Right now one-year performance figures are mostly meaningless.  Many of  the funds currently sporting the largest one-year returns were posting the worst one-year returns a year ago.  With recent earnings reports, it makes more sense to compare to two years ago than just one.  Likewise, when looking at returns, it is probably more constructive to look at a longer period, such as three years.  And while we’re at it, let’s see how the current rally stacks up against 10-year Nasdaq bear market.

The table below shows cumulative return (not annualized).  The data is from Investors FastTrack and is therefore adjusted to reflect the reinvestment of all dividends.  The 3-year period begins 3/9/2007, while the start of the 10-year period is skewed one day to coincide with the Nasdaq’s closing peak on 3/10/2000.  The list contains only a few representative ETFs – it is not intended to be all inclusive.

QQQQ is still mired in its 10-year bear market with a -58% return the past 10 years.  However, the most recent 3-year period looks better with a +10.3% gain.  The QQQQ long-term chart could be viewed as 7-8 years of base building.  As you might expect, the technology sector (represented by XLK) is in a similar position.

SPY shows only a small loss for the 10-year period while posting a -13.2% decline for the 3-year period.  It established a new high in late 2007 and is still down more than -22% from that level.

XLE (energy) and XLP (consumer staples) represent a select group of sectors and industries with positive returns for both the 3-year and 10-year periods.  However, a look at their charts reveals a significant difference.  XLP is within a few percentage points of setting a new lifetime high while XLE would need nearly a +50% gain to do likewise.

The financials (represented by XLF) have lost more than half their value in the last three years, despite recent big gains.  XLF is also showing a loss for the 10-year period.

The picture is mixed internationally as well.  Japan (EWJ) is notorious for its “lost decade” of the 1990s.  The past 10 years were yet another lost decade, and the past three years have also been unkind to Japan.

Meanwhile, resource rich countries like Australia (EWA) are similar to energy (XLE) and boast positive returns for both the 3-year and 10-year periods.

Bottom line: Yes, the new bull market is now one year old – but many sectors and countries are still in the grips of a 3-year bear market, a 10-year bear market, or both.

Disclosure covering writer, editor, and publisher: Long QQQQ and EWJ.  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.

The newest ETFs are

• Direxion Daily BRIC 2x Bull (BRIL) (summary)
• Direxion Daily BRIC 2x Bear (BRIS) (summary)
• Direxion Daily India 2x Bull (INDL) (summary)
• Direxion Daily India 2x Bear (INDZ) (summary)
• Direxion Daily Semiconductor 3x Bull (SOXL) (summary)
• Direxion Daily Semiconductor 3x Bear (SOXS) (summary)

For those who haven’t heard the term, BRIC refers to the four largest emerging market nations: Brazil, Russia, India and China.  BRIL and BRIS  provide long and short coverage, respectively, to the BNY Mellon BRIC Select ADR Index with 200% daily leverage.  INDL and INDZ do likewise for the Indus India Index.

These four will be the first Direxion ETFs to offer anything less than 300% daily leverage.  Why they are doing so is unclear.  As we’ve said before, people who want to use leverage typically can’t get enough of it, so we doubt they are doing it for marketing reasons.  More likely some kind of legal or operational constraint prevents Direxion from achieving a 3X daily target in these particular indexes.

The remaining two new ETFs are domestically-focused, specifically on the PHLX Semiconductor Index, often called the SOX.  This index has been a popular tool among options traders for many years, so we suspect SOXL and SOXS will gain a following fairly quickly.  Both the long and inverse versions are leveraged at 3X.

As we always say, everyone should be aware that leverage is reset daily and results over longer periods can vary dramatically.  These are trading vehicles, not long-term investments.  Use with caution.

Disclosure 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.

RBL will compete mainly with Market Vectors Russia (RSX), which until now has been the only way for U.S. investors to get pure Russia exposure in an ETF. Launched in 2007,  RSX has a big head start but SPDR is a formidable marketing machine.  RBL anticipates an expense ratio of 0.59%, only a fraction better than 0.62% for RSX.

As we have pointed out before in regard to Eastern Europe/Russia ETFs, RBL is heavily weighted in energy and materials.  Together those two sectors account for about two-thirds of the index.  The breakdown looks like this, according to SPDR’s RBL Fact Sheet:

• Energy 49.2%
• Materials 17.9%
• Financials 11.7%
• Telecom 8.7%
• Utilities 8.3%
• Consumer Staples 2.7%
• Consumer Discretionary 0.9%
• Health Care 0.4%
• Industrials 0.3%

If this looks lopsided, it is because the Russian market is itself lopsided.  Energy and natural resources dominate the nation’s economy.  Other sectors simply orbit around those two.  In time Russia may become more diversified, but for now it is mainly a bet on a profitable worldwide energy/materials sector.

RBL Overview Page

RBL Prospectus (PDF file)

Disclosure 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.

The three new ETFs are Claymore Wilshire 5000 Total Market ETF (WFVK), Claymore Wilshire 4500 Completion ETF (WXSP), and Claymore Wilshire US REIT ETF (WREI).  If these sound to you like clones of existing ETF products, then you are not alone.  Claymore is marketing them as access to the “pure and complete” indexes from Wilshire.  However, the Wilshire indexes and Dow Jones Total Market indexes are essentially duplicates of each other.

According to an April 2009 press release from Dow Jones, “the Dow Jones Total Stock Market Index family is identical in all aspects to the former Dow Jones Wilshire index family, including methodology, composition and historical data back to 1987.”

To Claymore these new ETFs are pure and complete.  To me, they are redundant and unnecessary “me too” products.  But don’t take my word for it, review the following and decide for yourself:

Claymore Wilshire 5000 Total Market ETF (WFVK) (summary) seeks investment results that correspond to the performance of the Wilshire 5000 Total Market Index.  The fund’s expense ratio is 0.12%.

WFVK will compete with SPDR Dow Jones Total Market (TMW) (overview), which tracks the Dow Jones U.S. Total Stock Market Index, formerly known as the Dow Jones Wilshire 5000 Composite Index, and before that known as the Wilshire 5000.  Prior to April 1^st, 2009, the SPDR Dow Jones Total Market ETF was known as the SPDR DJ Wilshire Total Market ETF.  TMW currently has an expense ratio of 0.21%.

Top holdings and sector allocations of the two ETFs are virtually identical.  WFVK currently has an expense advantage and potentially less tracking error by holding 4,108 stocks instead of the 1,029 of TMW.  TMW has the brand and time in market advantage.

Claymore Wilshire 4500 Completion ETF (WXSP) (summary) seeks investment results that correspond to the Wilshire 4500 Completion Index.  The Wilshire 4500 is composed of the Wilshire 5000 minus the stocks in the S&P 500.  The fund’s expense ratio is 0.18%.

WXSP will compete with Vanguard Extended Market (VXF) (overview), which tracks the Standard & Poor’s Completion Index.  It contains all of the U.S. common stocks regularly traded except those included in the Standard & Poor’s 500 Index.  VXF has a lower expense ratio of 0.15% and holds slightly fewer stocks (3,015 versus 3,518).

Claymore Wilshire US REIT ETF (WREI) (summary) seeks investment results that correspond to the Wilshire US Real Estate Investment Trust Index.  The expense ratio is 0.32%.

WREI will compete with SPDR Dow Jones REIT (RWR) (overview), which tracks the Dow Jones U.S. Select REIT Index.  Prior to April 1st, 2009, the SPDR Dow Jones REIT ETF was known as the SPDR DJ Wilshire REIT ETF.  Both funds hold 82 REITs in nearly identical proportions while RWR has a lower expense ratio of 0.25%.

Disclosure 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.

The quick answer is “No.” The process of securitizing gold – as with any other asset – depends on the integrity and cooperation of numerous parties. The chain can fall apart at any point if someone is dishonest or incompetent. Assorted safeguards exist to reduce this possibility, but they are not foolproof. This applies not only with PHYS but also products like SPDR Gold Trust (GLD), iShares Comex Gold Trust (IAU), and ETFS Physical Swiss Gold Shares (SGOL).

That being the case, investors who demand assurance they really own physical gold stored in their name in a secure place should probably not buy any of these gold-related securities. All are nothing more than book entries and pieces of paper that claim to represent the ownership of gold. If you don’t trust whoever is making this claim, don’t do business with them. Buy a good safe and keep your gold at home.

Storing gold in your house isn’t risk-free either, of course. Burglary and robbery are always possible. You also won’t be able to buy and sell instantly, and your transaction costs will likely be higher than they are in the securities markets. It would be nice to have our cake and eat it too, but I don’t see how.

So I throw out a question to you: How do we square this circle? What do you want to see in an exchange-traded gold product? What could sponsors like Sprott, ETFS, iShares, or SPDR do to meet your needs?

Keep in mind there will always be trade-offs between expenses, liquidity, and security. The possibilities are also limited to what is legal. Maybe the law ought to be different – and would be different if guys like Ron Paul were in charge – but that’s a separate question. We have to play with the cards we are dealt. Add your ideas in the comments and maybe someone who can do something about it will pay attention.

Disclosure covering writer, editor, and publisher: Long GLD. 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.

Of the BRIC nations, Russia has the fewest ADRs trading on U.S. exchanges and just one ETF. Furthermore, Russia is mostly a play on oil and natural gas prices, making diversification difficult. But what about India? Despite the fact that India is the world’s largest democracy and the third-largest Asian economy behind Japan and China, the “I” in BRIC is often forgotten by U.S. investors. Yet this fast-growing market offers plenty of opportunity.

We’ve discussed investing in India before, and now we are looking at the subcontinent again. Investors have plenty of choices when investing in India from the U.S., with many ADRs and several ETFs and ETNs now available. We like WisdomTree India Earnings ETF (EPI). On the surface, EPI offers at least one primary advantage over other ETFs: liquidity. EPI easily tops several other India products in average trading volume with more than one million shares changing hands on a given day. Thus far in 2010, EPI has also outperformed two of its chief rivals, PowerShares India ETF (PIN) and iShares S&P India Nifty 50 Index (INDY).

Those are nice anecdotes. But what you really need to know about India is the long-term growth story. Indian officials recently met with Saudi Arabia in an effort to increase oil shipments. When a country needs more oil, it is usually a sign that the manufacturing sector is growing and needs energy resources. Some estimates show that India’s GDP is expected to grow by 14% annually in 2014, and by 2025 the country may have a larger economy than the U.S.

One drawback to EPI may be a lack of sector diversification. Industrial materials and financial services names account for 52% of the portfolio. That said, EPI has moved above its 50-day moving average. If it can clear its January peak of $23.65, a run to the high 20s is possible.

EPI has an expense ratio of 0.88% and currently over $720 million in assets. We also like how it recently broke out of congestion and could be on the verge of a healthy uptrend. Overall, EPI probably ranks high on the list of India ETFs currently available to U.S. investors. To buy into India’s growth story, go with EPI.

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.

DIA Name Change: After the close on February 26, DIAMONDS Trust (DIA) became SPDR Dow Jones Industrial Average ETF Trust (DIA).  The ticker is unchanged but there is a new CUSIP.  For more information please refer to the press release.

SPY & MDY Name Changes: The two oldest US-listed ETFs underwent name changes back on January 27.  The SPDR Trust (SPY) is now the SPDR S&P 500 ETF Trust (SPY), and the MidCap SPDR Trust (MDY) is now the SPDR S&P MidCap 400 ETF Trust (MDY).  More information can be found in the press release.

Disclosure 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.

Only four funds were launched last August.  Since they surpassed six-months of age during February, they are no longer excluded from consideration.  Three of them are doing quite well, but the Global X Nordic 30 ETF (GXF) is on this month’s list at #99.  I for one would like to see this product succeed as it provides unique foreign market access.  GXF is still relatively young and therefore has plenty of potential to escape the list in coming months.

The top of this month’s list is headed up E-TRACS CMCI Short Platinum Excess Return ETN (PTD).  Trading was especially pitiful with only 400 shares changing hands on a single day of trading back on February 4.  PTD is the only inverse platinum product on the market, so it can’t be blamed on competition.

ELEMENTS Ben Graham Large Cap Value ETN (BVL), one of our regulars, managed to trade on six days during February, an improvement from its five days of January trading.  Most investors are not familiar with the ELEMENTS brand.  ELEMENTS are more or less owned by Merrill Lynch, but Merrill does not issue them.  In the case of BVL and a few others, they are unsecured notes issued by Deutsche Bank.  Other ELEMENTS notes are issued by Credit Suisse, HSBC, or Swedish Export Credit Corporation.  The ETNs are then distributed by Nuveen and Merrill Lynch. 

Merrill Lynch’s ETF products aren’t doing much better than their ETNs.  Merrill Lynch HOLDRS have been around for years, but their fixed structure is now antiquated.  Six of the HOLDRS are on ETF Deathwatch this month, and there are now better “true ETF” alternatives for all HOLDRS.  

Don’t forget that WisdomTree will close 10 funds this month with the last day of trading being March 24.  Sell your shares before the liquidation process begins and use a limit order.  Listed below are the 104 products on ETF Deathwatch for March that failed to generate at least $100,000 in average daily value traded (ADVT) during the past month.

ETF Deathwatch - March 2010

 Past issues of ETF Deathwatch are available here.

 Disclosure 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.

18 new exchange traded products (ETPs) launched in February: 17 ETFs and one ETN.  No products were delisted.  The number of US-listed products now stands at 965 (874 ETFs and 91 ETNs).

February ended the three-month streak where new product launches exceeded 20.  It was also the second month in a row with no closures, but that streak will not be extended as WisdomTree plans to close 10 funds in March.

Notional trading of ETPs hit $1.420 trillion in February, up +4.6% from $1.357 trillion in January.  Trading in SDPR S&P 500 (SPY) exceeded $478 billion for the month, accounting for 33.7% of all ETP value traded.

82 products (8.5%) had an average daily value traded (ADVT) of $100 million or more.  There were 104 (10.8%) in the ETF Deathwatch classification (ADVT below $100,000 and more than six months on the market).

New products launched in February (in chronological order):

1. PIMCO Short Term Municipal Bond Strategy Fund (SMMU) (PIMCO Adds Short-Term Munis to ETF Menu)
2. ProShares UltraPro Dow30 (UDOW) (ProShares ETFs Go 3X)
3. ProShares UltraPro S&P MidCap400 (UMDD)
4. ProShares UltraPro QQQ (TQQQ)
5. ProShares UltraPro Russell2000 (URTY)
6. ProShares UltraPro Short Dow30 (SDOW)
7. ProShares UltraPro Short S&P MidCap400 (SMDD)
8. ProShares UltraPro Short QQQ (SQQQ)
9. ProShares UltraPro Short Russell2000 (SRTY)
10. GlobalShares FTSE Developed Countries ex US Fund (GSD) (Another Unneeded ETF from Old Mutual)
11. EGS INDXX China Infrastructure Index Fund (CHXX) (Emerging Global Launches China Infrastructure ETF)
12. Market Vectors Egypt Index ETF (EGPT) (Egypt Now Available to ETF Investors)
13. PowerShares CEF Income Composite Portfolio (PCEF) (Closed-End Funds Inside an ETF)
14. Credit Suisse Long/Short Liquid Index ETN (CSLS) (Do Not Buy CSLS)
15. EGS INDXX Brazil Infrastructure Index Fund (BRXX) (New Brazil Infrastructure ETF)
16. Direxion Daily 2-Year Treasury Bull 3x Shares (TWOL) (Leveraged & Inverse Short Term Bond ETFs)
17. Direxion Daily 2-Year Treasury Bear 3x Shares (TWOZ)
18. Sprott Physical Gold Trust (PHYS) (Now You Can Store Your Gold in Canada)

Product closures/delistings in February:

none

Previous monthly statistics reports are available here.

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.

Sprott Physical Gold Trust (PHYS), the latest physically backed gold exchange-traded product began trading yesterday (2/26/10) on the NYSE.  The fund also applied for listing on the Toronto Stock Exchange under the symbol PHY, but it appears that Canadian trading has not yet commenced.  The fund will be managed by Toronto-based Sprott Asset Management and will store its gold at the Royal Canadian Mint.

With the introduction of PHYS, investors can now choose between physically backed ETFs that safeguards gold bullion in Zurich, Canada, London, and US vaults.  The fund’s new website does not contain much information at this time.  The prospectus highlights the potential benefits of the offering, which include:

Ability to Redeem Units for Physical Gold Bullion: Unit holders will have the ability, on a monthly basis, to redeem their units for physical gold bullion in a minimum of one bar (350 to 430 troy ounces) for a redemption price equal to 100% of the NAV minus expenses.

Storage at the Royal Canadian Mint: The Trust’s physical gold bullion will be fully allocated and stored at the Royal Canadian Mint.

Potential Tax Advantage For U.S. Investors: Any gains realized on the sale of units for U.S. federal income tax purposes, may be taxable as long-term capital gains (at a maximum rate of 15% under current law, compared to a long-term capital gains tax rate of 28% applicable to physical gold bullion and other “collectibles”), provided that such U.S. investor has made a timely and valid Qualified Electing Fund election with respect to the units. Note: I recommend consulting a qualified tax specialist if you are relying on this claim.

PHYS will have expenses capped at 0.65%, making it more expensive than its major competitors.  PHYS traded more than four million shares on Friday and closed at $9.59.  This means each unit worth less than 1/100 of an ounce.  Its three prime competitors are:

• SPDR Gold Shares (GLD), expense ratio = 0.40% (overview)
• iShares COMEX Gold Trust (IAU), expense ratio = 0.40% (summary) (IAU article)
• ETFS Physical Swiss Gold Shares (SGOL), expense ratio = 0.39% (summary) (launch article)

In related news, Eric Sprott, CEO of Sprott Asset Management, purchased 8 million units of the new fund as part of the IPO.  It’s nice to see that management believes in the product.

Disclosure covering writer, editor, and publisher: Long GLD. 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.