“We worked with independent experts to create an objective list of ETFs focused on long-term investing. Morningstar Associates considered all ETF providers, and neither TD Ameritrade nor Morningstar Associates will receive any incentive from those firms, for inclusion on the list,” said Fred Tomczyk, president and chief executive officer of TD Ameritrade. “We’re taking a better and more client-focused approach to helping our clients build long-term portfolios.”

The new ETF Market Center on TD Ameritrade’s site features enhancements focused specifically on ETFs, including a powerful ETF screener.  Morningstar Inc. has also provided ETF data, independent research, and commentary so that investors can learn more about ETFs and determine whether they fit their needs.  The tools are designed to help investors create diversified portfolios oriented for the long-term.

The products included in this program are an impressive lineup of both ETFs and ETNs from a wide range of sponsors including iShares, SPDRs, Vanguard, PowerShares, Van Eck, WisdomTree, Barclays, and Deutsche Bank (complete list of Ameritrade commission-free ETFs).

Ever since Schwab entered the ETF arena with commission-free ETFs, we have been predicting the arrival of more commission-free ETF Supermarkets, similar to the spread of no-transaction fee mutual fund supermarkets in the 1990s.  Here is a quick summary of the brief history of commission-free ETFs:

• Schwab Creates Watershed Event with Commission-Free ETFs (11/03/2009)
• The 26 Commission-Free ETFs at Fidelity (2/03/2010)
• Vanguard Enters ETF Free Trading War (5/04/2010)
• Launch of TD Ameritrade ETF Supermarket (10/08/2010)

In less than a year we have gone from no one offering commission-free ETF trading to now having four major firms offering some level of the service.  Today’s launch by TD Ameritrade is the most encompassing of the four.

To trade commission-free ETFs at TD Ameritrade, you must be enrolled in the program.  Investors need to be aware that any ETFs purchased through the commission-free program that are subsequently sold within 30 days, a short-term trading fee of $19.99 will be assessed.  Additional information: 30-day hold period.

Disclosure covering writer, editor, and publisher:  Our money management affiliate, Capital Cities Asset Management, uses TD Ameritrade as one of its independent custodians.  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

We see here a good example of first-mover advantage in ETF marketing. GLD came out in November 2004, and as the first such product made quite a media splash at the time. IAU came along a few months later, but by then the ticker GLD was firmly imprinted in trader’s minds. It doesn’t hurt that the letters G-L-D spring to mind a lot faster than I-A-U when you want to buy G-O-L-D.

While iShares is still the leader in overall ETF assets, new owners BlackRock apparently want to dominate each individual segment as well. To that end, the firm recently announced a 10-for-1 split in IAU shares. The split will be effective after the close on June 21, 2010.

As in stocks, ETF share splits do nothing to directly increase the value of your investment. Instead of owning one $120 share, you will have ten $12 shares. So why is iShares doing it? The lower price may enhance liquidity, since smaller players will be able to take advantage of the creation/redemption mechanism. On the other hand, large investors who typically pay trading commissions at a per-share rate will actually be encouraged to abandon IAU for GLD – which will still have a share price in the $120 range.

Maybe I am missing something here, but to me it looks like iShares is flailing. Someone at the top is annoyed to be so far behind SPDR in this asset class, and they can’t figure out any other ways to distinguish their offering. The supreme irony is that if the split does somehow help IAU attract assets, SPDR can simply execute the same kind of split in GLD.

Disclosure covering writer, editor, and publisher: Long GLD. No other positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

Take two ETFs designed to track the S&P 500. SPDR S&P 500 Index ETF (SPY) has an expense ratio of 0.09% as does its lesser known rival, the iShares S&P 500 Index ETF (IVV). SPY, the original ETF, is more widely held than IVV. In fact, SPY is bigger than any other ETF in the world having at more than $70 billion. SPY is also very liquid, trading nearly 165 million shares on an average day.

IVV, on the other hand, has “only” $21.2 billion in assets and trades “only” 3.95 million shares per day. It’s big and active, but SPY is even more so. So one might prefer to invest in SPY, right? Not so fast. In news that is likely to have long-term ramifications on the ETF industry, brokerage giant Fidelity announced commission-free trading for 25 iShares ETFs. IVV is one of those ETFs. SPY is not.

Commission-free ETF trading was pioneered by Schwab for its own proprietary ETFs. Fidelity’s move is a response to competitive pressure – and a good one, since iShares is one of the largest ETF issuers in the world. Plus, the 25 iShares ETFs (including IVV) that Fidelity is offering commission-free gives investors many more choices than at Schwab.

Many of Fidelity’s 12 million retail customers could see a big reduction in their trading expenses as a result of this change. The cost-savings could make the choice between IVV and SPY very easy for many investors. The impact of the Fidelity announcement was immediately visible during Tuesday’s trading session. Shares of Fidelity rivals such as Schwab (SCHW), TD Ameritrade (AMTD) and E*Trade (ETFC) all traded lower on the news.

While a brokerage price war doesn’t testify to the future performance of any particular ETF, this move by Fidelity does make choosing between two S&P 500 ETFs that much easier. If you have an account at Fidelity and want to buy the S&P 500, use the commission-free choice: IVV.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned. Our affiliate, Capital Cities Asset Management, uses Fidelity Brokerage Services and Ameritrade Institutional as custodians and brokerage for client accounts.

A recent addition to the tech lexicon has the kind of game-changing potential that tech investors crave: cloud computing.  We previously discussed cloud computing and since then this new technology gained more steam.

Cloud computing tries to make life easier for businesses and consumers.  The premise is the use of remote servers to allow users to access their favorite and most-used computer applications from anywhere.  Old-timers may notice a resemblance to the mainframe time-share systems of yesteryear.  In many respects, it appears that the computer services delivery model has come full circle:  from centralized to desktop and now back to centralized.

Cloud computing helps businesses save money on tech expenditures.  A 2009 study showed that companies using cloud computing were able to reduce their IT budgets by 18% and cut their data center energy costs by 16%.  In this economy the ability to trim costs is crucial, especially for the biggest companies.

Last week tech giants Hewlett-Packard (HPQ) and Microsoft (MSFT) announced a $250 million cloud computing agreement.  That news was followed by an announcement that International Business Machines (IBM) and Japan-based Panasonic entered into the largest cloud computing pact to date.  Soon 300,000 Panasonic employees, partners and suppliers will be using IBM’s LotusOne cloud computing technology.

Internet search giant Google (GOOG) already has a significant footprint in the cloud computing arena, and Intel (INTC), the largest semiconductor maker in the world, has declared its intent to seek profits from the cloud.  Throw in VMWare’s (VMW) recent acquisition of Zimbra from Yahoo (YHOO), a clear cloud computing play.  Obviously many of tech’s biggest names see tremendous value in the future of cloud computing.

Even though cloud computing is relatively new, industry participants are already eying the next frontier: mobile cloud computing.  Analysts estimate the mobile cloud computing market could feature 240 million business customers and be worth as much as $5.2 billion by 2015.  With smartphones expected to outsell personal computers with the next year or two, it’s no surprise that cloud computing vendors are focusing on the mobile market.  Cloud computing should generate impressive returns for investors in the coming years, even though there isn’t a cloud computing ETF yet.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

In October, we discussed how jobs numbers could be declining while the market was rising. Our humble conclusion related to companies cutting operating expenses in order to show better-than-expected numbers to investors.  Improved efficiency rather than top-line growth was driving earnings.  There could be other reasons, though. Two weeks ago Pimco’s co-CEO Mohamed El-Erian pointed out how the government stimulus package is continuing to work its way through the economy.  This is the reason we’ve seen a steadily appreciating market since last March. El-Erian said, “We’re on a sugar high.  It feels good for a while but is unsustainable.”

No doubt stimulus money is affecting the job market. As late as November, the White House boasted saving 640,000 jobs by stimulus spending so far.  Though we could debate their numbers – and Washington figures usually can’t pass muster of an independent audit – injecting money into any business sector will usually be a healthy thing.  The current 10% might be higher had not the Feds pumped more into the economy.

The better question relates to you, dear investor.  What do you invest in while unemployment is so high?  Keep in mind, the US economy has lost 7.2 million jobs which is significantly greater than the amount of jobs cut during the previous four economic downturns.  Rapid recovery will be more difficult with this sort of weight on the economy.  We’re not exactly dealing with an-early 80’s economy with $1 trillion in national debt.  Instead, we are shouldering 12-times the debt load with a more service-based economy.  When job recovery happens, it doesn’t appear that it will look the same as it did in the 80’s or 90’s.  That’s the broad view.

Here’s a better picture of unemployment by the Bureau of Labor Statistics’ sectors.  This may help you see where businesses are willing to invest and where you might want to invest (or avoid) in US stocks or funds.

Unemployment Rate by Sector (as of 12/31/09):

New security measures resulting from the thwarted Detroit bombing promise to make flying even more of a hassle than it already is. This comes at the same time as the economic slowdown is changing a lot of vacation plans. Competition for passengers is brutal. If ever there were a time not to be in the airline business, now would seem to be it.

Why, then, are airline stocks performing so well lately? Even after a small retreat since the Christmas Day incident, Claymore/NYSE Arca Airline ETF (FAA) has still more than doubled from its March 2009 low. How can this be?

I do not believe this is simply a result of economic recovery hopes. The more likely answer is that airlines are, like banks, a government-protected industry. They employ a lot of people, directly and indirectly, so the politically expedient move for Washington is to do whatever it takes to keep them in business.

Imposing ever-greater security measures might seem inconsistent with this goal. I have a theory there, too: the security measures are not really security measures. The real goal of all the screening and searching is to create the appearance of security, thereby reassuring passengers and keeping the airlines in business.

The fact is that any terrorist who wants to create havoc doesn’t need to get on a plane to do it. The same amount of explosive can kill just as many people and send just as big a message in any number of places. Extremist groups are well aware of this. So are airlines and their regulators. Even if it were possible to make the airliners 100% secure (and I’m not sure it is, short of stripping the passengers naked and giving everyone a body cavity search), terrorists would simply find new targets.

This being the case, major airlines are probably just as safe as major banks, and for similar reasons. At some point the bailouts and protection will stop working, but that point seems far in the future for now.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

Part of the tech gain is related to how new media companies are categorized. Some of the stocks that make up the sector probably don’t belong there. Companies like Google (GOOG), Ebay (EBAY), and Mastercard (MA) are considered tech stocks. The first two inherited the space because they are more internet-based than other companies. However, Google is more like a giant newspaper that gets its revenue from advertising. Like other media companies, GOOG might fit better in the Consumer Discretionary group. Ebay is an auction house – same thing. Mastercard is a credit car company but for some reason is not listed as a Financial. Yet all three companies contributed to the dramatic rise of the sector this year. Technology is more diversified than it looks.

Another Consumer Discretionary-like stock may soon be added to Technology sector: Facebook. Although not yet public, Facebook is heading toward an IPO. In September, Facebook announced it was cash-flow positive, making enough money to cover the expenses of its 300 million users. This is more than can be said for Amazon (AMZN), which had negative cash-flow for years after going public.

Facebook is a a social media company. For those not yet in the club, Facebook allows users to build personal web pages and connect to “friends” in the network. According to Alexa.com, Facebook is now the 2^nd most visited website on the planet – just behind Google. It’s big, it’s growing, and it’s almost surprising that it took so long for the company to make money.

In September, we told you how to buy a few other tech stocks in the media space. Today, we offer another way to get into social media before Facebook’s IPO. Last year, Facebook started allowing employees to sell stock. This helped open a secondary market for their pre-IPO stock. If you want to buy Facebook stock before their IPO, check out two sites that specialize in these sorts of transactions: Sharespost & SecondMarket. This isn’t a recommendation, just a tip. Buyer beware.

Disclosure compliant with FTC 16 CFR Part 255 covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

Arresting a billionaire or two must have seemed like a good way to get started.  Earlier this year the SEC went after Allen Stanford, who like Madoff operated unmolested for years.  Now they have Raj Rajaratnam in handcuffs for alleged insider trading.

Rajaratnam, if you haven’t heard of him, is the founder and head of a large hedge fund firm called Galleon Group.  (In hindsight, the pirate-looking ship photos on their web site might have been a clue something was up.)  He was recently listed in Forbes magazine as the 559th richest person in the world with a net worth of $1.3 billion.  He is charged along with several others, including executives at Intel, IBM and McKinsey & Company.

I realize the wheels of justice turn slowly.  However the fact that the SEC has been wiretapping Rajaratnam’s cell phone since March 2008 and has only just now arrested him makes me wonder what they’ve been doing all this time.  I also wonder why someone who is already a billionaire would get involved in a criminal scheme worth only $20 million.

Meanwhile, on a surely unrelated note, the SEC has hired a 29-year-old former Goldman Sachs employee to be the Chief Operating Officer of its Enforcement division.  According to a Bloomberg story, Adam Storch will be charged with making the unit more efficient.

Some will decry the ever-revolving door between Washington and Goldman Sachs, but I will give Mr. Storch the benefit of the doubt along with this suggestion:  When one of your staff attorneys investigates Bernie Madoff and finds nothing wrong, don’t give her the highest possible performance rating and don’t promote her to New York branch chief.  Neither act made the SEC’s enforcement efforts any more efficient.

Over $204 billion in TARP funds have been distributed to 600 different financial institutions.  The initial controversy surrounding TARP related to larger financial institutions using taxpayer funds to purchase faltering banks. The money may not have led directly to the Wachovia, Washington Mutual, or Countrywide purchases, but JPMorgan Chase (JPM), Wells Fargo (WFC), and Bank of America (BAC) certainly found it easier to loosen their purse strings for acquisitions as a result.

What is probably not so well-known is how smaller banks actually used TARP money for its intended purpose:  to shore up their balance sheets and stay solvent. According to CNNMoney.com, roughly two-thirds of the TARP money went to community banks. Community banks have traditionally eschewed Federal assistance. But when times turned tough, a little help from Uncle Sam was welcome.

Last Thursday Treasury Secretary Timothy Geithner reminded Congress how smaller banks are faring in this economic crisis…and why:

“We’re a country of 9,000 banks, not just 20 banks. Fewer every day. But that’s sort of the necessary process of restructure and repair that we’re going through. And many of those banks came into this crisis with more capital than the big banks held, but many of them also had more concentrated exposure to commercial real estate and real estate.”

As Geithner might say, overexposure to real estate made community banks more vulnerable in this environment. That’s why we’re still staying clear of regional banks for now.  Larger, too-big-to-fail banks like Wells Fargo (WFC) are a different story. Late last month we recommended WFC. Although it dropped initially, Wells has been consolidating in a trading range between $26 and $29. We think it will break to the upside in the near future. Time will tell.

However, in the upper strata of American society, CEOs don’t always enjoy such luxuries.  The top executives of publicly-traded companies have their compensation disclosed in SEC filings. And many CEOs make millions upon millions every year. The more money they get paid, the more outcry there is for disclosure.

Through the years executive compensation has taken a few different forms: base salary, bonuses, long-term incentives, perks, and compensation protection (golden parachutes). To make it more complex, the amount of compensation is not always dependent on either the industry or even the size of the company. CEOs in a niche industry can take home multiple millions. Or they could run a successful business and make $558,000 a year – like Costco CEO James Sinegal. It depends on the company, the board, and sometimes the personality of the CEO.

Another conundrum is the compensation disparity between executives and workers, i.e. the difference between executive pay and worker pay. In 2005, the average CEO earned 262 times the pay of the average worker. In fact, chief executives made more in one workday than the average worker made the entire year.  In 1965 the differential was only 24 to 1.

Does it matter for investors? Defenders of high pay point to the supply and demand nature of the executive market. There is simply not enough talent and experience to manage multinational corporations – thus executive pay keeps rising. However, it seems boards who continue to vote for this sort of compensation to CEOs may not be managing company resources as wisely as they could. Investors should take that into account.

Last week CNNMoney.com released a report on the Top 10 Executive Earners in corporate America. Perhaps I’m a tad jealous of their fat wallets, but I was awestruck at these numbers. In addition, we posted the stock price performance in 2008. I’ll let you decide if these guys were overcompensated for their company’s performance.