Everyone Is Talking About the Dollar. Let's Talk About Currency ETFs.

Exchange traded fund (ETF) investors are fully aware of the value of the dollar these days as they snap up products that allow them to hedge its losses. But now more than ever, even the average Joe knows what the dollar is (or isn't) worth.

It's invaded pop culture: you've got Jay-Z waving euros in a video. McDonald's commercials talk about how the dollar is "dropping like a lead balloon." Model Giselle Bundchen was rumored to be asking to be paid in euros awhile back.

Since when are exchange rates the subject on the minds of so many? People are becoming increasingly aware of the fact that it's possible to spend your dollars on other forms of currency, says Rob Walker for the New York Times. Some point to the internet and the wide choices of financial news sources.

One bank has sold foreign-denominated certificates of deposit (CDs) for years, and they're more popular today than ever.

Don't count out foreign currency ETFs and exchange traded notes (ETNs) - there are more choices than ever, and more are likely to come along. Investors can hedge the falling dollar against the euro or the Japanese yen and a number of other currencies, or they can simply bet on a bullish or bearish dollar.

Among the many currency ETFs and ETNs:

• CurrencyShares Euro Trust (FXE)
• PowerShares DB US Dollar Index Bullish (UUP)
• Market Vectors Rupee/USD ETN (INR)
• WisdomTree Dreyfus Brazilian Real (BZF)

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

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

With ETNs, Risk Is Small, But It's There

Exchange traded notes (ETNs) are distant relatives of the exchange traded fund (ETF) and they come with their own unique issues attached.

Matthew Hougan for Index Universe points out that while the credit risk is small, it's still there. The Bear Stearns (BSC) fiasco showed that crazy things can happen. When you invest in an ETN, you're investing in a 30-year debt instrument. They are a promise by the provider to pay the investor the amount reflecting a change in the underlying index.

ETNs do have some tracking error, but the difference is that they will never trade below the value of their index. This is part of what the provider offers to the investor. However, there's no guarantee that they won't trade above their net asset value (NAV). With ETFs, any tracking error is borne by the investor.

Late last year, the iPath MSCI India (INP) traded at a big premium to its NAV after the government clamped down on foreign investing.

The issue of taxes and ETNs is still a matter of ongoing debate. While the IRS has ruled on taxes regarding foreign-currency ETNs, they don't appear to be any closer to a decision, according to Stephanie Carreras at Barclay's. Open discussions are taking place until the middle of this month.

As the Dollar Ticks Up, Picking An ETF Can Be a Challenge

After months of a downhill slide, the dollar is making gains again and it's benefiting some exchange traded funds (ETFs).

It lost a little ground last week, but so far in trading today, it seems to have resumed its climb. The gains have helped calm some worries about inflation, reports Tim Paradis for the Associated Press. When the dollar is weak, it can heighten price increases. Commodities like oil then become more attractive to investors who are looking to hedge inflation.

With that, oil retreated from its record high and fell to $125.41. Last week, it gained $10.

Jack Crooks for Money and Markets points to the G7 meeting in early April as the kick-off point for the dollar's about-face. Traders began to dissect the events of the meeting and perhaps became concerned that a bottom had been hit, and now there's a battle between the dollar bulls and bears.

There are many ways to play your sentiment on the dollar and other currencies around the world. Rydex's CurrencyShares allow investors to hedge the falling dollar relative to a variety of currencies. Market Vectors has two new exchange traded notes (ETNs) that allow investors to go double long or short on the euro. And PowerShares has two ETFs that capitalize on either bullish or bearish sentiment on the dollar.

There's also an all-in-one ETF if you find it hard to pick and choose: the PowerShares DB G10 Currency Harvest (DBV). It contains exposure to the dollar, euro, yen, Canadian dollar, Swiss francs, British pound, Australian dollar, New Zealand dollar, Norwegian krone and the Swedish krona.

Among your other options:

• PowerShares DB US Dollar Index Bearish (UDN)
• PowerShares DB US Dollar Index Bullish (UUP)
• CurrencyShares Australian Dollar Trust (FXA)
• Market Vectors Indian Rupee (INR)
• CurrencyShares Swiss Franc Trust (FXF)

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

BRIC ETFs Were Anything But In April

BRIC exchange traded funds (ETFs) showed themselves to be solid in April. Investor interest and enthusiasm for the funds has peaked over the past several years, with outstanding sector-leading performances in 2007.

Richard Widows for The Street researched the BRIC ETFs for the month of April, some of which posted impressive performance numbers.

SPDR S&P China (GXC) was up 17.97% in April, and was the top performer for the month. iShares FTSE/Xinhua China 25 Index (FXI) advanced 17.5% with a net $6 billion in assets.

Brazil fared well with a pair of ETFs: iShares MSCI Brazil Index (EWZ)  up 17.3% and HOLDRs TeleBras (TBH) up 14.2% in April.

First Trust ISE Chindia (FNI) was up 16.6%, as a blend of China and India, and Claymore/BNY BRIC (EEB) was up 11.1%. An honorable mention was given to iPath MSCI India Index (INP), as the ETN gives a hard-to-access passage to India. The fund rose 7.1% in April.

There's still more BRIC exposure to be had, though, both in single-country and broad-based form.

• Market Vectors Russia (RSX), up 3% in April
• SPDR S&P BRIC 40 (BIK), up 9.7% in April
• iShares MSCI BRIC Index (BKF), up 9.8% in April

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

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.

Foreign Currency ETF Offerings to Pour In Next Month

Exchange traded fund (ETF) providers Dreyfus and WisdomTree are teaming up to offer five actively managed foreign currency ETFs next month.

They will include the WisdomTree Dreyfus Euro Fund, Japanese Yen Fund, Indian Rupee Fund, Chinese Yuan Fund and the Brazilian Real Fund. These will be the first of 12 to be launched under the WisdomTree Dreyfus banner. Two others include two U.S. current income funds, reports Mariana Lemann for Ignites.

Later this year, more funds will launch and cover the Australian dollar, British Pound sterling, Canadian dollar, New Zealand dollar, South African rand and South Korean won. Several of these funds will be a first in currency ETFs.

When they launch, they'll join a growing lineup of both currency ETFs and exchange traded notes (ETNs), including:

• CurrencyShares Euro Trust (FXE)
• CurrencyShares Japanese Yen Trust (FXY)
• Market Vectors Indian Rupee (INR)
• Market Vectors Chinese Renminbi (CNY)
• PowerShares DB G10 Currency Harvest (DBV)

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

Rationing Leads to Hoarding of Rice and Possibly ETFs, Too

The commodities craze spread to exchange traded funds (ETFs) awhile ago - now it's reached Sam's Club.

A worldwide rice shortage has led the warehouse unit of Wal-Mart (WMT) to start rationing some types of it, reports Cotten Timberlake for Bloomberg. Where allowed by law, customers are going to be restricted to four bags a visit.

Shrinking supply and rising prices have led to hoarding. Rice is a food staple for half the world, including in China, Vietnam, India and Egypt, countries that have also started restricting sales. Thailand is also considering restricting shipments.

Some of Costco's (COST) stores are putting limits on sales of flour, in addition to those of rice.

The good news is that both stores have extensive distribution systems, enabling them to redistribute supplies.

The rice shortage is just the latest in a long line of commodities that have become more scarce and expensive recently. Rice futures have risen 26% this month. Wheat, corn and soybeans are also at record prices, which has led to riots in Haiti and Egypt.

A spokesman for the USA Rice Federation says the rice shortage should ease up with the June harvest, and may be resolved by the end of 2009.

But if you were mulling a low-carb diet, now might be the time.

Agriculture ETFs are becoming a popular way to hedge those rising prices. Some of them include:

• MLCX Grains Index ETN (GRU): The fund has 46.7% wheat, 35.4% corn, 10.1% soy meal and 7.9% soybeans.  
• Market Vectors Global Agribusiness (MOO): Tracks an index of global companies primarily engaged in agriculture.
• PowerShares DB Agriculture (DBA): Tracks corn, wheat, soybean and sugar futures.
• iPath Dow Jones Agriculture (JJA): Composed of seven futures contracts, including wheat, cotton, soybean oil, coffee and sugar.

Deutsche Bank also issued a line of long/short agriculture exchange traded notes (ETNs) last week:

• DB Agriculture Double Short (AGA)
• DB Agriculture Double Long (DAG)
• DB Agriculture Short (ADZ)
• DB Agriculture Long (AGF)

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.

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%

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

India ETFs Serve As Gateway For Investors

India has always been just out of reach for many U.S. investors, but the newest India exchange traded funds (ETFs) are making it much easier to gain access to this rapidly growing market.

Although the market conditions were less than friendly for the debut of the new ETFs, they are a welcome and long-awaited addition to the emerging markets list. WisdomTree India Earnings ETF (EPI) is down 13.1% since its launch on Feb. 21, while the PowerShares India Portfolio ETN (PIN) has dropped 6.1% since it bowed on March 5.

The benchmark Bombay Stock Exchange Sensex stock index is down 11% since Feb. 21.

These two funds might share the "India" name, but their underlying indexes were constructed differently.

Will Swarts for SmartMoney explains that short-term volatility associated with emerging markets should not disillusion investors. The uncomplicated and inexpensive access to India is far more important.

India's gross domestic product (GDP) has grown an average of 8.8% over the last five years, compared with China's 10.6%. And while China is heavily dependent on exports, India has plenty of internally focused growth.

China's Inflation Creates More Opportunity For Other Emerging Market ETFs

China is facing an inflationary trend, and exchange traded funds (ETFs) from competing countries might be able to gain an edge against one of their biggest competitors. Thus far, Chinese growth has relied upon low prices with high top-line sales growth. Low-cost Chinese imports allowed a way to keep inflation at bay.

Carl Delfed for Forbes says the deflationary impact of China on world markets is now becoming an inflationary red flag with implications for global investors. Wages have begun an upward climb, energy is expensive and food prices and demand are exploding. The Chinese Consumer Price Index (CPI) was up 8.7% in just one year.

Delfeld recommends a lean toward countries that are net exporters of commodities instead of net importers like China. iShares MSCI Brazil (EWZ) or the iShares MSCI Hong Kong (EWH) present better opportunities than the iShares FTSE/Xinhua China 25 Index (FXI) ETF.

China's inflationary pressures will create opportunities for other emerging market countries to pick up the slack, such as India. India has two ETFs right now: the PowerShares India (PIN) and Wisdom Tree India Earnings (EPI).

This is an ever-evolving situation, so keep an eye on it. Once these areas head above their trend lines, they could be worth a look.

Barclays Throws Hat Into Foreign Currency ETN Ring

Barclays Global Investors is set to roll out three new exchange traded notes (ETNs) that will track currencies in Asia, the Middle East and emerging markets. The ETNs have already acquired $150 million during the month ahead of their launch.

Jesse Emspak for Investor's Business Daily says the new ETNs are:

• Asian and Gulf Revaluation: This tracks an index Middle Eastern and Asian currencies tied to the U.S. dollar. Included are the yuan, Hong Kong dollar, Saudi Arabian riyal, Singapore dollar, and United Arab Emirates dirham.
• Global Emerging Markets Strategy: Tracks 15 emerging markets countries' currencies, including Asia, Latin America and Eastern Europe, through money markets.
• Intelligent Carry Index ETN: Follows the 10 most liquid currencies in the world, designed to give market-neutral returns.

These ETNs are just in time to join two other currency ETNs that have recently launched: Market Vectors Indian Rupee (INR) and Market Vectors Chinese Renminbi (CNY). CurrencyShares by Rydex was the first to cover currency through exchange traded products.

Bear in mind, the IRS has done away with the tax breaks on foreign currency ETNs. A ruling on other types of ETNs is awaited sometime this year.

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

New ETNs Track Chinese and Indian Currency

Two new exchange traded notes (ETNs) will give access to the Chinese and Indian currency, the first of their kind.

The funds, Market Vectors Indian Rupee (INR) and Market Vectors Chinese Renminbi (CNY), are issued by Morgan Stanley, reports Business Wire.

Both funds track the performance of rolling investments in short-term forward contracts for their respective currencies.

Up until now, the main path for investors who wanted currency exposure was through Rydex's line of CurrencyShares. The advent of these new ETNs are adding to the convenience of currency investing.

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

Emerging Market ETFs Could Be Worth a Look In Rough Times

Is it time for exchange traded fund (ETF) investors to take a trip to emerging markets - or anywhere other than the United States for now?

While some stocks are beginning to stir and the markets have been up so far today, thanks to optimism about the Federal Reserve's most recent rate cut, economists are still ready for a slowdown within the U.S. economy for the latter part of 2008.

The problems within the financial markets, in particular, are spreading into the broad stock market and are causing problems that will not go away overnight. One Moody's economist says the United States is 100% in a recession.

If that's the case, it could be time to seriously look elsewhere until this mess plays out.

Economists are favoring the long-term prospects of Brazil, China and India, reports Murray Coleman for Index Universe. China, in particular, has taken a real hit lately, but the prevailing sentiment is that it's not going to be this way forever. Mexico is showing signs that it's emerged from the U.S.' shadow. Russia's influence in Europe's emerging markets should also be watched.

If you're thinking emerging markets might be right for you, you've got many options once the funds move above their trend lines (200-day moving average):

• iShares MSCI Brazil Index (EWZ), down 4.6% year-to-date
• iShares MSCI Mexico Fund (EWW), down 3.1% year-to-date
• Market Vectors Russia (RSX), down 9.1% year-to-date

India ETFs Might Focus on the Same Country, But That's Where Similarity Ends

Two new exchange traded funds (ETFs) finally give investors the passage to India they had been looking for.

The country has been in the spotlight lately, with its 9% annual GDP growth and strong currency and a presence that demands some attention, reports  Roger Nusbaum for TheStreet.

The newest additions, the  WisdomTree India Earnings (EPI) and PowerShares India Portfolio (PIN) might represent the same market, but they're vastly different. EPI is fundamentally weighted with 150 companies while PIN is market-cap weighted, focusing on 50 companies.

EPI gives 41% to energy and materials, while PIN allocations 37% to the sectors. EPI gives less to telecom, 17%, while PIN gives 26%. PIN's heavier weighting in technology is seen as more of a bet on what India can provide to the world. Did you know that the "brains" of the iPod were invented by an Indian company, who then sold it to Apple (AAPL)?

EPI has had better past performance because of its heavier weighting in resources, but any large commodity correction will hit EPI harder then PIN, Nusbaum says. EPI focuses more on internal growth, which appears to be a better choice.

Earlier this week, iShares announced that it has filed a registration form with the Securities and Exchange Commission (SEC) for yet a third India ETF.

India will add volatility to any portfolio, and whichever fund you choose, make sure it fits in with your investment goals.

Even In These Markets, You Can Still Find ETF Movers and Shakers

Yesterday, the markets delivered outstanding performance and some exchange traded funds (ETFs) finished up in the double digits.

But one good day doesn't mean we're out of the slump yet. It's still time to take a defensive stance with your portfolio and make sure you've got that exit strategy firmly in place. But while it seems as though everything is in a downward spiral, but there are still some buying opportunities, believe it or not.

At our asset management firm, we track a list of about 100 ETFs and review it daily to see how things are performing and if there are any trends emerging. Of particular interest to us is which funds are above their 200-day moving averages. We never buy something sitting below that line.

Once we own an ETF, we keep an eye on it to make sure it's still above that line and continuing to perform. Once it dips below the trend line or falls 8% off its high, we sell. No ifs, ands or buts. A sell strategy from which emotions are entirely removed is the only kind that will benefit any investor.

It can be hard to let go of a little mover and shaker you've always had that soft spot for, but if you want to protect your money, you have to. It's like your parents always said when they were grounding you every other week: "This hurts me more than it hurts you." But sometimes it has to be done for everyone's good.

There are no guarantees that when you let a fund go, it's not going to turn around and deliver the numbers again. But that doesn't mean it won't, either. It's exactly why you have to remain as stoic as possible and stick to the plan and rationalize nothing.

There are a number of ETFs sitting well above their trend lines. Take a look at them, keep an eye on them and if they fit into your overall portfolio and are moving in an overall upward direction, they could be well worth considering:

• iShares MSCI Taiwan Index (EWT), 6.2% above
• Claymore/BNY BRIC (EEB), 5.9% above
• iShares S&P Latin America 40 Index (ILF), 10.1% above
• iShares MSCI Brazil Index (EWZ), 13.7% above
• Market Vectors Russia (RSX), 8.1% above
• iShares S&P GSSI Natural Resources (IGE), 6.8% above
• PowerShares DB Commodity Index Tracking Fund (DBC), 27.7% above
• iShares S&P GSCI Commodity-Indexed Trust (GSG), 23.9% above
• United States Oil Fund (USO), 28.3% above
• iShares Dow Jones US Oil & Gas Exploration Index (IEO), 14.4% above
• Energy Select Sector SPDR (XLE), 6.7% above
• iShares Dow Jones US Energy (IYE), 6% above
• Market Vectors Steel (SLX), 14.4% above
• iShares COMEX Gold Trust (IAU), 21.2% above
• streetTRACKS Gold Shares (GLD), 21.1% above
• Market Vectors Gold Miners (GDX), 16.5% above
• iShares Silver Trust (SLV), 30.3% above
• SPDR S&P Metals & Mining (XME), 11.5% above
• PowerShares DB Base Metals (DBB), 8.5% above
• PowerShares DB Agriculture (DBA), 30.8% above
• Market Vectors Global Agribusiness (MOO), 11.4% above
• CurrencyShares Euro Trust (FXE), 6.9% above
• CurrencyShares Swiss Franc Trust (FXF), 10.2% above
• CurrencyShares Japanese Yen Trust (FXY), 8.5% above

For full disclosure, some of Tom Lydon's clients own shares of EWT, IEO, DBB and DBA.
Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

Which ETFs Are On First Today?

After a big day for the markets, you can't help but wonder which exchange traded funds (ETFs) stood out head and shoulders above the rest.

If you scroll through ETF Screen's breakdown of fund performance, you'll see that most ETFs ended higher in trading today.

Coming out way ahead are:

• ProShares Ultra Short Financials (UYG), up 14.4%
• ProShares Ultra Real Estate (URE), up 12.6%
• ProShares Ultra Basic Materials (UYM), up 11.6%
• iShares FTSE NAREIT Mortgage REITs Index Fund (REM), up 10.7%
• Claymore/AlphaShares China Real Estate (TAO), up 10.3%
• iPath MSCI India ETN (INP), up 10.2%
• iShares FTSE-Xinhua China 25 Fund (FXI), up 9.6%

The Ultras didn't do anything special to come out on top today, but instead, they benefited from the big jump financial ETFs experienced today. They illustrate the potential to do that much better when the market is faring well - and today, they did.

ETFs and Your Wallet Feel Those Grocery Store Prices

 

Have you ever wondered what the drought in Australia has to do with your dinner table and your exchange traded funds (ETFs)?

In every aisle, prices at the grocery store are higher. From chicken (up 10% retail) and milk (up 20%) to eggs (up 30%) and tomatoes (up 25%), according to the Bureau of Labor statistics.

The unfortunate drought in Australia has increased demand and pressure for U.S. farmers, while demand for ethanol has taken over most crop land that was used for soybeans.

Higher fuel prices are making it expensive to grow crops and get them to retail markets. Corn inflation has turned meat prices higher and bread (grain) is experiencing rising costs as well.

According to Karen Robinson Jacobs for the Dallas Morning News, many analysts are expecting consumers to keep paying higher prices for food, which accounts for 13% of household spending. After all, people gotta eat. The Department of Agriculture forecasts food prices will rise 4% this year alone.

But that means that while consumers spend more on food, they'll have less disposable income. Consumer spending is what drives the economy. Without that, it's just wheel-spinning.

The growing middle class in China and India means more people will be eating meat while the Australian drought has narrowed grain and dairy exports to Europe and Asia, cutting the global supply and causing more countries to turn to the United States for food.
 
To access the rising cost of a trip to the grocery store, look at these funds:

• Market Vectors Agribusiness ETF (MOO)
• PowerShares DB Agriculture (DBA)
• PowerShares Dynamic Food & Beverage (PBJ)
• PowerShares DB Commodity Index Fund (DBC)
  

Three's Company With India ETFs

First, WisdomTree and PowerShares launched their India exchange traded funds (ETFs). Now iShares wants to join in the party, too. It filed a registration form with the Securities and Exchange Commission (SEC) last week.

iShares will have its work cut out, because the first fund to launch usually benefits from the pent-up investor demand, says Jeffrey Ptak for Morningstar. The WisdomTree India Earnings Fund (EPI), launched in February, was the first India ETF. Right out of the gate, it traded a million shares, reports Mariana Lemann for Ignites, and has since garnered assets of $85.7 million. The PowerShares India Portfolio (PIN) launched last week.

The iShares India will track the S&P India Nifty 50 Index, which tracks the equity performance of the top 50 companies by market cap that trade in the Indian market. Barclays Global Investors will aim for a 95% correlation to the index.

An iShares fund could gain a competitive advantage in pricing: the expense ratio for WisdomTree's fund is 0.88%, while the PowerShares fund is 0.78%. The average expense ratio for the type of fund iShares will create is 0.61%.

The Truth About Surging Oil and ETFs

Exactly why are the oil prices surging and sending related exchange traded funds (ETFs) through the roof?

There are two European theories on this. One comes from Chris Skrebowski, the editor of Petroleum Review, and the other from Barclays Bank PLC.

Barclays supports the idea that demand is increasing steadily from China, Saudi Arabia and India - in that order - and is expected to keep going. Demand in 2008 will grow 1.7%, up from 1.2% in 2007. They don't believe that economic weakness in the United States and possibly in the European Union will be enough to dent the growth, either.

Jim Kingsdale for Seeking Alpha reports that another theory from Skrebowski reinforces Barclays point-of-view, where we now have an oil world where the impact of high oil prices is only really felt in the Organisation for Economic Co-Operation and Development (OECD) countries, where demand is already falling.

Meanwhile, OPEC reports that markets are well supplied, but not everyone agrees. Are OPEC countries in a position to increase exports or are they covering an inability to increase supplies by reporting that action is not necessary?

We'll have to wait for the answer until fall, as OPEC has adjourned until September.

PowerShares Launches Its India ETF Today

PowerShares launched its India exchange traded fund (ETF) this morning, and it's trading on the NYSE Arca.

The PowerShares India Portfolio (PIN) will join the WidsomTree India Earnings Fund (EPI) as the two ETFs dedicated to gaining exposure to India, one of the world's fastest-growing emerging markets. PowerShares says it has taken measures to address the country's restrictions on foreign investment.

PIN will hold a basket of 50 Indian stocks that represent the largest companies listed on the two major Indian indexes, the Bombay Stock Exchange and the National Stock Exchange. The fund is allocated primarily in large-cap stocks: 72.2% are large-cap growth and 23.6% are large-cap value. Mid-cap growth is 2%, and mid-cap value makes up 2.3%.

Across the sectors, PIN is most heavily allocated in energy: 25.2%. Financials make up 17.9%, information technology is 14.2% and telecommunication services is 11.4%.

All Eyes on Two New India ETFs

Two India-focused exchange traded funds (ETFs) have been locked in a fierce race to the starting line, and one of them finally reached it today.

The WisdomTree India Earnings Fund (EPI) began trading on the NYSE Arca this morning, trading a million shares straight out of the gate. On Monday or Tuesday, PowerShares will follow up with its own India ETF: the PowerShares India Portfolio (PIN).

There's huge demand for an India ETF. For a time, there was the iPath MSCI India Index (INP) investors could use to get exposure. Once India changed up its foreign investing rules, the ETN was pretty much down for the count as no new shares were being issued.

While the two ETFs they might have one country in common, their underlying indexes are constructed very differently.

WisdomTree's fund, as its name implies, is based on an earnings-weighted index of 150 companies. It's made up of companies listed on the Indian National Stock Exchange or the Mumbai Stock Exchange that issue ordinary common shares that are eligible for foreign ownership. Each company has a minimum $200 million market cap, $5 million in earnings in the fiscal year before the screening date and a price-to-earnings ratio (P/E) of at least 2. Each September, the index is rebalanced.

Because of India's restrictions on foreign investment, the index's creators aimed to build a broad index. The dividend payout ratio and dividend yield in the India stock market are among the lowest in the developing world, thus the decision to go by earnings.

The PowerShares fund, on the other hand, used a patent-pending proprietary method to build an index "as investable as possible" while getting around the country's restrictions.

It's made up of 50 of the largest Indian stocks, weighted by "IndusCap," a methodology that specifically addresses the foreign ownership limits. PowerShares believes it will deliver a more accurate representation of the capitalization in each company than market-cap or float-weight.

Who will come out ahead as the top performer? Which index will work best with India's complicated rules regarding foreign investing? Only time will tell on this one.

Both Bellies and Agriculture ETFs Benefit From Whole Grains

Whole grains are good for you, and agriculture exchange traded funds (ETFs) could be, too.

The planting season is just around the corner. With that is the result of a study showing that people can lose weight by loading up on whole grains, reports Reuters Health. The grains are heart-healthy and help dieters shed excess belly fat. We Americans love finding new ways to battle the bulge, so perhaps a run on whole grain products such as brown rice, barley and oatmeal is around the corner.

The results of the study are perfect timing. The PowerShares DB Agriculture (DBA) is weighted in corn, wheat, soybeans and sugar. Michale Ferrari for Seeking Alpha reports that more wheat is being planted in response to the growth in demand for the product, which is edging out corn and soybeans.

Market Vectors Global Agribusiness ETF (MOO) will feel the effects of this push and pull between the various types of agriculture.

As for the agriculture situation around the world:

• In South America, heavy rains and cooler temperatures will benefit corn and bean crops. The rest of the month could remain dry in Argentina, which will hurt the soybean crop.
• In the EU, a cool, dry week shouldn't have a negative effect on dormant EU oilseeds.
• India's outlook is dry, and as the oilseed pods are being set, they could use more moisture.
• Thanks to heavy snow and freezing rain in China, wheat and oilseed crops are going to be lost in the northern and easter regions. Recent estimates place more than 4 million hectares of land in the "suffered significant damage" category.

When Will ETF Industry Cotton to Demand?

Agriculture is all the rage right now, but where is that cotton exchange traded fund (ETF)?

Demand for this soft commodity hasn't dropped. You're probably wearing some of it right now. In fact, rapidly growing middle classes from emerging countries such as China, India and Latin America are buying more jeans, t-shirts and hats, reports Money Morning.

Because of the popularity of agriculture, farmers are seeing dollar signs and using their farms for profitable crops such as corn and soybeans, particularly after the ethanol demand put more pressure on these crops.

According to the National Cotton Council, U.S. growers are going to decrease the acres of cotton growing land around 14% less than in 2006, and the 2008 decrease will be lower. Growing demand and decreasing production means cotton is only likely to become a lot more pricey.

China is wasting no time in back-stocking the resource, and has purchased while cotton is still cheap. China is so serious about cotton that it has created its own cotton futures market.

While the London Stock Exchange has a cotton-specific ETF, most U.S. investors cannot tap into the commodity just yet.

While you're waiting for such an ETF to appear, you can at least follow the booming agriculture sector with Market Vectors Agribusiness (MOO) or PowerShares DB Agricultural Fund (DBA).

The Dow Makes a Rare Component Change, ETFs Will Change Along With It

It doesn't happen often: Dow Jones announced they will be changing the composition of the Dow Jones industrial average, changing the exchange traded funds (ETFs) that track this index.

Two component stocks will be replaced: Bank of America Corp. (BAC) and Chevron Corp. (CVX) will replace Altria Group Inc. (MO) and Honeywell international Inc. (HON), effective as of Feb. 19.

These are the first changes made since April 8, 2004, when 3 stocks out of 30 were replaced.

A lot of thought goes into any changes in the index:

• Altria, formerly known as Philip Morris Cos., had been on the index since Oct. 30, 1985.  Restructuring is taking place at the company, which will ultimately result in a much narrower and smaller company.
• Honeywell is dropped because it's the smallest of the industrials in terms of revenue and earnings.
• Any changes cause a thorough review of all the stocks, and the financials industry was under represented, hence the addition of Bank of America.
• The oil and gas industry is important to the world's economy, as well, and it was felt that another representative was needed to join Exxon Mobil Corp. (XOM).

The "Dow" was created by Charles Dow as a 12-stock index in May 1896, and is the best-known stock market barometer in the world. Today, it holds 30 companies, weighted by their price.

The component changes will change the look of the Diamonds Trust Series 1 (DIA) and Ultra Dow 30 ProShares (DXD). Now is a good time to look at your portfolio and make sure that with these additions, you're still diversified enough.

Infrastructure ETFs Could Build Up in Weak Economy

Weakness in the economy isn't the only thing dogging exchange traded funds (ETFs) as well as both developed and emerging markets: the infrastructure is hurting, too.

Scott Jagow for Marketplace reports that one only need to look around the world to see the evidence: railway disasters in China, power outages in South Africa, Internet disruptions in India and the Middle East. Not to mention the bridge collapse in Minnesota last August.

While emerging markets have been growing and building skyscrapers, factories and commercial properties, they've been neglecting their infrastructure.

Marketplace Economic Correspondent Christ Farrell says that this is actually a silver lining to all the weakness in the economy: there's going to be infrastructure investment over the next couple years, not just just in growing economies, but in the United States, as well. Our highway system was built, he says, when Elvis was still shaking his pelvis.

Farrell says it's what governments naturally do when the economy slows: they want to boost spending and get people employed. The classic way to do it is borrow some money and put it into infrastructure.

If Farrell's prediction proves true, two infrastructure ETFs could reap the rewards:

• SPDR FTSE/Macquarie Global Infrastructure 100 (GII)
• iShares S&P Global Infrastructure Index (IGF)

BRIC ETFs Caught In Gap Between Perception and Reality

The consistency of economic strength is still being determined among investors of BRIC (Brazil, Russia, India, China) exchange traded funds (ETFs).

Pierre Daillie for Seeking Alpha says that at best, the general sentiment surrounding emerging markets has remained skeptical, and this is why the market has been absorbing the BRIC investment story with a grain of salt. Is their credit worthiness being overlooked?

Right now, emerging markets have a current account surplus of $700 billion, and longer term surpluses of $3 trillion are found on balance sheets of BRIC countries in the form of Foreign Exchange and trade surpluses.

BRIC countries have been financing the debt and driving the growth of the G7 countries for the last 5-7 years. This makes their relationship a symbiotic one.

Furthermore, the idea of emerging markets being highly correlated to U.S. markets has been overplayed, Daillie says. The correlation is there, but it is low, at .30-.40. Emerging markets will sustain, and some of their current growth and inflationary pressures may benefit from a U.S. slowdown.

The four of these are "total" emerging markets funds that give broad-based exposure to any portfolio:

• iShares MSCI Emerging Markets (EEM)
• PowerShares FTSE/RAFI  Emerging Markets Portfolio (PXH)
• SPDR S&P Emerging Markets (GMM)
• Vanguard Emerging Markets (VWO)

Coal ETF Won't Benefit From Plant for Now, But It Could from Global Demand

News that could affect the coal-focused exchange traded fund (ETF) involves the FutureGen project, in which the carbon dioxide emissions from coal power plants will be re-directed away from the atmosphere.

Coal-fired power plants are one of the biggest energy producers worldwide and coal is more abundant than oil and is far cheaper. The drawback is that the Bush Administration pulled the plug on pursuing the plan in which a commercial-scale coal fire plant would emit no CO2 into the atmosphere, a gas that contributes to global warming.

Andrew C. Revkin for The New York Times reports that the plan was been put off when the budget doubled from the original $1.8 billion. More than 70% of the original bill was reworked and eventually the administration completely re-vamped the project. New plans, approvals, designs, budget hassles and construction could take years.

The Market Vectors Coal (KOL) ETF won't see a drop in returns because the plant was put on hold, however, it can't benefit from going forth with FutureGen's idea, at least not at this time. A switch from oil to coal may not be far off, but more research must be conducted.

Meanwhile, David Khani, FBR managing director and energy analyst, appeared on CNBC's Squawk Box yesterday to talk about the commodity. The video can be viewed here. Khani says that regardless of what happens in the United States, coal demand abroad is outpacing the supply - so much that 20% of Indian coal-fired plants are currently without coal.

The Dow Jones U.S. Coal Index illustrates how the price if coal has shot up in recent weeks.

Two New India ETFs Should Hit This Month

The challenge for PowerShares will be getting around India's rules about foreign stock ownership with its new India-focused exchange traded fund (ETF).

Instead of traditional ETFs, which use derivatives and/or notes that provide indirect exposure, the PowerShares India Portfolio (PIN) will provide direct exposure by owning local equities, PowerShares says. It will get around India's restrictions through a proprietary formula, according to InvestmentWires.

The index is designed to track the performance of the equity markets as a whole with representation in various sectors: information technology, health sciences, financial services, heavy industry and consumer products. It's expected to begin trading in mid- to late February.

There isn't going to be just one India ETF, though: WisdomTree is launching one as well. The WisdomTree India Earnings (EPI) fund is expected to launch early this month. The fund will consist of 150 locally listed companies, reports Index Universe for Seeking Alpha, and only includes companies that were profitable in the previous reported 12 months.