State Street Goes Down The International ETF Road

State Street Global Advisors is going down the real estate and mid-cap road on an international scale, with new exchange traded funds (ETFs) that invest overseas.

The new funds, according to Reuters, are:

• SPDR DJ Wilshire Global Real Estate (RWO), based on 240 commercial and residential real estate companies in 23 countries, including the United States.
• SPDR S&P International Mid-Cap (MDD), based on an index of 850 companies whose market caps are between $2 billion and $5 billion. The companies are located in 25 countries, including the United States.

Their global real estate fund will join these other international real estate ETFs:

• SPDR Dow Jones Wilshire Intl Real Estate Index (RWX), down 2.7% year-to-date
• First Trust FTSE EPRA/NAREIT Global Real Estate (FFR), up 0.7% year-to-date
• iShares FTSE EPRA/NAREIT Asia (IFAS), down 7.1% year-to-date
• iShares FTSE EPRA/NAREIT Global RE ex-U.S. (IFGL), down 5.3% year-to-date

The other international mid-cap ETF is the WisdomTree International Mid-Cap Dividend (DIM), which is a dividend-paying fund. Year-to-date, it's down 2.5%.

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

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.

Talks Between Two European Utilities Might Affect Global ETF

European utilities may be on some investors minds, as the biggest power producer in Europe gets ready to offer a takeover, lighting up related exchange traded funds (ETFs). Electricite de France S.A., the biggest power producer in Europe, is offering British Energy Group Plc a contract that will be 5% below the company's share price, report Paul Dobson and Ambereen Choudhury for Bloomberg.

The proposal is expected any day now, but it's confidential. Many power producers want to buy British Energy because Prime Minister Gordon Brown backs nuclear reactors to meet energy demand and replace the aging units. The U.K. government would sell its stake in the deal.

iShares S&P Global Utilities (JXI) holds 1.9% in Electricite de France, Iberdrola is 5.9%, with E.ON AG at 10.9%, the largest holding. The fund is allocated throughout Europe, with the United Kingdom containing 10.7% and France at 10.8%.

European Large-Caps On Their Way Up To Help ETFs

Although the U.S.dollar is weak, and the credit crunch has tightened the cash flow, European large-caps don't seem to be feeling this.

Exchange traded funds (ETFs) that hold European large-cap stocks include Vanguard European Stock (VGK) and the iShares S&P Europe 350 (IEV), both of which are down year-to-date, but have been ticking back up during the past four weeks.

VGK in the last month has risen 2.1%, but is down 3.1% year-to-date. IEV is up 1.7% in the last month, but down 3.4% year-to-date.

VGK is made up of bigger firms, while IEV is actually five years older. IEV holds 600 companies while VGK holds 348. The ETFs track different indexes, the MSCI Europe Index for IEV and the S&P Europe 350 Index for VGK.

Both ETFs give exposure to large, Western European companies and currencies, reports Joanne Von Alroth for Investor's Business Daily. The large-caps that make up these funds have performed well recently.

But not all is rosy in Europe: the European Union is battling 3% inflation, a credit crisis and high food prices. Some retailers have seen sales fall. But there's optimism, too, since in April both France and the United Kingdom saw their highest monthly benchmark index gains in nearly five years.

ETFs Adapt To Ever-Changing World and Business Dynamics

Mutual funds don't seem to be stepping up to the challenge that a global economy presents, possibly creating a wide-open door for the exchange traded fund (ETF) industry.

The power of global business has arrived, with less anchored in the mindset of the nation-state and more concentrated in private enterprise. ETFs offer greater flexibility in accessing these global opportunities at a generally lower cost than mutual funds, reports Tom Pochari for World Affairs Monthly.

Have a listen to my discussion with Tom to hear about the future of the investment business as it relates to ETFs.

New ETF Provider Comes Bearing International Real Estate Fund

A new global real estate exchange traded fund (ETF) is in town, along with a new ETF provider.

The Cohen & Steers Global Global Realty Majors (GRI) from ALPS Advisors provides exposure to the global real estate market with 75 companies in developed markets including North America, Asia Pacific and Europe. It rebalances quarterly and has an expense ratio of 0.55%.

This fund joins a number of other international real estate ETFs, including:

• iShares S&P World Ex-US Property Index (WPS), down 4.6% year-to-date
• SPDR DJ Wilshire International Real Estate (RWX), down 1.2% year-to-date
• WisdomTree International Real Estate Fund (DRW), down 10.2% year to-date

The U.S. housing crisis has been taking its toll on the markets of other countries lately, but perhaps when this sector experiences a rebound here, it will spread overseas.

Insurer AIG's Losses Leave ETFs Mixed; Citigroup Making Changes

Insurance exchange traded funds (ETFs) were mixed in early trading today after insurer American International Group Inc. (AIG) announced larger-than-expected losses.

The company lost $7.81 billion, the second consecutive quarterly loss. The losses did send anxiety through the general markets, though, and sparked more concerns about the global financial system, reports Tim Paradis for the Associated Press.

AIG is the world's largest insurer. It's a component of both the iShares Dow Jones US Insurance (IAK, 16.1%) and KBW Insurance (KIE, 7.1%). Year-to-date, the funds are down 12.2% and 8.2% respectively.

Meanwhile, Citigroup (C) said today that it plans to shed $500 billion in assets and grow its revenue by 9%. That would bring the bank's total assets down to $1.7 trillion, reports Madlen Read for the Associated Press. Growing the assets will include, in part, job cuts in addition to the 13,200 that have already taken place since last summer.

Citigroup is 5.9% of the Financial Select Sector SPDR (XLF), as well as 2% of the iShares S&P Global Financials (IXG). XLF is down 8..4% year-to-date, and IXG is down 5.8%.

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.

Steel ETF Is Getting Hot to the Touch

Describing something as "steely" is usually a synonym for "coldness," but not when it comes to the steel exchange traded fund (ETF).

Market Vectors Steel (SLX), which launched in October 2006, is at record highs thanks primarily to booming global demand for the metal. Year-to-date, it's up 19.6%.

In the Middle East, the steel industry is said to be undergoing a transformation. It currently accounts for only 2% of the global steel trade, AME Info reports. In 2006, the region produced 21.1 million tons of raw steel and consumed 41.6 million tons of finished goods. Those numbers are respectively forecast to rise to 35 million and 60 million tons by 2010.

In China, the number of steel factories has doubled in the last few years. Even on our home turf, steel demand is up about 30% ahead of its supply.

Think You're Diversified Enough With ETFs?

How diversified is your exchange traded fund (ETF) portfolio? No matter how well you think you have your bases covered, every portfolio is vulnerable to something, cautions Roger Nusbaum for The Street.

Many investors who invest in broad-based ETFs or actively managed mutual funds end up too heavy in the financials. Individual stocks and sector funds also tend to have the same problems. An example of the correlation between two broad-based funds can be seen in two market segments that tout increased growth and unstoppable demand.

iShares S&P Global Materials Index Fund (MXI) and the BLDRs Emerging Market 50 ADR Index (ADRE) have a tight correlation, especially in times of stressful corrections. The increased demand for natural resources in places like China and India have also triggered demand from countries with the natural resources like Brazil and Chile, according to Nusbaum.

The infrastructure buildup is still in its infancy, and needs more time and dollars to take off. Right now China is off its peak 40%, so think about what this could do for related sectors, ETFs and countries. Think about the China decline, and how easy emerging markets, and materials could go down, too. Also, remind yourself of the true total exposure to these sectors and how a decline would affect your portfolio.

The time to come up with your exit strategy is now. It's wise to know your plan and stick to it, regardless of emotion. When a fund drops below its 200-day moving average or 8% off its high, sell it. Once you begin rationalizing your movies or hoping for a turnaround is when you get into trouble.

Northern Trust Enters ETF Arena With First ETFs To Track Major Foreign Market Indexes

With its new line of exchange traded funds (ETFs), Northern Trust opted to stay true to their principles while traveling around the world.

Is it a sign that ETFs are slowly entering the mainstream and gaining acceptance as more than just a passing fad? An institution as old and well-known as Northern Trust entering the market could be a sign.
 

"We know who we are. We knew what we needed to bring to the market, something that was consistent with our notions of asset management overall," says Peter Ewing, the managing director of Northern Trust's ETF group.

The first batch of funds, the first to track major foreign market indexes, were a year in the making. Ideas were kicked around as the world's third-largest asset manager of institutional index-based assets felt it needed to seriously consider an ETF product line. In 2007, the management committee gave the go-ahead and they filed with the Securities & Exchange Commission (SEC).

"Our opening salvo is traditional," Ewing says. But the provider isn't averse to more inventive ETFs and strategies. But for now, "We want to stay true to our principles."

Northern Trust's ETFs, which all have an expense ratio of 0.47%, are:

• NETS S&P/ASX 200 Index Fund (AUS): Represents Australia
• NETS DAX Index Fund (DAX): Tracks Germany's major exchange
• NETS FTSE 100 Index Fund (LDN): Invests in the largest companies by market cap on the London Stock Exchange
• NETS CAC40 Index Fund (FRC): Represents France
• NETS Hang Seng Index Fund (HKG): Represents Hong Kong
• NETS TOPIX Index Fund (TYI): Represents Japan

At a later date, there will be funds issued that cover Belgium, Ireland, Portugal, South Africa and more.

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.

Global Asset Allocation Wrapped In An ETF

Asset allocation is an important factor within a portfolio, and now Invesco PowerShares offers this strategy all wrapped up in an exchange traded fund (ETF). Their latest ETFs are designed to give investors access to long-term, core asset allocation strategies.

The newest portfolios are based on three distinct risk profiles, targeting a specific percentage of an investment in equity and fixed-income securities. Balanced, balanced growth and growth are set for a May 15 debut on the NYSE Amex, according to PowerShares.

Asset allocation is an important consideration for any investor - it helps one maintain their desired risk/reward profile. Depending on your desired level of risk and long-term goals, investments are spread over several types of asset classes, including equities, fixed-income and non-equity correlated assets.

The anticipated fund names and ticker symbols are:

• PowerShares Autonomic Balanced NFA Global Asset Portfolio (PCA)
• PowerShares Autonomic Balanced Growth NFA Global Asset Portfolio (PAO)
• PowerShares Autonomic Growth NFA Global Asset Portfolio (PTO)

Currency ETF Moves Depend on Many Factors

One reader wanted to know about foreign currency exchange traded funds (ETFs). Thanks to ETFs, foreign currency is a market the average, everyday investor can get exposure to an area that previously wasn't accessible to them.

The rise and fall of currency has a lot to do with several factors, according to George D. Lambert for Investopedia. The value is impacted by economic growth, government debt levels, oil and gold prices, and more.

Just look at what happened recently in the United States: gross domestic product (GDP) slowed, government debt rose, oil and gold prices spiked. Suddenly, our dollar was hitting record lows against the yen and euro.

Currency ETFs replicate the movements of the currency in the exchange market either by holding currency cash deposits in the currency that's being tracked, or by using futures contracts on the underlying currency.

Currency ETFs can either track the specific currency you'd like, or a group of them, as in the case of the DB G10 Currency Harvest Fund (DBV).

How they operate is cut-and-dry: when you sell it, if the currency has appreciated against the dollar, you'll earn a profit. If the currency has dropped relative to the dollar, it's a loss. Foreign currency ETFs are bought and sold just like regular ETFs, throughout the day.

Keep an eye on the dollar, though: it strengthened yesterday, reports Madlen Read for the Associated Press. Dropping oil prices and the Dow's close above 13,000 for the first time since Jan. 3 are viewed as signs of optimism.

The options investors have for currency ETFs have exploded. Among the many choices:

• CurrencyShares Australian Dollar Trust (FXA)
• WisdomTree Dreyfus Brazilian Real Fund (BZF)
• ELEMENTS British Pound (EGB)
• CurrencyShares Swedish Krona Trust (FXS)

Depending on your feeling about the dollar - will it continue to strengthen, or is this just a temporary lift? - there's also the PowerShares DB US Dollar Index Bearish (UDN) and the PowerShares DB US Dollar Index Bullish (UUP).

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

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.

Global Semiconductor Sales Surge; Will ETFs Stage Turnaround?

While semiconductor exchange traded funds (ETFs) are down slightly so far today, the outlook for the sector has improved with some first-quarter numbers.

Worldwide semiconductor sales rose 3.8% in the first quarter from the same period in 2007, reports Melinda Peer for Forbes. Sales did fall, however, from the fourth quarter of 2007, down 5.1%. It's not cause for alarm, though, because the fourth quarter typically has stronger sales, according to the Semiconductor Industry Association (SIA).

Even though the U.S. economy has slowed, consumers in other countries are snapping up electronic products - especially personal computers. Sales growth in the United States for the first quarter was 2.3%. The SIA anticipates that global demand will remain strong for the rest of the year.

Watch these funds and wait until they move above their 200-day moving averages before considering leaping in:

• iShares S&P GSTI Semiconductor Index Fund (IGW), down 6.9% year-to-date
• PowerShares Dynamic Semiconductors Portfolio (PSI), down 1.7% year-to-date
• SPDR S&P Semiconductor (XSD), down 2.7% year-to-date
• Merrill Lynch Semiconductor HOLDRs (SMH), down 2.6% year-to-date

How to Invest in Single-Country ETFs

Exchange traded funds (ETFs) that track a single country have have been a boon to many long-term investors. They allow investors to reduce their exposure to specific regional disruptions, such as the recent credit crunch, and they up the exposure available to countries that are profiting more than the United States or other distressed nations.

Global growth has been outpacing that of the United States' for some time now. Evidence of this can be seen just by looking at the performance of the S&P 500: year-to-date, it's down 5%. Its five-year average return is 10.6%, and the ten-year average is 3.9%.

Investors can't be blamed for considering looking abroad for places to put their money. Single-country funds offer more flexibility than mainstream equities, says Alan Farley for The Street.

Overnight gaps that can occur in single-country ETFs can subject them to volatility.

iShares MSCI Mexico (EWW) is an example, as it fell nearly 3% on April 25 because of weak earnings from America Movil (AMX). However, over the past decade, EWW has benefited from Mexico's steady growth in the last decade. Year-to-date, the fund is up 3.6%.

Other ETFs with a strong year-to-date performance include iShares MSCI Brazil (EWZ), which is up 12% and has an annualized return of 55.4% over the last five years;  iShares MSCI Taiwan Index (EWT), up 10.2% so far this year, with an annualized return of 18.6% over the last five years.

Brazil was upgraded yesterday by Standard & Poor's to "investment grade."

These uptrends over time with single-country ETFs are all well and good (hindsight is 20/20, right?), but what if you had bought Brazil in November and sold it in January? You would have been down 50%.

But each single country needs to be evaluated on its own merits. Not all of them are going to go up. When it comes to these funds, educate yourself and monitor the trends closely. Have your sell points set for each, letting it go when it either drops below its 200-day moving average or 8% off its high.

If you stick to the plan, hopefully you will achieve your goal of doing well on the uptrends while avoiding the volatility that occurs from time to time.

Brazil, Latin America ETFs Soar After Investment Upgrade

Brazil's exchange traded fund (ETF) got a big boost after Standard & Poor's rated the country to "investment grade."

The country's continually growing economy and debt reduction are cited as two reasons for the upgrade, reports Rob Wherry for Smart Money.

Brazil once had a volatile economy, but is now enjoying some newfound stability, says the Associated Press. Experts are predicting that the country's typical boom and bust economic cycles are a thing of the past.

The upgrade was hard-earned. In the 1980s, the country defaulted on its debt and declared a moratorium on payments. Now it's booming thanks to exports such as beef, iron ore and soy. Foreign investment is on the rise, companies are making record profits and consumers are taking out loans to purchase cars and homes.

S&P Credit Analyst Lisa Schineller says Brazil appears to be on track for sustained economic growth between 4% and 4.5% this year.

iShares MSCI Brazil (EWZ) and iShares S&P Latin America 40 (ILF) rode the wave, gaining 7.2% and 4.4% yesterday, respectively.

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

BRIC ETFs Have Many Access Points for Investors

A reader wrote in recently wanting to know more about BRIC and the related exchange traded funds (ETFs). We're here to help!

BRIC stands for four of the fastest-growing emerging markets out here: Brazil, Russia, India and China. In 2007, these countries delivered some of the biggest returns of any ETFs or exchange traded notes (ETNs) around. So far for 2008, BRIC ETFs and some of the single country funds have been fairly quiet.

But make no mistake: these countries are still growing, and could have plenty to offer down the line.

Rising Interest Rates In Bond ETFs Signaling Strength As Fed Meets?

Rising interest rates within the bond market are signaling a change within investor sentiment that could possibly boost stocks and exchange traded funds (ETFs) in the coming months. It appears that the financial sector may be ready to rebound, and equities may start to head in the right direction.

This change in sentiment comes just in time for the Federal Reserve's meeting today and tomorrow. The public had been awaiting another rate cut of around one-half a point. Now, the feeling that one-fourth a point cut may do, and be the last in a two-year series, explains Carl Gutierrez for Forbes.

The market may not feel that the economy is dropping so much as before, and money is beginning to flow more steadily. Friday's global bond selloff was triggered by inflation in Japan reaching a 10-year high, in tandem with better-than-anticipated first quarter earnings reports in the United States.

As yields around the world stabilize, one analyst says that it removes the incentive for investors to take money out of the United States, leading to stabilization.

SPDR Lehman International Treasury Bond (BWX) is up 5.2% year-to-date and has a 3.83% yield. iShares Lehman 7-10 Year Treasury Bond (IEF) is up 3% year-to-date and has a 4.05% yield.

ETF Providers Growing Strong Around the World

It's no shock to hear that exchange traded funds (ETFs) are growing in number, but the number of providers is exploding, too.

According to Morgan Stanley, 14 companies launched their first ETFs in 2007, bringing the worldwide total to 75 providers. That includes Deutsche Bank, XShares and Spa. This year, the newest entrant to the market is Northern Trust.

Twenty more are going to jump on the bandwagon globally, reports Steve Johnson for the Financial Times. They include Merrill Lynch, Alpha Bank of Greece and Tata, the Indian Conglomerate.

One member of the industry fears that not all of these companies will be successful, since many of them are smaller companies backed by venture capital.

In an era with more providers than ever and more competition, this is probably true. Investors are going to look at products with a more discerning eye as more options become available to them. Naturally, not everything is going to be a success.

But companies that give investors access to areas in which they haven't been able to get into might be among the more successful ones. Being first to market can be key, as well: the first ETF to launch often gobbles up most of the assets.

ETFs Might Benefit From Global Water Shortage

A water shortage has wide implications that hurts many while benefiting water-focused exchange traded funds (ETFs) in the long run.

In Yemen, Mohammed Nasser has had to change his way of life, abandoning traditional customs of hosting passer-by or politicians, now unable to supply essentials for his own family because of the water shortage affecting agriculture. Almigdad Mojalli for Yemen Times reports that 10 years ago, water was plentiful. Now, of the 20 wells that used to supply the village's water, only two are functioning.

A bit closer to home, Tim Teichgraeber for decanter reports that April frosts have caused widespread damage to vines in Northern California, and now a water shortage has hampered sprinkler usage in an effort to salvage them. Some of the more vulnerable vineyards are those that lack overhead sprinklers which protect the vines when temperatures go below freezing. Some sprinklers have used up the entire water supply for the season, too.

Around the world, in New South Wales, Australia, the drought is also taking a significant toll. The dams that supply water for irrigation to the large crops are dried up, causing many farmers to go without crops, and therefore, without income. Australia's failed rice crop will also affect the cereal and grain crop, reports Asa Wahlquist for The Australian.

The rice shortage has led to rationing in the United States and riots in Haiti and Egypt.

However, water is not quite like the other commodities, and has its own special set of circumstances. It's not priced on a global market, it's heavy and transporting it costs more than it's worth.

Water ETFs currently available are:

• PowerShares Water Resources (PHO), down 4.1% year-to-date
• Powershares Global Water (PIO), down 10% year-to-date
• Claymore S&P Global Water (CGW), down 5.6% year-to-date
• First Trust ISE Water (FIW), down 1.4% year-to-date

What Do Expense Ratios Have To Do With It?

There are big discrepancies between assets and revenues, as analysts point out, but do expense ratios really matter to investors when it comest to investing with exchange traded funds (ETFs)?

Matthew Hougan for Index Universe shows evidence that investors seem to overlook expenses:

• iShares MSCI Emerging Markets (EEM) has an expense ratio of 0.74%. It currently has $24 billion in assets. Vanguard Emerging Markets (VWO), which is a competing fund, has a 0.30% expense ratio with a strong performance record, but has a smaller $6 billion in assets. 
• Another case in point: Mid Cap SPDR (MDY) tracks the S&P 400 and charges 0.25% in expenses, with $8.2 billion in assets. iShares S&P 400 MidCap (IJH) charges 0.20%, tracks the same index and has $4.4 billion in assets.

This may be a case where the ETFs with the greatest assets in each category are also the first ETFs to hit the market, since this is the case in these examples.

Another clue Hougan cites as evidence that investors might not care much about expense ratios is that, with some exceptions, fund companies generally don't market toward it. Some ETFs are launching today with fees of 0.70% or more.

Do investors know, but just not care? Perhaps. Expense ratios are just one factor in the equation. Spreads, in some cases, can outweigh any advantage a low expense ratio might offer.

It doesn't seem a lack of understanding as far as ETFs go is the problem. A survey we summarized yesterday reported that of the investors who participated, 16% use ETFs. A large portion of these ETF users, 87%, said they understood how fees impacted their returns.  This was quite different compared to all the survey respondents; 88% felt fees for the fund industry overall were unclear.

Which single ETF feature is most important to you among the following? Expense ratio, brand name, past performance or assets under management? Feel free to answer in the comments!

Renewed Cooperation Between Singapore and Malaysia Can Help ETFs

Malaysia and Singapore have been working together to benefit their economies and, in turn, their exchange traded funds (ETFs).

Carl Delfeld for ETFfolio feels investors have finally begun to appreciate that Malaysia offers attributes that are similar to its neighbor to the south, Singapore.

Malaysia has a diversified economy: 43% of its gross domestic product (GDP) is in the service sector, while agriculture is 8%. One-third of its population is under the age of 15. Economic growth last year was 6%.

Malaysia's improvements have given the country power to improve its political and economic relationship with Singapore. In the past, the two countries have had a rocky relationship. By teaming up, though, it could be a win-win situation.

The iShares MSCI Malaysia (EWM) and the iShares MSCI Singapore (EWS) are two ways to get exposure to these countries. EWM is down 5.4% year-to-date, while EWS is up 0.3%.

Singapore's fund is most heavily allocated in the service sector, at 67.5%. Another 20.5% is in information. Malaysia's fund is split between the service (49.2%) and manufacturing (44%) sectors.

 

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

Could Spreading Wealth Make China's ETFs Go 'Vroom'?

Could China's economy and exchange traded funds (ETFs) be faltering like some think? Perhaps not. One sign: sport utility vehicle sales are taking off.

Two of the fastest growing segments in the Chinese market, in fact, are luxury cars and SUVs, reports GM China's vice president for sales and marketing. Analysts are expecting auto sales growth between 15% and 20% this year, reports Joe Mcdonald for the Associated Press.

Demand for the behemoths of the road and luxury vehicles is expected to grow by 40%-45%. China's economic growth has topped 10% for five consecutive years, and a spike in real estate and stock prices has created some freshly minted billionaires looking to spend.

The Chinese don't have to worry about the price of gas, either: pump prices have been frozen, and they're among the world's lowest.

While wealth is spreading in China, the country needs to remain vigilant about inflation, Reuters reports. Prices for food and other products are rising, and consumer inflation is running near 12-year highs. Food prices alone rose 21.4% from January to March this year.

China's ETFs have lost much of their huge gains from 2007. A turnaround for this country is eagerly awaited.

• iShares FTSE/Xinhua China 25 Index (FXI), down 13.7% year-to-date
• PowerShares Golden Dragon Halter USX China (PGJ), down 22.1% year-to-date
• SPDR S&P China (GXC), down 16.7% year-to-date

ETFs Give Options for Intenational Investing

With the U.S. economy questionable lately, it might be the time to look into international investments through exchange traded funds (ETFs). The U.S. economy may not be experiencing much growth right now, but overseas markets can present opportunities.

Jonas Elmerraji for TheStreet suggests that investing international does not mean you have to put your money into risky places.  There are developed economic superpowers, such as France and the United Kingdom, with potential for global plays. ETFs give investors easy access to countries and regions around the globe.

The largest international ETF by assets is iShares MSCI EAFE (EFA), which includes exposure in the U.K., Japan, France, Germany, Switzerland and other countries.  iShares MSCI Taiwan (EWT) is up the most year-to-date of the international ETFs, up 12.6%.  Compared to the S&P 500 that is down 7%.

There are numerous ETFs available to gain exposure overseas either by single country, region or even the world, such as Vanguard FTSE All World-ex U.S. (VEU).

Try looking at ETFs that are above their trend lines and use caution when considering an investment in a volatile country where there is lots of political upheaval.

Steel ETF Keeps Its Momentum Strong

The broader markets have been shifting all over for the first half of 2008, while the steel sector has remained solid, helping to anchor the related exchange traded fund (ETF).

Market Vectors Steel (SLX) is up 10.8% year-to-date and in the last three months has soared 22.5%, thanks to strong holdings that are trading at or near their 52-week high. Over the last year, the fund has jumped up 61.4%.

Rio Tinto (RTP), Companhia Vale Do Rio Doce (RIO) and Arcelor Mittel (MT) account for 40% of the fund's assets. Billy Fisher for The Street adds that U.S. steel demand is up around 30% ahead of its supply and the dollar continues to weaken, making conditions fertile for these companies. So can the momentum continue?

Steel demand should maintain its upward growth because emerging markets continue to seek out the metal as they build up new cities. The only factor that might put a stop to this is if the U.S. economic downturn hits some of the overseas markets.

Sugar Might Sweeten Agriculture ETF Performance

Sugar is one commodity whose price remains relatively low when compared with historic highs, but it may not remain that way for long, leaving room to grow for exchange traded funds (ETFs).

Take Baltimore's famous Berger cookies, the price of which one woman recently balked at: $4.59. We can personally attest to the worth-it-ness of that price. The cookies are simple: eggs, milk, sugar, flour and cocoa for that delicious mound of chocolate frosting on the top. Really, you should try them.

The price of all those ingredients has soared in recent months - except for sugar. In "real" terms, the price of sugar has been dirt cheap since the late 1980s, reports Graham Summers for Seeking Alpha.

Blame much of it on a bad reputation: sugar rots your teeth, makes you fat and makes your kids swing from the chandeliers.

But the populations of other countries are beginning to get a sweet tooth as they start eating more like we do (heaven help them), contributing to a demand for sugar that has increased 15% since 2002. Demand is beginning to outpace production: consumption has risen 4%, production has risen 1%.

The biggest sugar consumers per capita are, in order: Brazil, Mexico and Australia, according to Daniel Workman for Suite 101.

The London Stock Exchange has a sugar ETF, ticker symbol SUGA. In the United States, there is sugar futures exposure to be had in the PowerShares DB Agriculture (DBA).

International Markets, ETFs Catching U.S. Housing Disease

The U.S. housing crisis is taking its toll on other countries, and it could hit their exchange traded funds (ETFs) if it persists for long.

Real estate prices are plummeting in the Irish countryside, the Spanish coast and even parts of Northern India, reports Mark Landler for the New York Times. Some property analysts abroad are expressing fear of a wholesale collapse. Western European once were buying investment properties in places such as Warsaw and Estonia - but no longer. In India, prices have dropped 20% in the last year.

The International Monetary Fund cut its global economic growth forecast last Wednesday, and said the downturn could carry through to 2009.

The SPDR DJ Wilshire International Real Estate (RWX) could feel the pinch if the crisis continues to spread. Year-to-date, the fund is down 7.8%. Some single-country funds may also experience some bruising:

• The New Ireland Fund (IRL), down 2.9% year-to-date
• WisdomTree India Earnings (EPI), down 13.6% since Feb. 26 inception
• PowerShares India (PIN), down 6.7% since March 5 inception
• iShares MSCI Spain (EWP), down 3.1% year-to-date

The troubles stateside aren't getting much better. J.W. Elphinstone for the Associated Press reports that home foreclosures jumped 57% in March. A rash of adjustable-rate loans are also scheduled to reset in May and June, as well, meaning yet more foreclosures are likely in the third and fourth quarters.

How will real estate ETFs react in the long run?:

• iShares Dow Jones US Real Estate (IYR), down 0.3% year-to-date
• iShares Cohen & Steers Realty Majors (ICF), up 2.8% year-to-date
• DJ Wilshire REIT (RWR), up 2.4% year-to-date

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

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.

Telecommunications ETFs on Line One

Few sectors have taken as much of a beating as telecommunications and its related exchange traded funds (ETFs). But is a turnaround in the offing?

Some analysts seem to think so. One for Citigroup upgraded telecom to "overweight," since analysts appear to be done slashing their estimates.

Telecoms have a history of underperforming the markets, reports Dan Burrows for Smart Money. If we are, in fact, at the bottom, says one analyst, telecom could be poised to outperform.

Global telecommunications is undergoing a transformation. India is the fourth largest telecom market in Asia, after China, Japan and South Korea, reports the Centre for Telecom Policy Studies. The quality of service is improving, as well as the overall accessibility.

Telecom ETFs that might be worth a look:

• iShares Dow Jones US Telecom (IYZ), down 19.2% year-to-date
• iShares S&P Global Telecommunications (IXP), down 10.5% year-to-date
• Vanguard Telecom Services (VOX), down 17.1% year-to-date

Switzerland and ETF Could Be On the Mend, But More Woes Predicted

Switzerland recently got socked by the global credit crunch, but the country and its exchange traded fund (ETF) seem to be in recovery mode.

The Swiss bank UBS (UBS) had write-downs in the billions last week. Around the same time, mutual funds investing in the country began experiencing inflows. Year-to-date, those funds have reported $2.4 billion in inflows, the bulk of which took place last week, reports Trang Ho for Investor's Business Daily.

It's a turnaround from last year, when those funds experienced $280 million in outflows.

iShares MSCI Switzerland (EWL) has gained 1% during the past year. Year-to-date, it's down 0.6%, but in the last month, it's moved up 2.9%.

One economist predicts more reports of losses and more financial turmoil through the end of the second quarter.

The financial sector accounts for 15% of the Swiss gross domestic product (GDP), and it could make or break the ove