Dave's Daily ETF Blog

MARKET COMMENT

November 20, 2008




I thought we were dangerously on a cliff a few days ago and now we've been pushed off.

There could be more trouble as an institution like Citigroup below $5 must be sold by institutions prohibited from owning stocks below that price. Alwaleed, the wealthy Saudi who owned 4% of the stock, said he was upping his ownership to 5% today. Perhaps someone tapped him on the shoulder and told him to do that to prevent more selling. Obviously the Big Three auto companies are no longer in the books of those institutions barred from owning sub $5 stocks. AA is closing in on $5 as well.

We're going through a crash if only in slow motion. Everything the government has done has only prolonged the death spiral. Bernanke is dusting off his Depression prevention studies, taking another look and perhaps tweaking his models.

Volume increased today and breadth probably put in another negative 90/10 day. And, just as I wrote that subscriber and blog reader David Hurwitz vacationing in Geneva sent me the updated market internals. He needs relax and have some fun but we thank him.

Continue reading Dave's Daily or learn more about Dave in his biography.

Interviews How To Create A Hedge Fund With ETFs A Trading Play Whose Time Really Has Arrived Investor In The Woods: Part I Interview Central: David Fry, Part III Interview Central: David Fry, Part II Interview Central: David Fry Part I Bloated array of ETFs results in liquidations Interview About Israeli ETFs With David Fry Regulator taking closer look at commodity prices Best ETFs in Small-Cap, Mid-Cap Space Visit the Press Room for more news and media links.

Essays Dawn Of A New Era - The Great Race The first part of this essay was written five years ago--how time flies! And how the ETF sector has grown! By the end of the first quarter in 2008 roughly 650 ETFs were issued with 40% of those launched in 2007.... June 1, 2008 View all of Dave Fry's Market Essays.

What's New

Charles Kirk Question & Answer

10 Questions With David Fry

Kirk: Since our last Q&A, what are some key developments in your area of expertise - i.e. exchange trade funds and their use in portfolio management?

David Fry: It's been awhile since we did the last one and a lot has changed. Other than what is probably the tremendous growth of issues available and assets under management there have been some great new developments that we're thrilled about.

First is the arrival of many Alternative Investment, Inverse and Leveraged issues.

As some investors know, adding true uncorrelated assets to a conventional investment portfolio can reduce risk and increase overall returns. Therefore, having commodity and currency issues have been a major breakthrough. Previous to having commodity and currency ETFs, the only way for conventional investors to deal with them was either directly through trading expensive and highly leveraged futures contracts or in commodity limited partnerships.

As a former CTA [Commodity Trading Advisor] and CPO [Commodity Pool Operator] these pools traditionally involved high leverage, high minimum investments, expensive double digit fees, illiquidity and other negatives that turned-off mainstream investors.

ETFs have changed that considerably. Most of the previous negatives have been eliminated with ETFs linked to Commodity Tracking Indexes, gold, currencies, agricultural products, base metals, energy and so forth. If you want to use some leverage you can add a modest amount with some issues, liquidity is high and costs are comparatively much lower than previous vehicles.

Further, commodity markets are driven primarily by supply/demand issues. It's as likely to be long a commodity as short. And, in 2007 and 2008 we've benefited in both directions.

Currency investing has always been intriguing for most investors but was equally as difficult to participate in as commodity markets. Now, ETFs can be utilized for most major currency markets either for speculation or hedging without having to use the futures market or employ complex options strategies.

Inverse and leveraged issues covering US sectors, major market indexes, overseas sectors, and commodity and currency issues have been a great addition to the ETF Digest portfolio menu giving investors the opportunity to create some basic hedge fund like strategies.

Continue reading 10 Questions With David Fry on Charles Kirk's blog, The Kirk Report.