All ETF Daily News Articles

How Managing Risk With ETFs Can Backfire

backfireAlcohol ads urge us to "drink responsibly." Cigarette packs are emblazoned with the surgeon general's warnings about cancer. And the firms that sell leveraged exchange-traded funds keep begging individual investors not to buy the things because they are meant only for short-term trading and can have erratic long-term returns. Nonetheless, roughly 13,000 people are killed in alcohol-related crashes each year, over 33 million Americans smoke at least once a day -- and more than $2 billion has poured into leveraged ETFs so far this year, much of it from financial advisers and retail investors who hang on too long. ETFs are funds that trade during the day like stocks. A leveraged ETF seeks to use futures and other derivatives to multiply the daily return of a market index. Some, called "ultra," "2X" or "3X bull," attempt to double or triple the market's return each day. Others try to double or triple the opposite of an index's return; on a day when the market goes down, these "ultra-short," "inverse 2X" or "3X bear" funds should go up two or three times as much. So why bother with a boring index fund when you could double or triple your money by using a leveraged ETF? And why helplessly watch your stocks wither away when an inverse leveraged fund could let you mint money in a falling market? There are 106 such funds with $46 billion in assets, much of it "hot money" that flies right back out. On Wednesday, trading volume for Direxion Financial Bear 3X totaled 23.1 million shares on only two million shares outstanding -- implying an average holding period of less than 34 minutes. Full Story:  http://online.wsj.com/article/SB123578237239398181.html?mod=rss_Money#articleTabs%3Darticle
ETF BASIC NEWS April 20, 2009 10:30am

Ten Reasons Commercial Real Estate Won’t Rebound

commercial-reGiven that I’ve already spelled out my thinking on the sector, I’ll use a “bullets” format here, pulling in ideas from recent reports by Goldman Sachs (GS) and Stifel Nicolaus, as well as information from a very well-placed broker in the Washington area: 1. In prime office markets, closings for trophy properties are being done at 7.5-8.5 cap rates; anything other than “trophy” quality is above 9.0 caps. Against a backdrop of halcyon-era deals, which happened at nominal 3-4 caps (in reality cap rates were at zero since under normalized financing terms there would have been no cash flows), and leveraged 75% plus, this means that many properties have now lost approximately 50% of their value. To wit, Normandy’s $660 million foreclosure of Brodway’s Hancock Tower in Boston took place at 50% of the original price, but only because Normandy chose to assume the very favorable loan on the property. In a regular auction sale, the property might have pulled in less than $500 million (Stifel Nicolaus). 2. “CRE fundamentals will continue to worsen for the next 12-18 months; cap rates will rise another 3 to 5 points, to the low teens; secured financing costs will rise to the 8-10% range; unsecured financing will command double digit rates." (Goldman Sachs). I agree completely, and it matches the assumptions surrounding many troubled projects we're familiar with........ ........10. At the risk of being redundantly redundant, the ProShares Ultrashort Real Estate (SRS) remain an excellent trading vehicle to short CRE, and just as bad an investment tool to achieve that purpose. I continue to trade the former, but I've now started a short position in the IYR, looking for it to bleed slowly for an extended period of time. Full Story:  http://www.minyanville.com/articles/GS-SRS-IYR-goldman-Sachs-Boston/index/a/22256/p/1
NYSE:SRS April 20, 2009 10:08am

Financial-sector rally fizzles

stocks-plungeBOSTON (MarketWatch) -- U.S. financial stocks opened lower Monday after Bank of America Corp. said it earned more than $4 billion in the first quarter but warned credit markets continue to deteriorate on a stagnant economy and rising unemployment.
 
Bank of America (BAC 9.05, -1.55, -14.6%) shares were off more than 10% following its first-quarter earnings announcement, but the stock is up more than 40% so far this month as a result of the dramatic snapback rally in bank shares.
 
The bank is still facing "extremely difficult challenges primarily from deteriorating credit quality driven by weakness in the economy and growing unemployment," said Chief Executive Ken Lewis. See full earnings coverage.
 
The Financial Select Sector SPDR Fund (XLF 10.52, -0.59, -5.3%) , a sector exchange-traded fund, was down about 5% in early trading Monday. The ETF had risen the previous three sessions, but the financial sector suffered across-the-board losses to start the week.
 
Full Story:  http://www.marketwatch.com/news/story/financial-sector-lower-after-b/story.aspx?guid=%7B92EF25A0%2D232F%2D45A4%2DB544%2DD7A013AF0773%7D&siteid=yhoof
NYSE:XLF April 20, 2009 9:53am

ETF Breakdown: Understanding the Three Categories

etf-news7The exchange-traded fund (ETF) boom has been one of the fantastic bull-market trends of all time. Unfortunately, it's been one of those trends that we as investors haven’t yet been able to cash in on, but have been able to directly participate in by learning the business and understanding the players. I started using ETFs years ago and have slowly evolved to a separate managed account (SMA) model that utilizes them exclusively. But interestingly enough, you wouldn’t believe the number of people with whom I discuss my SMA strategy who have never heard of an ETF. If you happen to be one of the few who don’t yet understand just what an ETF is, in simple terms, it's a tracking stock that owns a basket of underlying securities. It allows you to diversify your holdings in the same manner as a mutual fund, but without the restrictions of buying and selling at 4 p.m., as ETFs trade when the market is open. I believe one of the greatest strengths you can have as a trader is to know all the major ETFs intimately. When you see a sector or market moving, it's helpful to know exactly how to play it via ETFs, rather than searching this out when it's time. Being prepared is always worth more than you can ever imagine. Observing this growing industry has been fascinating, and like old media versus new, I suspect it will still be several years before the dying, mutual-fund world, understands the competition that ended up cleaning its clock. Yet with this incredible market and unbelievable opportunity, I'm still not sure if all the players in the game understand their very own business and roadmap to success. Full Story:  http://news.moneycentral.msn.com/ticker/article.aspx?symbol=US:QQQQ&feed=MY&date=20090420&id=9800889
ETF BASIC NEWS April 20, 2009 9:29am

Why the Case For ETFs In 401(k) Plans Just Got Stronger

retirementThe 401(k) market is the last frontier for exchange traded funds (ETFs) to fully break into, and the latest market upheaval may lead to an easier road for these funds to break into this segment of the market. Many individual investors are switching their retirement savings plans over to a pure ETF platform. Murray Coleman for Index Universe showcases one example, the owner of Lafayette Copier Sales & Service Inc. in Lafayette, Indiana. The owner had been using a 401(k) plan only offering mutual funds. But about a month ago, the plan’s service provider worked out a system that allows participants to create their own portfolios and freely transact using any iShares ETFs currently on the market. The retirement markets need the flexibility of ETFs, since they trade at any time of the day, have total transparency and the ability to buy in fractional shares. These plans are still few and far between, however, the more employers that see how ETFs can be useful to 401(k) plans, the more will switch over. Full Story:  http://www.etftrends.com/2009/04/why-case-for-etfs-in-401k-plans-just-got-stronger.html
ETF BASIC NEWS April 20, 2009 9:21am

The Bear ETF’S Are Getting Ready For “Sell In May And Go Away”

humorThe bears have been hibernating for the past 6 weeks, giving the bulls some glimmer of hope.  The legendary saying "Sell In May And Go Away" is fast approaching and the bears are getting ready for an INVERSE ETF party. Some investors do not beleive the worst financial crisis in history would lead to a recession only lasting 18 months.  This would make this recession the shortest on record for a financial disaster this big!  See chart link here:  http://etfdailynews.com/blog/?p=701 What has changed in the last 6 weeks?  Unemployment is still near 10%?  Foreclosures are still on the rise?  Banks are still not lending? The commercial real estate market hasn't popped yet, or has it just started to?  See Link: www.cnbc.com/id/30239789 Here are some inverse ETF's that are sitting at recession lows.  These ETF's will make large upward moves if the bears plan to reunite at their May reunion!
  • FAZ-The investment seeks to replicate, net of expenses, 300% of the inverse daily performance of the Russell 1000 Financial Services Index.
  • DXD-The investment seeks daily investment results, before fees and expenses, which correspond to twice the inverse of the daily performance of the Dow Jones Industrial Average index.
  • QID-The investment seeks daily investment results, before fees and expenses, which correspond to twice the inverse of the daily performance of the NASDAQ-100 index.
  • SRS-The investment seeks daily investment results, before fees and expenses, which correspond to twice the inverse of the daily performance of the Dow Jones U.S. Real Estate index.
By: David Bettencourt  ETF Daily News GET A FREE TREND ANALYSIS  FOR ANY ETF HERE!
NYSE:DOG April 19, 2009 2:11pm

What Obama’s Power Grid Plan Means for Utility ETFs

obamaElectric utilities are left vulnerable to computer-based attacks from foreign countries and hackers, a government-authorized regulatory group recently reports; will this leave related investments and exchange traded funds (ETFs) unprotected as well? President Barack Obama has just unveiled a $4 billion plan to fund new power-transmission technology, reports Ian Talley for The Wall Street Journal.  Obama wants to spur the development of a new artificially intelligent “smart” grid that could increase the efficiency of the nations electrical infrastructure. Full Story:  http://www.etftrends.com/2009/04/what-obamas-power-grid-plan-means-utility-etfs.html
ETF BASIC NEWS April 19, 2009 9:55am

Why Now for New Hedge Fund ETF? QAI (VIDEO)

ETF BASIC NEWS April 18, 2009 1:10pm

Investing for Hyperinflation (gold, silver, and agriculture ETF/ETNs )

inflationFORT LEE, N.J., April 16, 2009 /PRNewswire via COMTEX/ -- The National Inflation Association today released the following statement to its http://inflation.us members: "Today, hyperinflation is the last thing on most Americans' minds because they can't see it yet and they don't know it's coming.

Imagine taking a bottle and putting into it a bit of bacteria that you can only see under a microscope. Now let's say this bacteria doubled in size every minute and after 55 minutes, you still don't see any bacteria. But then, five minutes later or one hour since the bacteria started doubling, the entire bottle is full of bacteria.

Massive monetary inflation is already taking place today. Nobody can see it yet because temporary forces have pushed consumer good and commodity prices down, which has tricked economists into believing deflation is the real problem.

However, almost every action President Obama, Congress, and the Federal Reserve take every single day is sowing the seeds for hyperinflation. You need to invest today as if hyperinflation is already here, because once it arrives it will be too late.

People often ask us, how to invest in gold and how much gold is too much to have. There is no such thing as having too much gold. Although you should never put all your eggs in one basket, it is much better to have all of your money in gold than to have it all in U.S. dollars. The U.S. dollar will inevitably return to its true value, which is zero. Gold will always retain its value; unless huge new gold discoveries are made, which is very unlikely.

Many Americans are afraid to invest heavily into gold because of its volatility.

Today's volatility in gold is nothing but noise that should be ignored. Many short-term traders buy gold for the wrong reasons. They buy it as a safe haven from stocks, and when stocks rally they sell their gold to buy stocks.

Full Story: http://www.cnbc.com/id/30252116/

ETF BASIC NEWS April 18, 2009 12:54pm

Low-Volume ETFs That Fly Under The Radar

stealthETFs offer transparency, tax-efficiency, low-cost diversification and "trade-ability." These factors give investors an incredible edge on controlling costs and risks. Yet not all ETFs are equally tradeable; that is, while they may indeed trade throughout the day like individual stocks, limited investor interest may lead to an undesirable bid-ask spread. It follows that investors may find themselves buying at an intra-day price that may be anywhere from .5% to 1% more as well as selling at an intra-day price that could be .5% or 1% less than hoped for. And this is most common in low volume ETFs that trade few shares throughout the day. In my own endeavors, I typically steer far away from the low volume ETFs out there. Not only does there tend to be a greater risk of the fund being folded by the provider, but for those of us who use stop-loss protection, low-volume ETFs can execute at really poor prices. Full Story:  http://www.etfexpert.com/etf_expert/2009/04/etf-expert-lowvolume-etfs-that-fly-under-the-radar.html
ETF BASIC NEWS April 18, 2009 11:30am

Five Sector ETFs Ripe for the Picking

etf-news7There are plenty of ways to determine whether an equity-sector ETF is ripe for the picking. When Morningstar's ETF research team looks at sector funds, we consider all the possible variables including secular trends, macro-economic themes, and even sector momentum. Though all of those factors are important, we think that the most important way to decide whether to invest in a sector ETF is based on fundamental valuation. ETFs are really just the sum of their underlying holdings. Investors could aggregate their implied fair value estimates for all of the stocks in a sector ETF to come up with a fair value for the entire fund. Of course, that would mean doing the valuation homework on literally hundreds of stocks, which generally isn't very practical for most investors.   Luckily, Morningstar has an equity research team covering more than 2,000 stocks with the unique ability to do just that. The ETF team can aggregate and weight our equity fair value estimates for just about any U.S.-themed sector ETF out there. From this aggregation we can provide a fundamental perspective on whether a sector is priced cheaply or dearly. Full Story:  http://news.morningstar.com/articlenet/article.aspx?id=287403
ETF BASIC NEWS April 18, 2009 11:22am

Will Leveraged ETFs Put Cracks in Market Close?

crazyAt 3 p.m., do you get queasy just thinking about the toll that the final hour of trading might take on your portfolio? New research suggests that on days when the indexes make big moves, leveraged exchange-traded funds could trigger a trading cascade, turning the market close into a buying or selling frenzy. To be fair, there has been no meltdown -- yet. But as the financial crisis has intensified since last fall, the final hour of the trading day has felt rougher than ever. Leveraged ETFs offer double or even triple the daily return of a market index. Some of them, called "inverse" ETFs, move opposite to the market -- for example, going up twice as much as an index goes down. Each day, they all adjust their exposure by rebalancing, or "releveraging," their positions. These funds are the hottest thing on Wall Street. In March alone, $3.4 billion of new money poured into ETFs that use leverage to magnify the returns on U.S. stocks. Further amplifying the ETFs' actions: Every day, trading desks at big banks and brokerage firms blast out customized spreadsheets to favored clients. These tools, linked to live data feeds, predict whether the leveraged ETFs will be buying or selling as 4 p.m. approaches. That enables hedge funds and other big investors to trade ahead of the ETFs. Full Story; http://finance.yahoo.com/news/Will-Leveraged-ETFs-Put-wallstreet-14963248.html?.v=5
ETF BASIC NEWS April 18, 2009 10:34am

How Discount Shoppers Are Helping Retail ETFs

cartCheap is the new black. The changing face of consumerism is America is leading to a value-oriented shopper, leaving low-cost retailers in a position to prosper, and it is displayed in the performance of retail exchange traded funds (ETFs). The Family Dollar Store (FDO) is a low-cost retail chain that has fared well in this down economy. It has outperformed other retailers such as Macy’s (M) and J.C. Penney (JCP), as consumers are trading down and wanting their dollar to go a lot further. Most items sell for under $10 in these shops. Full Story:  http://www.etftrends.com/2009/04/how-discount-shoppers-are-helping-retail-etfs.html
NYSE:XRT April 18, 2009 10:15am

Too Far, Too Fast?

speed-limitThe rally gets the benefit of the doubt for now.

SO MANY OF US HAVE BEEN LOOKING THIS GIFT HORSE OF A RALLY in the mouth, we enter the weekend with the smell of nag's breath in our noses.

It isn't simply a lack of gratitude that is leading many investors to find flaws with the Dow's 25% run-up in the past six weeks. Many plainly wish this move to be another ill-fated bear-market triumph of hope over experience.

This is another way of saying lots of folks wish they had bought in, want prices to fall and hope that if stocks oblige by cracking lower, they will have the fortitude to be aggressive bidders.

If this widely shared sentiment is reason enough for the market not to stumble, other aspects of the rally leave us scratching our head. For one, many stocks have had a great year in the past six weeks, auguring a rest or retrenchment at minimum. The equal-weighted version of the Standard & Poor's 500 -- a proxy for the average big stock, represented by the Rydex Equal-Weight S&P 500 exchange-traded fund (ticker: RSP) -- is up 40% since mid-March. The straight indexes to date have outperformed every lift-off rally that came after a major bear-market low. So even if March 6 represented a decisive low, which is unknowable now, this move has gotten awfully far, very fast.

Under the surface, this rally has been driven not so much by economic stabilization or banks' revival or government stimulus, or even short-covering, but the surge in buying of extremely low-priced stocks. So conclude quantitative strategists such as Matthew Rothman of Barclays Capital, who notes that in March stocks under $5 essentially doubled in price.

Rich Repetto, analyst at Sandler O'Neill, calculates that in March the five most active stocks on the NYSE had a volume-weighted average price near $5 and accounted for 25% of all volume, compared with 8% of volume and an average price close to $20 a year earlier.

Online-broker customer volumes were up around 15% last month. The Direxion Financials 3X Bull ETF (FAS), which delivers triple the daily move in the Russell 1000 financial sector, began trading 300,000,000 shares a day and more as the rally got underway.

Full Story:  http://online.barrons.com/article/SB124000859852130569.htmlru=yahoo&mod=yahoobarrons

NYSE:FAS April 18, 2009 10:06am

Sector higher, but Citi takes hit after earnings

bank1Citigroup (C 3.65, -0.36, -9.0%) reported better-than-expected first-quarter results Friday to cap off a busy week for bank earnings. See earnings coverage.
Citi shares had traded higher in pre-opening-bell action Friday but closed the session off about 9%. The stock is up more than 40% this month, as one of the prime beneficiaries of the dramatic rally in financial stocks.
The Financial Select Sector SPDR Fund (XLF 11.11, +0.13, +1.2%) , an exchange-traded fund indexed to the financial sector, gained more than 1% on Friday. Full Story:  http://www.marketwatch.com/news/story/financial-sector-rises-citi-shares/story.aspx?guid=%7BF34E0419%2D3480%2D461C%2DB81C%2DF7E703871421%7D&siteid=yhoof
NYSE:XLF April 17, 2009 8:09pm

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