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.

Mexico ETF Goes Great With Chips and Salsa

What better way to celebrate Cinco de Mayo than with a heaping bowl of guacamole, a round or three of margaritas and a Mexico exchange traded fund (ETF)?

The timing is good, too: the iShares MSCI Mexico (EWW) has been gathering steam lately, going up 11.3% since March 10. Year-to-date, it's up 5.8%.

In the last decade, Mexico has delivered annualized returns of 16.99%, handily outpacing other single-country ETFs. The fund is heavily concentrated in the wireless sector, with 25.1% of the fund given to America Movil (AMX), the largest cell phone operator in Latin America.

Today, America Movil stock rose along with some mining companies, Reuters reports. Shares of Grupo Mexico, one of the world's largest producers of copper, shot up in trading today, as well. Grupo Mexico is 5% of EWW.

Mexico has also been given a lift via rising oil prices as the world's sixth-largest crude exporter. Futures rose past a record $120 a barrel today, says John Wilen for the Associated Press. However, over the weekend gas prices fell more than a cent. Don't spend those big savings all in one place.

Green ETF Marketplace In a Growth Spurt

When it comes to exchange traded funds(ETFs), is it in style to be green?

The clean energy market is growing faster than ever, and fund companies are right on the  money, launching so-called green funds. Some say that being green means being too narrow, too focused and just plain volatile.

Claymore S&P Global Water Fund (CGW) has been criticized for being too focused on small companies within a narrow sector. The fund is down 5.3% year-to-date. Likewise, the solar energy ETFs that have hit the market can also take the narrow path, with both the Claymore/Mac Global Solar Energy Index (TAN) and the Market Vectors Solar Energy (KWT) offering similar solar exposure, with the same expense ratios.

As Gary Gordon on ETF Expert  points out that, by definition, a sector fund is supposed to be concentrated. And as the awareness grows, the number and selection of funds will, too. That's the beauty of ETFs - you can pick and choose what works for you. It's been a rough year so far for this sector, but many are feeling optimistic about the long-term prospects as concern about global warming gathers steam.

Just be sure not to have your portfolio overweight in a particular sector, and always keep an eye on those areas that are performing. Protect yourself by not getting in until the 200-day moving average has been crossed and get back out when it drops below that line or 8% off its high.

Other green ETFs include:

• First Trust NASDAQ Clean Edge (QCLN), down 23.7% year-to-date
• Market Vectors Environmental Services (EVX), up 0.4% year-to-date

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.

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.

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.

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.

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.

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.

Take Off Your Shades And Look Directly At The Solar ETFs

The recent rise in energy consciousness has given way to more solar energy-focused exchange traded funds (ETFs).

The latest slew of funds invest in specific technologies, and Matthew Hougan for Index Universe analyzes the two ETFs providing access to the solar market.

Claymore/MAC Global Solar Energy Index (TAN) and the Market Vectors Solar Energy (KWT) tout the same expense ratios at 0.65% and offer global solar energy exposure.

Both indexes aim to proved global exposure to the solar energy market. They were also constructed with "screens": TAN requires components to generate at least one-third of their income from the solar industry. Companies that generate more than 66% of their revenues from solar are weighted at their full market cap. Companies between 33% and 66% are weighted at half their market cap.

KWT tracks the Ardour Index and takes a simpler approach. Companies must generate 66% of their revenue from solar energy to be included at all. KWT's components are all pure plays.

There's no way to tell which fund will ultimately do better, though, and the case could be argued either way. In a fund made entirely of pure plays, those companies could lose out to larger conglomerates. It could be more sensitive to changes in solar, making the potential for returns (and losses) greater. TAN could be less volatile, with broader exposure and more upside potential.

Oil Prices May Get Worse; Steel and Natural Gas ETFs Are Keeping Pace

The price of oil has slipped some over the last few days, but it's projected to soar even higher - what will it mean for its exchange traded funds (ETFs)?

The reports on fuel got more dismal this morning, as many wonder just how much worse it's going to get. According to an energy report from the Canadian Imperial Bank of Commerce today, oil could hit $225 a barrel by 2012.

Cars are blamed for the continually rising prices: 90% of the demand growth in the last few years has gone to transportation. Car sales globally soared last year, growing 60% in Russia, 30% in Brazil, 20% in China. Sales were flat in Europe and dropped in the United States.

Meanwhile, the oil ETF isn't the only one performing. Steel and natural gas are nothing to turn up one's nose at, either. Gary Gordon for ETF Expert reports that funds for both of the commodities have at least kept pace with United States Oil (USO), if not leaving it in the dust.

In the last month, USO is up 18.6%. Year-to-date, it's up 25.6%. Not too shabby.

United States Natural Gas (UNG) is blowing right past oil, though: it's up 20% in the last month, and 45.2% year-to-date. Market Vectors Steel (SLX) is keeping up: it's up 17.9% in the last month and 17.6% year-to-date.

The question on everyone's minds is whether the U.S. slowdown will eventually catch up to the global markets and put the brakes on demand for these commodities. Gordon says it's possible for some commodities, but he doesn't see steel demand slowing. In China, the number of steel factories has doubled in the last five years.

Global demand for natural gas is also high, but the supplies are plentiful. That begs the question: why has the price been rising? It all traces back to the price of crude oil; it's so expensive that natural gas is one of the alternatives under consideration. It's the cleanest burning carbon-based fuel (unlike coal), and cars powered by natural gas are getting attention from major car makers such as Honda.

Do you find it daunting to focus on a single commodity? Another option is picking a fund diversified over several commodities, such as the Dow Jones Total Commodity Index ETN (DJP) or the iShares S&P GSCI Commodity-Indexed Trust (GSG), which is allocated about 67% in energy, 16% in agriculture, 7% in industrial metals, 7% in livestock, and 3% in precious metals.

Strong Coal Profits Stoke the KOL ETF

Coal prices are getting fired up, as demand for steel products and supply disruptions in Australia are aiding the rise of the fossil fuel's exchange traded fund (ETF). It looks like the commodity is rising above its bad reputation.

Arch Coal (ACI) released strong first quarter results on Monday, with a 22% increase in revenue, reports Christopher Barker for the Motley Fool.

Market Vectors Coal (KOL) holds 5.3% of ACI, and the fund is up 13.9% since its Jan. 15th launch. Peabody Energy (BTU), which is 7.2% of KOL, released earnings yesterday. First quarter revenues rose 15%.

Going forward, the sentiment for coal appears bullish. Arch has locked in sales contracts well into next year, and many of those are priced at least 40% higher than those in the first quarter of this year.

Is It Hot In Here, or Is It Just Solar ETFs? (Updated)

A software glitch at the American Stock Exchange held up the launch of the newest solar exchange traded fund (ETF) today.

When it does launch, the Market Vectors Solar Energy (KWT) will the Claymore/MAC Global Solar Energy Index (TAN) as the only two pure plays on the fast-growing sector. 

KWT is based on the Ardour Solar Energy Index (SOLRX), which has worldwide exposure to 26 companies that derive at least 66% of their revenues from solar energy. The fund comes with an expense ratio of 0.65%. The fund is most heavily weighted in Germany, with 36.7% of its assets allocated there. China is second, with 24.3% of assets.

TAN has 25 components, with 25% of them based in the United States. The fund also has an expense ratio of 0.65%.

Solar energy accounts for less than 1% of global electricity, so the sector has plenty of room for growth.

Party on Earth Day With ETFs

There are numerous ways one can celebrate Earth Day: take out the recycling, turn off the lights, carpool to work or buy green exchange traded funds (ETFs).

After all, ETFs don't emit anything, so you don't even have to feel guilty about being a polluter.

While the sector has taken a hit along with the rest of the market in recent months, many experts encourage investors to take a long view when it comes to these funds. The United States is still in the early stages of solar energy development, and an interest in alternative fuels could increase if the cost of oil and gas keep up the way they have been.

Some experts accuse many companies of "greenwashing"; that is, making claims the make consumers think they're more environmentally responsible than they actually are. Luckily, consumers are catching on, CNBC reports. In Britain and Australia, there are already hefty fines that come along with false claims.

The Federal Trade Commission (FTC) is currently reviewing its own environmental marketing standards. Terra Choice lists the six greenwashing sins.

There are a number of green ETFs to choose from, so take your pick. And remember to turn out the lights.

A few of them:

• PowerShares WilderHill Clean Energy (PBW), down 20.7% year-to-date
• PowerShares Global Clean Energy (PBD), down 12.2% year-to-date
• Market Vectors Global Alternative Energy (GEX), down 10.5% year-to-date
• First Trust NASDAQ Clean Edge US Liquid (QCLN), down 21.5% year-to-date
• PowerShares Cleantech Portfolio (PZD), down 5.8% year-to-date
• Claymore Global Solar Energy (TAN), up 4.4% since April 15 inception

Silver, Base Metals ETFs Reflecting Strong Demand

Demand for silver is on the rise and it's reflected in its exchange traded fund (ETF).

Gene Arensberg for Resource Investor says the rise in demand is evident because the paper silver market isn't reflecting popular demand. The COMEX paper silver market is related to, but different, from the physical one in that it deals exclusively with very large, average 1,000-ounce "good delivery bars," and each futures contract covers the delivery of five of those bars.

The physical market is every coin and bullion shop and a range of other silver products.

The scarcity of the metal is evident now, Arensberg says, because dealers are paying higher than normal premiums, evidence of an immediate need for the metal. This means that current inventories are insufficient to meet the demand at the prevailing spot price. Some dealers are paying premiums as much as $1.85 over the spot price - costs that will be passed on to their silver-buying customers.

The iShares Silver Trust (SLV) has benefited from demand for the metal. Year-to-date, the fund is up 17.7%.

PowerShares DB Base Metals (DBB) is trading higher today, lifted by a strike against Chilean copper miner Codelco, which sent futures for the metal upward. Metals were also stronger because of the weaker dollar and May oil hitting $119.90 a barrel, reports Allen Sykora for Dow Jones Newswires. DBB is up 15.6% year-to-date.

What's Next for the MacroShares ETFs? Version 2.0

Last week, the price of oil topped $111 for three consecutive days, setting off a termination trigger for two unusual exchange traded funds (ETFs).

The last trading day for MacroShares Oil Down (DCR) and MacroShares Oil Up (UCR) will be June 25 and will liquidate the week after that.

So, what's next? MacroShares is not going away. In fact, the company considers their up/down oil funds a success, with $300 million in assets, reports Mathew Hougan for Index Universe.

They'll be issuing a new round of Macros with the starting price set at $100 a barrel. The prospectus for the down trust is here, and the prospectus for the up trust is here.

Hougan wonders if people will bite on these new funds, as opposed to just going after the other oil-related ETF products out there.

Meanwhile, Hougan reports that the MacroMarkets people are developing a paired trust tied to medical cost inflation, as well.

Gas Tax Holiday Could Be Boon to ETFs

If a plan to eliminate the gas tax this summer goes through, what could it mean for exchange traded funds (ETFs)?

Sen. John McCain proposed ditching the tax, which would shave 18 cents per gallon off the price of gasoline between Memorial Day and Labor Day. But not everyone is convinced this is a good idea. Charles Delvalle for Howe Street says if he filled up his 17-gallon gas tank four times a month, he would save $12.24 per month. With that savings, he'd be off to the supermarket.

But Jad Mouawad for the New York Times reports that while it sounds like a good idea, it could have an opposite effect on the price of gasoline. Lower gas prices could lead to more demand, which could lead to...higher gas prices. Sounds like we're running in circles. Isn't consumption part of what lead to this problem in the first place?

If the plan actually passes, Delvalle suggests hedging the rising cost with the United States Oil Fund (USO), which is up 23.7% year-to-date. USO's provider, Victoria Bay, also launched the first ETF to track gasoline futures on Feb. 28: the United States Gasoline Fund (UGA), which is up 10.7% year-to-date.

The dollar could weaken under this tax cut, as well. Hedge that with the streetTRACKS Gold Trust (GLD), up 10% year-to-date, or the iShares Silver Trust (SLV), up 20.4% year-to-date.

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

Nuclear Energy ETFs Have Interest Generating Potential

Two pure plays on the nuclear energy sector can be found in the Market Vectors Nuclear Energy (NLR) as well as the PowerShares Global Nuclear Energy Portfolio (PKN) exchange traded funds (ETFs). 

The nuclear power industry supplies around 16% of the world's electricity, that number could double by 2030, says Mike MacMillan for Centre Daily.

But wait until NLR travels above its trend line before rushing out to buy shares, as it's currently sitting 7.8% below. The fund is also down 8.7% year-to-date. Assets are around $160 million as of March, in NLR, and the expense ratio is 0.65%.

PKN is still new - it launched on April 3.

As the debate over global warming gathers steam, the nuclear power industry could be one sector to benefit from the hunt for alternative energies. Seventeen power companies are making plans to build 30 nuclear plans. And Tallahassee, Florida, was given the okay recently to build its first nuclear plant in decades.

Oil Tops $111 for Three Days; Two Oil ETFs Terminate

It's "termination day" for a couple of oil exchange traded funds (ETFs).

Last week, we reported that the MacroShares Oil Down (DCR) and MacroShares Oil Up (UCR) would terminate if the price of oil reached or passed the price of $111 for three straight days.

We're here: on Monday, oil closed at $111.75. Tuesday, it closed at $113.30. Today, it closed at $114.93.

The last trading day for the funds will be June 25, reports Matthew Hougan for Index Universe. On June 30, shareholders of record will receive payouts based on the fund's net asset value (NAV). If the price of oil reaches or surpasses $120 a barrel by then, holders of UCR would get $40 per share (each share is valued at one-third the price of a barrel of oil) and holders of DCR wouldn't receive anything.

Oil briefly topped a record $115 after supply concerns arose, reports John Wilen for the Associated Press. Gas inventories fell by 5.5 million barrels last week, according to the Energy Department's Energy Information Administration, and it was a bigger drop than analysts had been expecting. Crude oil inventories also fell last week by 2.3 million barrels, instead of the increase that had been expected.

Gas demand has dropped off, falling 1% a week for the last four weeks. One analysts says it would normally be rising at this time of year as the travel season begins picking up. But at a record $3.39 a gallon, suddenly staying home and watching the Travel Channel is looking like a much better bargain.

If you aren't crying yet, this may move you to: Charles Maxwell, the "Dean of Energy Analysts" predicts $180 oil by 2015 and $300 by 2020, reports Aaron Task for Tech Ticker.

Other ETFs available to hedge oil and gas are:

• United States Oil (USO), up 20.6% year-to-date
• PowerShares DB Oil Fund (DBO), up 21.2% year-to-date
• United States Gasoline (UGA), up 7% since Feb. 28 inception

Agriculture ETFs Are Hungry For Higher Food Prices

The United States is dealing with the gnarliest food inflation seen in 17 years, and Wall Street and exchange traded fund (ETF) investors may be the only side winning out.

New data to be released tomorrow may show that it's only going to get worse. U.S. food prices rose 4% in 2007. It's not likely to get any better this year, either: 2008 prices are forecast to rise by 4.5%. Compare that to an annual rise of 2.5% over the past 15 years, says Ellen Simon of Associated Press.

Market Vectors Global Agribusiness (MOO) may be primed to capitalize as rapid growth in China and India has increased demand for meat. Exports of U.S. products, such as corn, have increased, as the weaker dollar has only made them cheaper.

Many farmers have traded corn for soybeans in an attempt to fuel ethanol tanks, a more profitable endeavor. PowerShares DB Agriculture (DBA) holds corn, wheat, sugar and soybean futures, which may come out ahead this year.

The simple rise in transportation costs, with higher energy prices are mixing with the increase in high commodity costs of wheat, corn, soybeans and milk, which are creating havoc on food prices.

Just In Time for Warm Weather, Claymore Launches Solar ETF

While there are several clean energy exchange traded funds (ETFs) out there, none of them have focused solely on one aspect of the sector until now.

Claymore this morning launched the Claymore/MAC Global Solar Energy Index (TAN) on the NYSE Arca. Claymore President Christian Magoon told us the potential for growth in the solar industry is huge. Currently, it accounts for less than 1% of global electricity.

ETNs Elbowing Their Way Into Competition With ETFs

Exchange traded funds (ETFs) could have another competitor if things keep going the way they are: exchange traded notes (ETNs).

The industry was once small, but has slowly been picking up steam. The first ETNs launched in 2006, by Barclays Bank PLC of London, says David Hoffman for Investment News.

They're so attractive primarily because they give investors access to hard-to-reach markets. It also gives investors that access while they wait for an ETF equivalent. For example, India was covered by the iPath MSCI India Index ETN (INP) for a couple years before two India ETFs were launched earlier this year: the WisdomTree India Earnings (EPI) and the PowerShares India (PIN).

Of course, that doesn't mean that just because there's an ETN there will automatically be an ETF.

While they might share similar names and an acronym that differs by only one letter, ETNs aren't exactly like ETFs. They are backed by the issuer of the ETN, meaning that if the issuer goes under, the ETN does, too.

ETNs also receive slightly different tax treatment that's currently the subject of much debate.  ETNs that cover foreign currency lost their tax breaks last year, and the IRS is debating what to do with the others. Right now, they're treated as prepaid forward contracts for federal income tax purposes. This means investors don't realize income or recognize any gain until the note is sold.

Among the top performing ETNs year-to-date are:

• iPath DJ AIG Natural Gas TR Sub-Idx (GAZ), up 31.5%
• iPath DJ AIG Energy TR Sub-Idx (JJE), up 21.1%
• iPath DJ AIG Industrial Metals TR Sub-Idx (JJM), up 21%
• ELEMENTS Rogers International Commodity Metal (RJZ), up 19.8%

Copper and Other Resources Enrich Chile's ETF

With a reputation as one of the world's most economically progressive free market-focused nations in Latin America, the global commodities market could take Chile's exchange traded fund (ETF) to new levels.

The country's economy has grown from ties to international markets, and many are pondering if the U.S. slowdown will affect the country's continued growth.

Chile emerged from a recession in 2000, reports Don Dion for Seeking Alpha, and since then it's experienced hearty growth. In 2007, its economy grew 5.1%. A similar rate for 2008 is projected.

The country benefits from a rich supply of natural resources, especially copper; it produces one-third of the world's supply. In addition to that, it trades fish, wine, pulp and paper products, fruits and chemicals. Only 15% of the country's exports go to the United States. It's far more reliant on trade with Asia.

On the downside, Chile could be on the brink of an energy crisis, caused primarily by a drought and a natural gas shortage. However, two of the iShares MSCI Chile (ECH) top holdings, the National Electric Company (EOC) and Enersis (ENI), could benefit. They appear to be positioned to produce enough power to take advantage of the higher prices.

So far this year, ECH is up 11.3%.

Biofuels Responsible for Higher Food Prices and Agriculture ETFs?

Once hailed as something that could help reverse global warming, biofuels are now being blamed for much of the high cost of food and the resulting strong performance of agriculture exchange traded funds (ETFs).

World Bank President Robert Zoellick says biofuels are a "significant contributor" to the prices. That, couples with droughts, financial market speculators and increased demand have created a perfect storm, according to a report on NPR's Morning Edition.

A 4.4-lb. bag of rice in Bangladesh eats up half the daily income of a poor family, Zoellick said. In Haiti, where most people live on less than $2 a day, riots protesting the rising cost of living there are threatening the stability of the country, reports Jonathan M. Katz for the Associated Press.

Staples aren't likely to get cheaper anytime soon, either. He said that since Europe and the United States have stepped up their biofuel production, it's going to keep prices high for the next couple of years.

One of the few good points about skyrocketing food prices is that they could benefit agriculture-focused ETFs:

• PowerShares DB Agriculture (DBA): up 18.7% year-to-date
• Market Vectors Global Agribusiness (MOO): up 2.5% year-to-date
• iPath Dow Jones Agriculture (JJA): up 11.4% year-to-date

As long as biofuels exist, there are a number of green and alternative energy ETFs around that can capture the sector, including:

• PowerShares Cleantech Portfolio (PZD)
• Van Eck Market Vectors Environmental Services (EVX)
• First Trust NASDAQ Clean Edge (QCLN)

Recent Oil Prices Make Up, Down ETFs Tricky

The inverse/down oil exchange traded fund (ETF) from MacroShares appears to have a mind of its own.

There are actually two funds designed to move along in a given direction according to what oil is doing: MacroShares Oil Down (DCR) and MacroShares Oil Up (UCR).

A quick explanation:

• UCR: long-term price of oil
• DCR: long-term inverse of oil
• The sum of the two funds is always $40

That's because the funds hold treasuries and cash. They're issued in pairs to authorized participants, who are then free to trade them on the secondary market. The funds' trustees have a "swap agreement" in that as the price of oil shifts, assets between the funds move accordingly. As an example, when the price of oil moves up by a dollar, one dollar is taken from the DCR trust and moved to the UCR trust.

Oil traded up more than 3% yesterday, once hitting $111.68. Yesterday, DCR was down 29.2%, while oil had been up only 3.12%, reports Bespoke Investment Group on Seeking Alpha.

What is going on?

DCR is down so much because of an early termination clause in the notes' structure. If the front-month price of crude closes above $111 for three straight days, the clause kicks in and the notes stop trading at their net asset value (NAV) on the fourth business day prior to the end of the quarter in which the termination occurs.

For that reason, DCR was trading at just above $9 per share, but the NAV was $3.83.

Considering the rapidly rising price of oil, such a scenario doesn't seem completely out of the question. Oil closed at $110.12 yesterday. It closed at $110.11 today. It's certainly flirting with the $111 mark, and it may test that termination clause.

Since each pair of these funds is worth $40 in total (or, one-third the price of a barrel of oil),  if the price actually reached this level, the Down trust would run out of money for the Up trust. The solution, says Gary for Investing Minds, is that  payouts to Up trust holders are capped at $40 per share.

If this all sounds confusing, you're not alone. It's a good lesson to always be sure you know what you're getting into when you purchase ETFs, especially when it comes to products with as much going on behind them as this one does. And read the prospectus! This clause is stated within the prospectus a number of times, warning of the risk involved with these ETFs.

New Heating Oil ETF Captures White-Hot Energy Sector

There's another entry in the category of energy commodities-focused exchange traded funds (ETFs), this one covering heating oil.

The United States Heating Oil Fund (UHN) holds futures contracts for the commodity, reports Murray Coleman for Index Universe. It's made up of near-month contracts set to expire, except when the contract is within two weeks of expiration. In that case, it invests in the next month.

One difference in this fund is that it takes advantage of something called "crack spreads," which measure the difference between profit margins when a barrel of oil is first handled to when it enters its final incarnation as things like heating oil or gas for your vehicle. Crack spreads are at historically high levels, and Coleman says that heating oil spreads on the New York Mercantile Exchange are running as high as $22.50.

This new fund is just the latest to cover the white-hot energy sector. In February, the United States Gasoline Fund (UGA) was launched - the first of its kind. The provider of UHN and UGA, Victoria Bay, also offer the United States Oil Fund (USO), United States 12-Month Oil Fund (USL) and United States Natural Gas Fund (UNG).

Speaking of "historic highs," the cost of a barrel of oil isn't getting any cheaper, reports Kenneth Musante for CNNMoney. The slick stuff surged to a new record today, hitting $112.05 a barrel, topping the previous intraday record of $111.80 set on March 17.

The jump came when the Energy Information Administration said stocks fell by 3.2 million barrels. Analysts had been expecting a jump of 2.4 million barrels. The good news, according to the publisher of an industry newsletter, is that it's a one-off to be corrected in the next two reports.

Gas is hitting new highs, too: $3.43, says AAA. Blame that on the seasonal purge of winter-grade fuel.

Food Shortage Has Many Roots; ETFs Could Grow From It

The financial crisis is the talk of the country, but another crisis might be helping some exchange traded funds (ETFs), but it's hurting people around the world.

Food prices have skyrocketed over the last few years, and even more so in the last few months, says Paul Krugman for the New York Times. Even Americans who are doing relatively well are grumbling at the swiftly rising grocery bills. But in poor, developing countries, it's devastating. Food often makes up half of a family's spending.

Countries that supply food, such as Ukraine and Argentina, have been limiting their exports to protect their own consumers. This has led to protests from farmers.

How did this happen?

1) Emerging markets. For the first time, a growing number of people around the world in previously poor countries can afford to start eating the way Westerners do, and beef isn't cheap to produce.

2) Oil prices. Modern farming uses a lot of it, which drives up the cost of agriculture.

3) Bad weather. Australia, in particular, has been experiencing a massive drought. It's the world's second-largest wheat exporter, and the lack of rain has cut into their production.

Can anything be done? Krugman isn't so sure. Expensive food and expensive oil may very well remain a fact of life.

Agriculture ETFs are a way to gain exposure to this sector if the prices do continue to rise as they have been. Among the many available:

• ELEMENTS Linked to the MLCX Grains Index (GRU), down 1.4% since Feb. 15 inception
• iPath Dow Jones AIG-Agriculture ETN (JJA), up 7.6% year-to-date
• PowerShares DB Agriculture Fund (DBA), up 16.4% year-to-date
• Market Vectors Global Agribusiness (MOO), up 0.5% year-to-date

ETFs Hold Steady While Earnings Reports Are Awaited

There was no rally in the first day of trading this week for stocks and exchange traded funds (ETFs) like the one last week, in which the Dow Jones industrial average skyrocketed nearly 400 points.

At the start of the day yesterday, stocks went higher, then shifted to flat and mixed. It's earnings season, and as the numbers come in, it could create some interesting movements in the market. Right now, Wall Street is proceeding with caution while they wait, says the Associated Press. On top of that, they're also waiting for the Federal Reserve to issue minutes from its March meeting today.

The top-performing ETFs in trading yesterday were:

• iPath DJ AIG Natural Gas ETN (GAZ), up 5%
• MACROshares Oil Up Tradeable Shares (UCR), up 4.7%
• United States Natural Gas (UNG), up 4.5%
• SPA MarketGrader200 (SNB), up 3.8%

UBS Enters Commodities Arena With ETN Line

UBS is getting into the exchange traded game with commodities exchange traded notes (ETNs).

Last week, the firm launched eight ETNs focused on commodities, and the plan is to venture into other asset classes, reports Jesse Emspak for Investor's Business Daily. The UBS Bloomberg Constant Maturity Commodity Index rolled out last year, and the ETNs will track it. The bank chose to go with