981 and is headed in the wrong direction.
Up until now, these confrontations between housing Bulls and Bears have been mostly academic, but that is about to change. On May 11, a new product will start trading allowing investors to wager on where these indexes are headed in the longer term. The housing index space has seen new products fail before, and this new entry is complicated, but I think the MacroShares have a decent chance of success.
In very simple terms, there are two shares: the Major Metro Housing UP and Major Metro Housing DOWN (Toronto: DMM.TO - News). When the product was designed each share was worth $25 and together the pair is worth $50. Based on yesterday’s Index of 154.70, the UP shares now have an underlying value of $21.55 and the DOWN shares $28.45.
Full Story: http://finance.yahoo.com/news/MacroShares-Major-Metro-etfsa-15064588.html?.v=1 The Anatomy of a 5-Star Active ETF (PWV)
Over the past three years, PowerShares Dynamic Large Cap Value (NYSEArca:PWV - News) has generated a track record that may not look that great on an absolute basis but is pretty impressive on a relative basis. Through April 24, 2009, PWV has returned negative 6.21% over the past three years. While negative returns are rarely something to crow about, when you compare that to the three-year return of the S&P-500-tracking SPDR (NYSEArca:SPY - News), negative 11.10%, the relative performance is impressive. The differential was good enough to earn this active ETF a 5-star rating against its ETF and open-end mutual fund competition.
So, how did PWV manage to generate 489 basis points of relative outperformance against its large-value benchmark? Structurally, the PWV is a quantitative-active fund following PowerShares' Intellidex indexing strategy. First, the index sorts the investable universe into its market-cap style--in this case large cap--and then further sorts the list down to a value component. From that series of sorts, the fund picks and weights and invests in the 50 best stocks according to its multifactor model. The factors essentially boil down to three categories: valuation, growth, and market-price momentum. Every quarter, the index mechanically re-sorts the list by these sorts and factors and rebalances as necessary.
So, that is how the fund works, but that doesn't necessarily explain how the factor screening managed to create such strong relative performance. To do that, we need to conduct an attribution analysis. This kind of analysis seeks to pull apart a fund's performance relative to its benchmark in order to dissect the true source of a fund's returns. There are a hundred ways to slice and dice a fund's performance, but the most common are to look at how various weightings affected the returns in terms of sector, industry, and style categories. Additionally, we can take a look at how the fund performs in these separate categories to get a sense of its stock-picking ability.
Full Story: http://finance.yahoo.com/news/The-Anatomy-of-a-5Star-Active-ms-15065826.html?.v=1 BNY Mellon Asset Servicing Selected to Provide Services for AdvisorShares ETF Trust
New ETFs Aimed at Growing Market for Active Management
NEW YORK, April 29 /PRNewswire-FirstCall/ -- BNY Mellon Asset Servicing, the global leader in securities servicing, announced today that it has been selected by AdvisorShares Trust to provide comprehensive exchange traded funds (ETF) services. BNY Mellon will supply custody, fund accounting, fund administration, basket calculation, and transfer agency services for AdvisorShares' multi-manager and single-manager strategies.
"We're pleased to be working with BNY Mellon, which excels in providing ETF services to our sophisticated family of active ETFs," said Noah Hamman, chief executive officer of AdvisorShares. "We are excited about the imminent launch of our first ETF and anticipate introducing additional products shortly. The AdvisorShares ETF structure delivers the combined benefits of active management found in mutual funds with the advantages of an ETF, including tax efficiencies and real-time pricing and transaction capability."
Full Story: http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=PR&date=20090429&id=9849081 Barclays ETF Sale Changes the Game
The pending blockbuster sale of Barclays Global Investors' exchange-traded fund unit to a private-equity firm may signal the next growth phase for the ETF business. However, investors in the low-cost BGI's iShares ETFs, most of which follow stock and bond indexes, are hoping it is business as usual.
Britain's Barclays PLC earlier this month said it planned to sell its iShares ETF business to a limited partnership established by CVC Capital Partners Group, for about $4.4 billion.
Several questions have emerged in the wake of the deal, which is one of the largest transactions ever in the asset-management sector. Can the iShares business -- the clear market-share leader in ETFs -- continue to thrive under private equity's umbrella? Should investors in iShares ETFs expect anything different, especially in fees? More generally, will the deal bring more mainstream firms into the ETF business and give the industry even more momentum to muscle in on mutual funds?
Full Story: http://online.wsj.com/article/SB124088724093862231.html Why New SEC Chair Is Investigating Commodity ETFs
The new Securities and Exchange Commission (SEC) chairman is concerned about the level of authority used with the introduction of new exchange traded funds (ETFs), especially those that focus on commodities.
SEC Chairman Mary Schapiro has brought concern to the forefront of the public’s awareness that the introduction of ETFs have not been monitored closely enough. The leveraged or inverse ETFs, as well as the commodity ETFs, are of the greatest concern. Gail MarksJarvis for The Chicago Tribune explains that Schapiro plans to examine both types of ETFs, in addition to an array of complex ETFs that have flooded the market the last few years.
Also of note is that she would be adding expertise to her staff and working along with the Commodity Futures Trading Commission, which recently was said to be investigating popular oil funds to see if they’re affecting the markets. Schapiro said the the SEC’s level of expertise hasn’t kept pace with some of the complexity of some ETFs hitting the markets.
Many critics are not supportive of the ETFs that let investors short the market, or sectors of the market, and they claim that these let investors force segments of the markets to fall, such as financials. They contend that manipulation causes individual stock prices to plunge harder and faster than they would based on fundamentals.
Full Story: http://www.nasdaq.com/newscontent/20090428/why-new-sec-chair-is-investigating-commodity-etfs.aspx?storyid=8969 Trading Leveraged ETFs? It’s All About the Stops
Trading leveraged ETFs comes with a significant amount of risk, especially if the market begins moving against you.
This is why advisers recommend using a stop loss order. Often referred to simply as a stop, it directs your brokerage to automatically sell a stock or ETF if it falls to a pre-determined level. This is intended to limit an investor's loss on an investment.
There are essentially two kinds of stops:
- A hard stop that causes the stock to be sold if it hits a particular price.
- A trailing stop that causes a stock to be sold if it falls a particular percentage from the most recent high
Why REITs, ETFs Acquire A Good Position
One sector that could be worth watching is the real estate investment trusts, or REITs, which have gotten strong ratings and risen rapidly; exchange traded funds (ETFs) can give investors well-diversified exposure to these investments.
In general, an investor who seeks a REIT is concerned with tax advantages, and a high yield. Jim Abbot of A Dash of Insight says that the REIT must return 90% of income to unit holders to avoid taxation at the trust level. Furthermore, the REIT provides smaller investors the opportunity to add real estate of various types to their portfolios without directly buying properties.
When the properties held within the trust depreciate substantially is when the biggest risk is incurred. Commercial real estate has taken the biggest hit since the economy has taken a beating. As of right now, the potential acquisitions are the reason REIT ETFs may have potential.
Full Story: http://www.etftrends.com/2009/04/why-reits-etfs-acquire-a-good-position.html Source Poses Questions
Source's launch of 13 new funds last week marked the arrival of a major new issuer in the European exchange-traded products market.
The launch of an ETF "platform", with backing from several financial institutions, was a topic that we covered in a recent feature. But Source's pricing policy went against the grain of recent competitor launches, which have been characterised by falling fund fees. Is this a sign that a long-standing trend towards cheaper management charges is about to change? And what should one make of the issuer's decision to list funds on a single European exchange, the Deutsche Boerse, rather than cross-listing its ETFs in different European countries?
In a recent blog we highlighted some recent research from Debbie Fuhr's team at Barclays Global Investors, which showed that European ETF average fee levels had converged with those in the US, at 31 basis points per annum.
There are still some differences between the two markets—to give two examples, Europe still cannot match the ultra-low fees on offer from US large-cap equity ETFs, which average 12 basis points, while the more institutional investor base in Europe means that there is no real equivalent to the multi-billion US leveraged and inverse leveraged funds sector, which is popular with retail investors, and where the typical fee is 95 basis points.
Full Story: http://www.indexuniverse.com/component/content/article/12-features/5774.html?Itemid=19 Case-Shiller: Just Being Less Poor In Housing Prices (XHB)
There is some good news on the housing front, although this “good news” may only be a relative issue and we are having to go back to February in this data. The S&P/Case-Shiller home-price index for February did stay on path for its neverending slide, but the good news is that the record declines were broken after 16 months. The report showed that 15 of the 20 major metropolitan areas posted average sale price declines of 10% or more and housing prices on a national average look more similar to 2003 levels. The SPDR S&P Homebuilders ETF (NYSE: XHB) is down 1.4% at $13.37 so far this morning.
Full Story: http://247wallst.com/2009/04/28/case-shiller-just-being-less-poor-in-housing-prices-xhb/ OOK Advisors Files Texas Exchange-Traded Fund with Securities and Exchange Commission
Well, it does not take a genius to assume that we will be seeing more of these. It is only a matter of time for all the States to establish an ETF of their own to offer investment opportunities for their local economies.
Oklahoma-based OOK Advisors, a sister company of Capital West Securities, recently filed a registration statement with the U.S. Securities and Exchange Commission (SEC) to launch the Texas Exchange-Traded Fund. The Fund is expected to be traded on the NYSE Arca under the stock symbol “TXF.” The initial paperwork was filed with the SEC in January. The fund will be made up exclusively of stocks issued by Texas’s publicly traded companies. TXF is expected to be one of the first state-based equity Exchange Traded Funds (ETF) to “ring the bell” and begin trading. “We believe there are some outstanding companies in Texas with proven abilities that will make this fund a great vehicle to invest in Texas with us,” said Keith Geary, chairman of the Geary Companies. Full Story: http://news.morningstar.com/newsnet/viewnews.aspx?article=/bw/20090424005638_univ.xml
New Filings: Foreign Sector ETFs Planned By iShares
In a move expected to round out its lineup, iShares has filed to launch 10 international sector exchange-traded funds.
The firm already has some 38 sector ETFs for the U.S. and North America. It also has 11 different global funds focused on industries covering U.S. and foreign markets.
Now, iShares wants to boost its coverage to just non-U.S. developed and emerging markets divvied up by sectors.
No expense ratios were mentioned in the filings. The proposed iShares international sector ETFs will face several competitors, including a full lineup tracking S&P indexes sponsored by State Street Global Advisors. Most have tiny asset bases and charge 0.50% in annual expense ratios.
Full Story with list: http://www.indexuniverse.com/component/content/article/10-news-in-focus/5773.html?Itemid=19 Jim Cramer rants on leveraged ETF’s
ETFs Most Sickened By Swine Flu Fears
Mexico and airlines led ETFs south Monday on fears the swine flu crisis could deepen the global recession.
The worst-hit industry, as tracked by Claymore/NYSE Arca Airline (NYSEArca:FAA - News), plunged 11% as the U.S. declared a public health emergency and discouraged nonessential travel to Mexico. The ETF experienced its steepest one-day dive since it started trading in late January. Volume swelled more than five times usual.
Two of the ETF's largest holdings: Delta Air Lines (NYSE:DAL - News) and Continental Airlines (NYSE:CAL - News) nose-dived 14% and 16%, respectively, upon hitting overhead resistance at their 40-week moving averages.
FAA rallied 68% off its low over the past seven weeks vs. 31% for the S&P 500 and was due for some profit-taking. It reversed last week after failing to break prior resistance above 22. It may be forming a handle in a V-shaped base.
The pullback offers a buying opportunity in airlines, which should continue rising through May, according to Yiorgo Aretos, founder of the TMPProject.com.
He recommended buying airlines at the end of 2008. He also expected the market overall to pull back after rising for seven weeks.
| Symbol | Price | Change |
|---|---|---|
| CAL | 11.08 | -2.17 |
| COW | 30.10 | -0.87 |
| DAL | 6.75 | -1.13 |
| EWW | 30.73 | -2.38 |
| FAA | 19.71 | -2.32 |
Watch the ‘Mexico ETF’ Fall (EWW)
Mexico's economy is in serious trouble, tourism was already hurting thanks to the recent drug trade violence, the peso has never been more volatile, and now you add the Swine Flu to the mix?! Don't forget about Mexico City's 5.6 magnitude earthquake a few hours ago. The downfall of the iShares MSCI Mexico Inv. Mt. Idx. (ETF) (NYSE:EWW) is just beginning.
Today the EWW has already shed 8%, trading at $30 a share and there's no doubt that if iShares could file and put out an Inverse Mexico ETF, they would rush to do so.
Full Story: http://thestockmasters.com/short-EWW-Mexico-ETF-04272009 How does a 3x ETF gain 3 times the index performance
We have been asked many times the question: How can an ETF gain three times the performance of an index and where does this money come from. We have included the following from the Direxion Prospectus (FAS, FAZ) which should help answer this question. Keep in mind, these tools are to be used as a daily trading instrument, not a long term investment.
Rafferty Asset Management, LLC (“Rafferty” or “Adviser”), the investment adviser to the Funds, uses a number of investment techniques in an effort to achieve the stated goal for each Fund. For the Bull Funds, Rafferty attempts to magnify the returns of each Bull Fund’s index or benchmark for the relevant period. The Bear Funds are managed to provide returns inverse (or opposite) by a defined percentage to the return of each Bear Fund’s index or benchmark for the relevant period. Rafferty creates net “long” positions for the Bull Funds and net “short” positions for the Bear Funds. (Rafferty may create short positions in the Bull Funds and long positions in the Bear Funds even though the net exposure in the Bull Funds will be long and the net exposure in the Bear Funds will be short.) Long positions move in the same direction as their index or benchmark, advancing when the index or benchmark advances and declining when the index or benchmark declines. Short positions move in the opposite direction of the index or benchmark, advancing when the index or benchmark declines and declining when the index or benchmark advances. Rafferty generally does not use fundamental securities analysis to accomplish such correlation. Rather, Rafferty primarily uses statistical and quantitative analysis to determine the investments each Fund makes and the techniques it employs. As a consequence, if a Fund is performing as designed, the return of the index or benchmark will dictate the return for that Fund. Each Fund pursues its investment objective regardless of market conditions and does not take defensive positions. A Fund generally will hold a representative sample of the securities in its benchmark index. The sampling of securities that is held by a Fund is intended to maintain high correlation with, and similar aggregate characteristics (e.g., market capitalization and industry weightings) to, the benchmark index. A Fund also may invest in securities that are not included in the index or may overweight or underweight certain components of the index. A Fund’s assets may be concentrated in an industry or group of industries to the extent that the Fund’s benchmark index concentrates in a particular industry or group of industries. In addition, each Fund is nondiversified, which means that it may invest in the securities of a limited number of issuers. Each Bull Fund and Bear Fund has a clearly articulated goal which requires the Fund to seek economic exposure in excess of its net assets. To meet its objectives, each Fund invests in some combination of financial instruments so that it generates economic exposure consistent with the Fund’s investment objective. The impact of market movements determines whether a portfolio needs to be re-positioned. If the target index has risen on a given day, a Bull Fund’s net assets should rise, meaning the Fund’s exposure may need to be increased. Conversely, if the target index has fallen on a given day, a Bull Fund’s net assets should fall, meaning the Fund’s exposure may need to be reduced. If the target index has risen on a given day, a Bear Fund’s net assets should fall, meaning the Fund’s exposure may need to be reduced. If the target index has fallen on a given day, a Bear Fund’s net assets should rise, meaning the Fund’s exposure may need to be increased. A Fund’s portfolio may also need to be changed to reflect changes in the composition of an index and corporate actions like stock splits and spin-offs. Rafferty increases the Fund’s exposure when its assets rise and reduces the Fund’s exposure when its assets fall. To determine which instruments to purchase or sell, Rafferty identifies instruments it believes exhibit price anomalies among the relevant group of financial instruments to identify the more advantageous instrument. Each Bull and Bear Fund is designed to provide daily investment returns, before fees and expenses, that are a multiple of the returns of its index or benchmark for the stated period. While Rafferty attempts to minimize any “tracking error” (the statistical measure of the difference between the investment results of a Fund and the performance of its index or benchmark), certain factors will tend to cause a Fund’s investment results to vary from the stated objective. A Fund may have difficulty in achieving its daily target due to fees and expenses, high portfolio turnover, transaction costs and/or a temporary lack of liquidity in the markets for the securities held by the Fund.
