Protect Your ETF Portfolio If That Boom Goes Bust

When a particular "boom" goes "bust", what should investors do with their related exchange traded funds (ETFs)?

Gary Gordon for ETF Expert takes us back to 2000: the dot-com bulls were running rampant, convinced that the stock prices for those companies could do nothing but soar. In more recent years, the same craze spread through the real estate markets: the world is getting more crowded, there are fewer places to build and it can only send prices higher.

We all know very well by now how that turned out. But Gordon says that this isn't necessarily to suggest that the newest booming sector - commodities - is primed for a fall. But he does stress that investors should recognize the psychology of fear and greed.

It's a fact: booms go bust. Therefore, investors need to have a plan to sell.

Some resource ETFs are particularly attractive now, to be sure. Food is scarce. Water is scarce. Oil seems like it can't be stopped. Naturally, investors will be taking a look at such funds as S&P Metals and Mining (XME) or the PowerShares Water Resources Fund (PHO).

It's okay to get in those areas that are moving and above their trendlines. What's not okay is hanging on as it falls below that line or 8% off its high and hoping against hope that things will turn around.

Now that consumer spending is at a stand still and real estate investment trusts are unattractive, what do savvy investors do? They bargain hunt! There are values to be had if you look for them. For instance, the Vanguard REIT Index (VNQ) is above its long-term trendline and has outperformed the broader market for 2008. The Retail HOLDRs (RTH) has followed suit, sitting above its trendline.

For full disclosure, Tom Lydon's clients own shares of RTH.

As ETFs Have Evolved, So Have Investors

Exchange traded funds (ETFs) are such phenomenal investing tools they are actually changing the way investors invest.

They've come a long way since they first landed on the scene in 1993. Billy Fisher for The Street highlights some major advances arising from the advent of the ETF.

• Betting on the bears: ETFs make it much easier to take a bearish stance and hedge against downside risk. ProShares Short S&P 500 (SH) delivers performance that is the opposite of the index it tracks. Investors no longer have to buy puts or sell short. The high risk is also offset. Rydex also offers a line of inverse funds, including the Rydex Inverse 2x Russell 2000 (RRZ).

• Active management: Actively managed ETFs have finally gained approval from the Securities and Exchange Commission (SEC) and are now awaiting investor approval. PowerShares recently launched ETFs coupled with the skill of an active manager and the diversification of an ETF. PowerShares Active Low Duration Fund (PLK) or the PowerShares Active Alpha Multi-Cap Fund(PQZ) are a few examples of the ones available. XShares and State Street are also planning to launch products of this type.

• Access granted: Areas of the market individual investors once found hard to access, such as commodities or preferred equities, are now available. iShares S&P US Preferred Stock Index (PFF) and the PowerShares Financial Preferred Fund (PGF) have shown strong interest.

• Plays on the dollar: The weakening U.S. dollar has been the topic du jour, and now investors can put their money where their mouth is and invest in currency. PowerShares DB U.S. Dollar Index Bullish (UUP) is a favorite among some analysts.

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

Home Foreclosures and Food Prices Up and ETFs Are Mixed

Real estate and home builder exchange traded funds (ETFs) are mostly higher this morning, even after foreclosures shot higher in April.

The number of U.S. homeowners falling behind on their mortgage payments rose 65% last month over the same month last year, which sent home values down even further, reports Alex Veiga for the Associated Press. One in every 519 U.S. households received a foreclosure filing, and they increased in all but eight states.

Several real estate and homebuilder ETFs were trading higher - perhaps investors think this might be as bad as it gets? As eager as we all may be for a turnaround, we suggest sitting back and waiting for any uptrend to be on more solid footing and crosses the 200-day moving average. Trying to call the bottom can be a losing battle.

Among the related ETFs:

• iShares FTSE NAREIT Real Estate 50 Index (FTY), up 8.1% year-to-date
• First Trust S&P REIT Fund (FRI), up 8.6% year-to-date
• DJ Wilshire REIT (RWR), up 10.1% year-to-date
• SPDR S&P Homebuilders (XHB), up 10% year-to-date

Inflation in April eased up some, but food prices experienced their biggest jump in 18 years, reports Martin Crutsinger for the Associated Press. Consumer prices rose 0.2% in April, compared to a 0.3% rise in March. Energy delivered a flat reading, which helped offset a 0.9% rise in food prices across the board.

Among the agriculture ETFs, which are mostly static in early trading:

• Market Vectors Global Agribusiness (MOO), up 7.5% year-to-date
• PowerShares DB Agriculture (DBA), up 11.2% year-to-date
• iPath Dow Jones Agriculture (JJA), up 6.6% year-to-date

Run On Food Prices, Agriculture ETFs, Leads to a Tiff

The rising cost of food that has benefited agriculture exchange traded funds (ETFs) seems to have led to a squabble between India and the United States over who's to blame.

Indian politicians, economists and academics are upset that top U.S. officials have said India's growing prosperity is the reason for food inflation, reports Heather Timmons for the New York Times.

India countered that Americans should rethink their energy policy and go on a diet.

Zing!

One official said that if Americans slimmed down to the weight of middle-class Indians, many people in sub-Saharan Africa would find food on their plates.

India isn't the only country being blamed for the rising cost of food. China has been fingered as a source of greenhouse gases and rising commodity prices, as well. Many emerging markets that have seen a growing middle class in recent years are slowly adopting more Western diets (which is probably just a nicer way of saying "burgers, fries and milkshakes").

India has a point, though: the average American eats 3,770 calories a day. It's the highest caloric intake in the world. India consumes 2,440 a day per capita. It takes 3,500 calories to gain one pound.

The United States and Canada also lead the world in oil consumption per person.

Whatever side you find yourself on, you can at least capitalize on the growing demand by taking a look at some agriculture ETFs and exchange traded notes (ETNs):

• PowerShares DB Commodity Index Tracking Fund (DBC), up 26.5% year-to-date
• PowerShares DB Agriculture (DBA), up 12.7% year-to-date
• Market Vectors Global Agribusiness (MOO), up 7.6% year-to-date
• BS E-TRACS CMCI Agriculture (UAG), launched on April 4

Oil Futures ETFs Aren't the Only Ones Affected As the Price Moves

The retreat of oil service-focused exchange traded funds (ETFs) yesterday was a reminder for investors to not get so hung up on the price of oil that they ignore all else.

While funds such as United States Oil (USO) undoubtedly benefit from the rising prices, other funds feel the affects whether prices go up or down, too, so be sure to look around if oil pulls back and make sure the ETFs you're holding aren't getting dragged. It isn't always the most obvious ETFs that are affected - sometimes the impact can extend beyond them.

Some of the oil service-related ETFs are:

• iShares Dow Jones US Oil & Gas Exploration Index (IEO), up 19.4% year-to-date
• Oil Services HOLDRs (OIH), up 7.7% year-to-date
• SPDR S&P Oil & Gas Equipment Services (XES), up 14.4% year-to-date

Oil and gas today have hit new records, reports John Wilen for the Associated Press. Analysts are beginning to wonder if gas prices will stick to their old pattern of peaking around Memorial Day, then steadily declining as summer deepens. The cost of gas can be hedged with United States Gasoline (UGA), which is up 17.7% since its Feb. 28 inception.

The rising prices seem to be eating into demand for oil and petroleum products in the United States and Europe. Maybe that will bring prices back down from the stratosphere.

The prices have given top performances to natural gas and the energy sector for 2008, and this will only continue if there's truth in analysts' predictions that oil will rise to $200 for a barrel in the near future.

The United States Natural Gas (UNG) has risen the most year-to-date with a 42.6% return, according to Morningstar. Supply and inventory issues are pushing the ETF the right direction as many anticipate higher oil prices. UNG can also be used as a hedge for energy exposure, and tracks in percentages the movement of natural gas futures on the NYME, explains John Spence for The Wall Street Journal.

The fast growth in the oil and gas sectors has many suspecting we're in a bubble ready to burst, including Michael Kahn for Barron's. Are we? Only time will tell. The surest way to protect yourself on the downside is by having your exit strategy firmly in place if and when the downturn begins. In the meantime, don't fight the trend.

More Costly Natural Gas and Electricity Could Burn Cash, But Help ETFs

Get ready for a spike in electricity costs - it might hurt wallets more, but it could at least benefit exchange traded funds (ETFs).

California State Assemblyman Chuck DeVore says in Red County that if you think gas is eating up your disposable income, wait until you see your electric and natural gas bills in the next year.

California receives 42% of its electricity from natural gas, and homes use the commodity for everything from cooking to heating. Prices for it has increased 45% so far in the last year, and the Wall Street Journal recently reported that costs may double again soon. Ann Davis and Russell Gold for the Wall Street Journal say that the global appetite for it is on the rise.

But as this chart courtesy of the Wall Street Journal shows, the United States is actually on the lower end of the price range:

It once was a regional commodity, often consumed where it was produced. But there have been innovations in transporting it, and the global trade is now in full force.

Coal and gas power 70% of America's grid, as well, and the price of coal has doubled. This will ultimately translate into more costly electricity.

Suddenly, reading by candlelight doesn't seem like such a bad idea.

Investors may find this as an opportunity to hedge the rising energy costs:

• United States Natural Gas (UNG), up 53.5% year-to-date
• Market Vectors Coal (KOL), up 20.3% year-to-date
• Utilties Select Sector SPDR (XLU), down 4.8% year-to-date

Nuclear Energy Poised For a Comeback, and ETFs Capitalize

They say that everything eventually comes back in style, and nuclear energy is no exception now that there are two exchange traded funds (ETFs) available to take advantage of the sector.

Nuclear was once the black sheep of the energy sector, but as the threat of global warming looms and the cost of a barrel of oil becomes ever more pricey, atomic energy is looking like an increasingly attractive option. It fell out of favor after disastrous accidents at Three Mile Island and Chernobyl.

But nuclear energy emits relatively small amounts of greenhouse gases, reports Amy Bickers for Kiplinger. And spent nuclear fuel can be easily transported to waste-storage facilities. Demand is predicted to rise about 50% between 2005 and 2030, thanks to a concurrent rise in energy demand and greenhouse gas concerns. Right now, nuclear power provides about 16% of the world's electricity.

But which nuclear energy company is going to do well in the revival? An ETF that focuses on the sector might be a better option than individual stock-picking.

There are currently two options:

• PowerShares Global Energy Portfolio (PKN): up 2.6% since April 4 inception. The fund has a tilt toward companies that will build new plants as well as modernize existing facilities.
• Market Vectors Nuclear Energy (NLR): down 8.2% year-to-date. The fund has a 42% weighting in companies that mine uranium.

Oil, the Dollar and Gold ETFs Are Working Together

Slight upticks in the dollar against the euro this week may be in sync with investors timing their re-entry into the market and exchange traded funds (ETFs).

On Thursday, the U.S. dollar was up to an eight-week high against the euro in overseas trading, with the speculation of a possible slowdown in Europe that will allow the European Central Bank to cut rates, reports Peter A. Grant for GoldSeek. The dollar seems to be contained against two other major currencies, the Japanese yen and Swiss franc.

All the while gold has kept a solid stance, and oil is only heading higher lately with the newest record high reached on Friday: $126.20.

The streetTacks Gold Shares (GLD) has been turning around with positive performance in the last week, up 3.4% in that period. As long as oil continues to rise in price, it's believed that gold should continue rising along with it.

When the Price of Oil Goes Crazy, What Happens to the ETFs?

We all know how oil futures and exchange traded funds (ETFs) that contain them operate. But if you've ever wondered if the markets could ever "stop the madness" that is the rising price of oil, the answer is "kind of."

The New York Mercantile Exchange (NYMEX) has circuit breakers in place when prices move by $10 in either direction for all months. If any contract is traded, bid or offered at the $10 limit, trading is halted for five minutes to allow traders to regroup. When it resumes, a new $10 limit is put in place and if that's reached, trading halts for another five minutes, and so on.

So, it's possible for oil to gain or lose $30 or even more in a day, but the five-minute breaks cool things off a bit before they pick up again.

It's likely trading in ETFs that contain oil futures would halt for five minutes as well. At the very least, the bid/ask of those ETFs would widen out in those five minutes because market makers wouldn't have a "live" price to use.

Using Energy ETFs To Offset Gas and Oil Prices

Frenzy in the energy sector has reached a fever pitch, but are exchange traded funds (ETFs) that allow investors to hedge those prices necessarily a great idea?

The summer driving season is going to kick off soon, but with the way things are going, who can afford it? Oil passed $126 a barrel today, while gas rose to more than an average of $3.67, reports John Wilen for the Associated Press.

Oil's price spike came after concerns about Venezuelan President Hugo Chavez's ties with rebels who are threatening to overthrow Colombia's government. It may raise chances the the United States will impose sanctions on one of its largest oil suppliers, and Chavez might then cut off our supply.

Many investors have been looking at situations like this and wondering how they can lock in the lower prices and profit from the price hikes. ETFs that hold oil and gas futures are designed to rise in value at the same time their underlying commodities are going up in price, reports Rob Wherry for Smart Money.

Natural gas has benefited from the fear that supply and inventory issues will push crude-oil prices even higher as well, says John Spence for MarketWatch. ETFs like U.S. Natural Gas Fund (UNG), up 50.1% year-to-date, has also served as a means for investors to hedge their exposure to energy.

With all this good energy flowing around the markets, a new alternative energy ETF has been launched. The Claymore/Mac Global Solar Energy Index (TAN) debuted on April 15, and has lured plenty of interest. Steve Gelsi for MarketWatch says this has been the second-fastest growing ETF from Claymore thus far. The TAN index invests in 25 companies chosen under the MAC Global Energy Index. The fund is up 0.2% since its launch.

The one hindrance to hedging is that the people who need the hedge most might be among the least likely to actually have the cash on hand to do it. And then there's the matter of the tax bill if a profit is made.

You can't forget the volatility of the energy market, either. It's prone to wild swings in either directions, and some suspect it's a bubble that's ready to burst.

This feeding frenzy in energy ETFs means that the more people who buy, the more the price goes up. It's hard to know where the speculation on rising prices ends and natural demand begins.

But if you look throughout history, whenever there's been a major bull trend, people will inevitably say it's a bubble. That may very well be the case with oil, too. But it could also go up another 50%-100% before that happens.

Don't fight the trend. But have your stop loss in place if the bubble does burst.

Other funds that trade energy futures are:

• United States Oil (USO), up 32.8% year-to-date
• United States Gasoline (UGA), up 17.3% since Feb. 28 inception

Investors Might Take a Shine to New Platinum ETNs

Investors have been salivating for an exchange traded product that gives access to platinum, and now UBS is granting it with two new exchange traded notes (ETNs).

The E-TRACS UBS Long Platinum (PTM) and the E-TRACS UBS Short Platinum (PTD) will be listed on the New York Stock Exchange.

Barclay's sought to launch a platinum exchange traded fund (ETF) awhile back, but the platinum industry voiced opposition, reports Heather Bell for Index Universe.

The new ETNs get around this concern by likely being based on futures contracts, which are typically settled in cash. The supply and demand of platinum wouldn't be immediately affected.

Until now, the only way to get exposure to platinum in the United States was through the Elements MLCX Precious Metals Index (PMY), which follows a benchmark of precious metals that includes platinum.

Platinum closed at $1961 an ounce yesterday, and is trading higher today.

It's Anybody's Guess Which Way Oil Will Go and Which ETFs Will Benefit

If you believe oil is in an increasingly fragile bubble that's fixin' to burst, there is an exchange traded funds (ETFs) out there for you.

On Wednesday, oil nearly hit a record $124 a barrel, reports Madlen Read for the Associated Press. Just when it seems the prices couldn't possibly go any higher, there they go. Goldman Sachs earlier this week predicted that oil could even hit $200 a barrel, and that we're in the midst of a "super spike" in prices.

Midday today, oil slipped to $122.55 a barrel.

This is where it gets dicey. Do you agree with Goldman Sachs, or do you believe that the exuberance is at or approaching the level of absolute insanity?

If it's the latter, ProShares has an UltraShort Oil & Gas Fund (DUG). Zoe Van Schyndel for Morningstar says you don't even have to worry about the timing of energy prices, as you can hold the ETF indefinitely.

There are risks involved with short funds, of course. Since oil prices are notoriously volatile, making some of their most rapid movements based on rumors and speculation in addition to the usual factors of supply and demand, these ETFs can swing wildly in one direction to the next. And the effect of high oil prices on the companies isn't always predictable.

Year-to-date, DUG is down 15.9%.

Naturally, if you think that energy is going to continue on the bull run, there are some other options for you, too, including:

• United States Oil (USO), up 31.7% year-to-date
• United States Gasoline (UGA), up 16.4% since Feb. 28 inception
• PowerShares DB Oil Fund (DBO), up 32.3% year-to-date

Commodities Sector Has Many Access Points With ETFs

Exchange traded fund (ETF) investors have the most simple and diversified tool to access commodities at their disposal.

The commodity expansion taking place is evidenced by people passed out from sticker shock in the bread aisle at your local grocery store, food riots and rationing in certain countries (including here) and barren tractor showrooms in the midwestern United States, reports Dow Jones Newswires.

ETFs are one quick and diversified way to get in, and commodity funds come in various shapes and sizes. Some hold futures, others hold stock for companies involved in the making of commodities and others are exchange traded notes (ETNs).

Demand for the agricultural items are exceeding supply leading many investors to opportunity. ETFs such as PowerShares DB Agriculture (DBA), which holds futures, is up 11.4% year-to-date. Market Vectors Global Agribusiness (MOO) holds the stock of some of the world's biggest agriculture companies.

Among the agriculture ETNs available are Elements Rogers International Commodity Agriculture (RJA) and the Opta Lehman Brothers Commodity Agriculture (EOH).

One analyst prefers a broad-based ETF focusing on energy, metals and agriculture. Diversification of this nature are found in PowerShares DB Commodity Index Tracking Fund (DBC) and the note, iPath Dow Jones-AIG Commodity Index (DJP).

A list of all commodity ETFs and ETNs can be found on Seeking Alpha.

When it comes to energy ETFs, exercise caution.

Always knowing the risks is key, though. The more specialized an ETF is, the harder it can fall when the momentum is over. Commodities are volatile, and there's been talk that he sector is in a bubble. Having your exit strategy will protect you.

Filipinos in Austria and ETF Feel Effects of Inflation

Rising inflation in Austria could help eat the way to a rise in the related exchange traded fund (ETF).

Filipino workers there are getting creative on ways to satisfy their daily dietary needs. For example, instead of eating rice, the price of which has shot up 30% lately, they're looking at potatoes and salad. The products are cheaper, but still nutrient-rich.

Consumer prices overall have inflated by 0.8% during April alone. They're up 3.5% for the year. 

Among the hardest-hit areas is that of food products, which are a basic need, reports Hector Pascua for ABS-CBN News. Rising fuel prices are to blame for the rise in food prices, similar to what we're seeing in the United States.

Is the iShares MSCI Austria Index (EWO) feeling the effects of a 7.8% rise in food prices for April, and the transportation fares rising 7.3%, all driven by the 26% increase in fuel prices? Consumer services only make up 0.96% of the ETF. Financials are 34.7% of the fund, however, and energy is 14.4%, so any increase may be reflected soon.

Year-to-date, the fund is up 1.8%. In the last month, it's up 7.9%.

Oil Prices, ETFs Rise On $200 Barrel Predictions

Oil exchange traded funds (ETFs) rose higher after futures (yawn) hit yet another record. What else is new?

Investors were snapping them up because Goldman Sachs predicted that oil prices rise to anywhere from $150 to $200 a barrel. The grim report sent futures past $122, but there were also concerns about declining production in Mexico and Russia, reports John Wilen for the Associated Press.

Goldman Sachs pointed to signs that the world is in the middle of a "super spike" in oil prices, which would culminate in prices eventually rising so high that demand would fall sharply.

Some analysts beg to differ from Goldman's view. Tim Evans, an analyst at Citigroup, says oil could just as easily drop to $40 a barrel as it could rise because supplies are comfortable.

Hmm...we like what Evans is saying a little better.

Analysts are equally divided on the direction of gas prices. Some say it's peaked, others say it's going to follow oil higher.

Have you, by chance, ever wondered exactly how much oil you're actually getting in those barrels? Today's your lucky day:

1 barrel = 159 liters or 42 gallons

Crude oil is measured in barrels because, to put it simply, that's the way it's always been done. According to OPEC, when oil first came into large-scale commercial use in the United States in the 19th century, it was stored in wooden barrels. Reserves are estimated at more than 1 trillion barrels. In 2006, the total world oil output was 72 million barrels per day.

Capture exposure to the rising futures of oil and gas with these ETFs:

• United States Oil (USO), up 27.7% year-to-date
• United States 12-Month Oil (USL), up 27.6% year-to-date
• United States Gasoline (UGA), up 13.5% since Feb. 28 inception

Energy ETFs Can Be Equal Parts Brutal and Rewarding

Admit it - you're tempted to invest in some energy exchange traded funds (ETFs). After all, gas and oil are hitting record highs and rising.

It's only natural that you would be, because investors tend to buy what they know. The United States, McDonald's, Disney, Target and so on. There's comfort in the familiar.

But trying to profit from energy isn't without its pitfalls, says Tim Paradis for the Associated Press. Many investors already invest in the sector by owning stock of the biggest oil companies, while others dive right into the commodities market and trade futures contracts.

One portfolio manager warns that the corrections in this sector can be brutal. Since 2004, he says, there have been at least two big corrections per year.

And then there's this paradox: those hardest hit by skyrocketing energy aren't likely to have lots of extra cash sitting around with which to invest.

Before you decide to get into the energy sector, look at the fundamentals and not this recent run. In oil's favor is that refining capacity is strained, there are supply disruptions, the dollar is weakening and speculators will push the price higher. On the other hand, demand for petroleum products fell 8.5% in February from January, while gas demand fell 6.2%.

And above all, always be sure to have your exit strategy in place if one of those big corrections occur.

Some ETFs that grant access to energy are:

• United States Oil (USO): up 23.3% year-to-date
• United States Gasoline (UGA): up 13.5% year-to-date
• iShares Dow Jones U.S. Energy Sector Index Fund (IYE): up 3.4% year-to-date
• Rydex S&P Equal Weight Energy (RYE): up 4.9% year-to-date

Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.

The Commodity ETF Picture Looks Different This Week

Gold futures and exchange traded funds (ETFs) began to stage a turnaround in trading today after the dollar once again fell and oil futures hit new records.

Gold today rose to $870.70, reports Bob Ewing for Digital Journal. Meanwhile, the dollar stepped back from its growth spurt, falling against the euro, and oil hit a record $120.01 a barrel, John Wilen for the Associated Press reports.

That sent investors once again scurrying for cover.

The gold-focused ETFs, streetTRACK Gold Shares (GLD) and iShares COMEX Gold Trust (IAU), surged higher after a difficult stretch a few days ago. They both closed on Friday down 3.1% for the week. iShares Silver Trust (SLV) was trading higher today, too. All three funds rose 2% at the end of trading today.

Last week, the situation looked a little different. Gold for June delivery closed on Friday at $858 an ounce. The U.S. dollar jumped after new of the U.S. labor market was not too shabby, as expected for April, report Polya Lesova and Mayra P. Saefong on MarketWatch.

As prices fell, the questions began: has the commodities bubble burst? Much like gold, wheat, rice, and silver were also on losing streaks. There was a slight rebound Friday as some of the losses appealed to bargain hunters, but are the commodities-as-a-safe haven thoughts in the past?

Where it goes next is anybody's guess.

A View of ETFs In An Obama White House

If Barack Obama were to win the election for presidency this November, what would happen to the investment world, particularly exchange traded fund (ETF) investors?

Awhile back, we talked about funds that could benefit in a McCain win, as well as an overall Democratic win.

Jonathon Bernstein for ETFZone believes that the most immediate and powerful impact of an Obama win would be the within the area of foreign policy. He could help to ease tensions with the Middle East and Venezuela, which would in turn calm oil prices and shift the overall momentum of the markets. Currently, oil is at all-time highs, so just the thought of Obama in the White House would send oil lower in funds such as Unites States Oil (USO).

The dollar might end up in a stronger state, as a major reason the dollar fell against the euro is oil imports. If the United States were to import less oil, or or pay less for the oil it does import, we might see an improved trade deficit, thus upping the demand for U.S. dollars. CurrencyShares Euro Trust (FXE) would reflect the dollar-euro ratio.

Obama says he would keep tax cuts for the middle class, and doesn't support Bush's tax cuts for the wealthy. Both those and his dividend tax cut expire in 2010. Dividend-focused ETFs such as iShares Dow Jones Select Dividend Index (DVY) or the State Street SPDR Dividend (SDY) could be vulnerable if the tax cuts aren't renewed.

Obama also supports working to put an end to global warming and a push to reduce U.S. carbon emissions by 80% by 2050. He also supports ending the ban on stem cell research.  Both iShares Nasdaq Biotechnology (IBB) and the WildersharesClean Energy (PBW) could experience positive movement if these issues are addressed.

New ETN Line Gives Broad Range of Commodity Exposure

UBS rolled into the exchange traded note (ETN) business last month with a line of commodity notes.

The UBS E-TRACS CMCI Total Return (UCI) is designed to track the UBS Bloomberg Constant Maturity Commodity Index Total Return. The index measures the collateralized returns from a basket of 28 commodity futures contracts ranging from three months up to three years.

The subsets are:

• UBS E-TRACS CMCI Agriculture (UAG), 0.65% expense ratio
• UBS E-TRACS CMCI Industrial Metals (UBM), 0.65% expense ratio
• UBS E-TRACS CMCI Livestock (UBC), 0.65% expense ratio
• UBS E-TRACS CMCI Silver (USV), 0.40% expense ratio
• UBS E-TRACS CMCI Gold (UBG), 0.30% expense ratio
• UBS E-TRACS CMCI Food (FUD), 0.65% expense ratio
• UBS E-TRACS CMCI Energy (UBN), 0.65% expense ratio

The futures contracts are diversified across five constant maturities, and they roll on a daily basis, as opposed to monthly. The aim of daily rolling is to stay as close to the spot price as possible instead of getting into a contango mess.

The industrial metals note gives investors exposure to copper, zinc, aluminum, nickel and lead. Energy has exposure to crude oil, gasoline, natural gas and heating oil.

The food note has exposure to live hogs, orange juice and coffee, among other things.

Is Three Times Performance Going to Be a Charm for New ETFs?

A firm better known for its leveraged index mutual funds has filed for 36 exchange traded funds (ETFs) with the Securities and Exchange Commission (SEC) that raise the stakes.

The ETFs from Direxion Funds would deliver three times the performance (or three times the inverse) of their underlying indexes. This is a new twist, since no ETF currently offers anything more than double the exposure, leveraged or short.

The funds will cover a variety of asset classes that include sectors, international regions, real estate and even commodities, reports Heather Bell for Index Universe. The prospectus says the management fees for the funds will be 0.75%.

ProShares and Rydex have no doubt proved that some investors want leveraged and short ETFs, but is this going too far with the concept? For financial advisors and retail investors, double exposure might be plenty. We're concerned that this might be a case of too much octane.

Are ETFs going to be like those razors that hit the market with one more blade every time a new one comes out? Investors should be careful - too many blades, and you're likely to get cut.

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

Gold Miner ETF Hits Low on Dollar's Strength

The dollar's renewed vigor is good news for most, but not for the gold miner's exchange traded fund (ETF).

Yesterday, the Market Vectors Gold Miner (GDX) hit its lowest point since Sept. 18 of last year, reports Wanfeng Zhou for Thomson Financial. Year-to-date, the fund is down 7%.

Gold is weakening, too, closing yesterday at $848.50. As the metal loses ground, so do the ETFs that hold futures: both streetTRACKS Gold Shares (GLD) and the iShares COMEX Gold Trust (IAU) year-to-date are up 2% and 1.7%, respectively. They both currently sitting at their lowest points since Dec. 31.

Lately, it doesn't seem like gold has done much of anything but go down. Even though commodities have been hit lately, and some more so than others, with ETFs it's easier to carve out those areas that are performing. Be sure to check in regularly with your funds and have your stop-loss points firmly in place if you choose to invest in commodities.

Meanwhile, the dollar hit a five-week high against the euro today and a two-month high against the yen after the government announced that fewer jobs were eliminated than expected, report Ye Xie and Bo Nielsen for Bloomberg.

One-year chart of the dollar vs. both the yen and the euro:

Oil Down ETF Moves Up On Oil Price's Slide

As oil prices head south, one exchange traded fund (ETF) shot way up.

MACROshares Oil Down (DCR) closed up 10.6% in trading today after oil speculators pulled out of the market. Crude settled at $112.52, stripped of its appeal to investors as the dollar gained strength, says John Wilen for the Associated Press. Oil is sitting at its lowest level since April 14, but analysts caution that it could be temporary.

Meanwhile, the MACROshares continue to trade as they normally would after hitting a termination trigger on April 16. Sam Masucci, MacroShares' CEO, says both Oil Down and MACROshares Oil Up (UCR) will trade as though they normally would.

On June 25, they'll cease trading. On July 3, shareholders of the funds will receive payouts based on the fund's net asset value (NAV) on that day. The funds are raking in assets, says Masucci, pulling in $120 million this week.

The company has filed with the Securities & Exchange Commission (SEC) for its second set of up/down oil ETFs. The hope is that they'll get the go-ahead before the first set of funds terminate.

Four New ETNs Hit The Market, Thanks to Deutsche Bank

Deutsche Bank launched four new exchange traded notes (ETNs) with a twist, coming out ahead of rivals such as ProShares.

The new broad-based ETNs focus on agriculture and commodities, but come in long, double-long, short and double-short varieties, rounding out a complete set for a commodities index, reports Murray Coleman for Index Universe.

The new notes are tied to the Deutsche Bank Liquid Commodity Index and the Deutsche Bank Liquid Commodity Index-Optimum Yield.

• DB Commodity Double-Short (DEE)
• DB Commodity Double-Long (DYY)
• DB Commodity Short (DDP)
• DB Commodity Long (DPU)

The securities will be issued in $25 denominations. As their name implies, these new funds give investors long and short exposure to the agriculture and commodities sector. All four notes are senior unsecured obligations of Deutsche Bank.

These notes join Deutsche Bank's launch of ETNs allowing investors to go long or short on gold and agriculture.

The newest additions to the ETN family add to the growing list of launches for 2008.

Exxon Earnings Put the Brakes on Energy ETFs

Some energy exchange traded funds (ETFs) are down more than 4% in midday trading after Exxon Mobil (XOM) reported a first-quarter profit jump that was less than what Wall Street was expecting.

You can't blame Wall Street for expecting more, considering the price of a barrel of oil these days. Even though Exxon's 17% profit jump to $10.9 billion was the second largest U.S. quarterly profit ever, it still wasn't enough.

Analysts were expecting $2.13 per share, but instead got $2.03 a share, reports John Porretto for the Associated Press. Exxon posted the largest quarterly profit in history for a U.S. company at the end of 2007.

Exxon's shares were down nearly 5% midday, weighing down some of the energy ETFs that count the company as a major component:

• iShares Dow Jones US Energy (IYE): Exxon is 23.1%; up 4.4% year-to-date
• Energy Select Sector SPDR (XLE): Exxon is 18.5%; up 3.3% year-to-date
• iShares S&P Global Energy (IXC): Exxon is 15.8%; up 2.9% year-to-date

Also, if you were thinking of moving out of the country in order to escape those high gas prices - not so fast. Of 155 countries surveyed, it turns out the United States is the 45th cheapest, says Steve Hargreaves for CNN Money.

Next time you drive by the pump and sob at $4 gas, think about how people in other countries must feel: in Europe, the average is more than $8 a gallon; in Aruba, it's $12.03 and in Sierra Leone it's $18.42.

If you're really itching to move, consider Venezuela, where it's 12 cents a gallon. Or Saudi Arabia at 45 cents.

But the numbers don't take some things into account: the falling value of the dollar, the differing salaries in countries and so on.

In Europe, the trade-off for the gas prices is cheaper health care and higher education, which is paid for partly through gas taxes. Europe also sports a better public transportation system.

Inner Workings of the Silver ETF

A recent commenter inquired as to how the silver exchange traded fund (ETF) works:

If the ETF iShares Silver Trust (SLV) goes under, do the holders of the ETF shares still have their interest backed by bullion? Is there any chance of default?

According to the frequently asked questions about the fund provided by iShares, the trust's objective is to reflect the price of silver at any given time (minus expenses and liabilities). Funds like these make it simple for investors to own silver without having to provide the storage space for it.

If the trust were to terminate, the assets would be liquidated and distributed to the remaining shareholders. The trust will terminate in 2046 on the 40th anniversary of its creation, if termination doesn't occur before then.

In the event of termination, holders would still have their interest backed by bullion, as the assets of the fund are segregated from the bank assets at Barclay's Bank (the ETF's provider) or the trustee of the fund, which is The Bank of New York.

The custodian is JP Morgan Chase Bank N.A., London branch. Both the trustee and custodian oversee deposits of silver and at times may hold cash from the proceeds of the sale of silver to pay the trust's expenses. If there is more cash than needed to pay expenses, it's distributed to shareholders' brokerage accounts.

Any investment involves a measure of risk. The value of the shares will be adversely affected if the silver held in the trust is lost or damaged in a situation where the trust isn't able to recover the loss. The custodian of the trust doesn't have an obligation to replace lost silver under circumstances beyond their control.

There are situations in which the fund's authorized participant isn't able to redeem a basket of shares, which will reduce the liquidity of silver for all of the shareholders in the secondary market.

The FAQ and prospectus for the fund can be found on the iShares website.

Dollar Up, Gold Down, While ETFs Reflect Activity

The U.S. dollar is toughening up, much to the dismay of gold which hit a three-month low on Tuesday, weakening the focused stocks and exchange traded funds (ETFs).

Also on the decline were oil prices along with weak sentiment just ahead of the Federal Reserve's big meeting today. U.S. gold futures for June delivery on the COMEX division of the New York mercantile exchange settled at $876.80 an ounce, as of Tuesday. As the dollar gains strength, it makes gold more expensive for holders of other currencies, thus lowering demand.

Meanwhile, the dollar hit its highest level against the euro in four weeks. It's on track for its largest monthly gain in a year after expectations that the Fed will end its easing campaign, reports Reuters.

Returning strength in the dollar would be the major reason streetTracks Gold Shares (GLD) is experiencing money outflow. But one trader said gold's fundamentals are still firm, despite the sell-off.

The performance of the dollar vs. the euro in the last year:

Energy-Focused ETFs Capitalize on a Booming Sector

Commodity exchange traded funds (ETFs) and exchange traded notes (ETNs) have come a long way since Nov. 18, 2004. That's when the first single-commodity ETF - streetTRACKS Gold Shares (GLD) - was launched.

Tom Lydon with Neil Cavuto

Tom Lydon appeared on Neil Cavuto's show on Fox Business earlier this afternoon to discuss rising food prices. Video of Tom's segment appears below:

Surely, Transportation ETF Gets a Lift from Airline Stocks (Don't Call Them Shirley)

The transportation exchange traded fund (ETF) wrapped up trading today slightly higher after oil prices took a breather.

The iShares Dow Jones Transportation Average (IYT) was up 0.8% after three of its airline holdings blasted off in trading today. Oil prices closed at $116.44 after demand for gas and other petroleum products dropped sharply in February.

• Continental Airlines, Inc. (CAL), up 3.5%; 1.9% of the fund
• Southwest Airlines (LUV), up 3.3%; 1.4% of the fund
• JetBlue Airways (JBLU), up 2.6%; 0.6% of the fund

Year-to-date, IYT is up 14%.

For full disclosure, some of Tom Lydon's clients own shares of IYT.

Agriculture, Energy ETFs Soar, But Consumers Lose Confidence

Soaring prices for the basic necessities might be helping your agriculture and energy exchange traded funds (ETFs), but the trade-off is beaten-down consumer confidence.

A research group reported today that consumer sentiment has dropped to a five-year low in its fourth consecutive drop. Wall Street economists had been expecting low numbers, reports Anne D'Innocenzio for the Associated Press. Its previous weakest point was in March 2003, just before the U.S. invasion of Iraq.

Deteriorating confidence is a sign that consumer spending may weaken, which would in turn further hurt the economy. Consumers remain worried about inflation and the toll that rising food and gas prices could take on their wallets. The employment picture looks bleak, as well: the Labor Department is expected to show another loss of 65,000 when its April report is released on Friday.

The director of the Conference Board Consumer Research Center also noted that the number of survey respondents who planned to take a vacation in the next six months has fallen to a 30-year low.

Looks like you'll have to rely on Calgon to take you away instead.

Stronger Dollar Leads to Asset Decline In Gold ETF

The top gold exchange traded fund (ETF) experienced its largest-ever three-day decline in its physical holdings.

streetTRACKS Gold Shares (GLD) is the world's biggest and oldest gold-focused ETF. Between April 21 and 24, a company that tracks aggregate gold ounces under management noted that redemptions in the fund represented 6% of all the gold held by the five major gold ETFs. Blame the rejuvenated dollar, in part.

The fund hit a record price in mid-March, but is now trading 12.5% below that mark, reports Barry Sergeant for Mineweb. GLD is not alone, though. Since early March, the world's dozed top listed gold names are trading at an average of almost 25% off their highs.

Analysts predict that gold will make another run at $1,000 an ounce in August and September.

Other gold-related ETFs are:

• iShares COMEX Gold Trust (IAU): Also holds physical gold. Up 6.9% year-to-date.
• PowerShares DB Gold (DGL): Holds gold futures. Up 5.3% year-to-date.

For full disclosure, some of Tom Lydon's clients own shares of GLD.

If Commodity ETF Bubble Bursts, Your Strategy Can Be Used As a Flotation Device

Market turmoil is leading to more and more investors turning to agriculture ETFs and exchange traded notes (ETNs), reports Hannah Glover for Ignites.

Especially in places such as China and India, a rising middle class is using that extra cash to splurge on more food, cars and other consumer goods. But many are wondering, too, if agriculture is going to be the next big bubble to burst.

Bubble or not, you can protect yourself on the downside by watching the trend lines. When your holding drops below its 200-day moving average or 8% off its high, it's time to let it go.

Can the Rally in Silver ETF Keep It Up?

Silver and its exchange traded fund (ETF) were among the strongest performers in the first quarter of this year, outperforming most other metal-focused ETFs.

iShares Silver Trust (SLV) finished up the first quarter 12.3% higher. streetTRACKS Gold Shares (GLD), on the other hand, rose 6.5%. Year-to-date, SLV has continued making strides and is up 13.5%. GLD is up 5.8% year-to-date.

Until April 2006, investors only had a handful of ways to get silver exposure, says Don Dion for Seeking Alpha. They could buy the metal themselves, purchase futures contracts, hold stocks in companies with direct exposure to silver companies or invest in funds focused on those companies.

SLV simplifies the equation: by buying a share, you are buying a stake in a cache of silver bullion stored at the London branch of JPMorgan Chase. The price of each share should reflect the current price of 10 ounces of silver, less the 0.5% operating expense of the fund.

The fund's method seems popular, says Dion. So much that it's actually considered to be partially responsible for the steep price increase of silver since the fund's inception.

Sonya Morris at Morningstar says investors would be better off using SLV as a tool of portfolio diversification rather than a hedge against inflation. Silver has industrial uses that make its price prone to volatility as the economy moves back and forth.

The question now is: can silver keep marching forward, or is the precious metals area due for a correction?

What's next? If inflation continues to loom and global industrial demand continues, the rally could be just getting started. But if the dollar keeps strengthening and the United States crawls out of the doldrums, precious metals might retreat.

For full disclosure, some of Tom Lydon's clients own shares of GLD.

Your Rebate Check Could Stimulate ETFs

Will exchange traded funds (ETFs) find the stimulus package stimulating?

Tax rebates will start going out today, even earlier than reported, in the hopes that they will inject a shot in the arm into our stumbling economy. Since consumer spending is 70% of the economy, the hope had been that we'll spend, spend, spend.

But President Bush says the checks will help offset the high gas and food prices that have been weighing down our wallets this year, reports Tom Raum for the Associated Press. It's a change from previous statements that the package is intended to ignite consumer spending.

In total, the Treasury will distribute more than $110 billion to 130 million taxpayers, says Catherine Clifford for CNN Money.

Depending on how you decide to use that extra cash, some ETFs could benefit.

If you use it at the grocery store, maybe an agriculture ETF such as the PowerShares DB Agriculture (DBA) or the ELEMENTS MLCX Grains Index (GRU) could reap the rewards.

Maybe if you decide to hit the mall, the Retail HOLDRs (RTH) or the SPDR S&P Retail (XRT) will get a lift.

Or if you just want to fill up your car, a trip to the pump could lift United States Oil (USO) or United States Gasoline (UGA).

How will you spend or save your rebate check?

For full disclosure, some of Tom Lydon's clients own RTH.