ETFs trended higher this week but finished flat on Friday as the markets digested conflicting data reports. This came after retail sales rose by 0.3% but the consumer sentiment index headed lower, leaving investors to wonder which direction the American consumer will take the economy. In other news, Obama is set to nominate Janet Yellen, the San Francisco Fed President, for the role of vice-chairman of the Federal Reserve. The move for Yellen is seen as an attempt to tilt the Fed in a more dovish direction. Below, we offer our picks for the week’s most important and interesting ETF stories from around the Web:
Although many pundits have been calling for the demise of the dollar for some time now, debt troubles in Europe have sunk the euro and strengthened the greenback in 2010. ETF Guide notes that it is now important to consider how a stronger dollar will impact portfolios and examines three key strategies. The author suggests ‘thinking domestically’, going inverse against foreign securities, and betting against commodities as three easy ways that investors can profit from a rising dollar.
What Every Investor Should Know About Commodity ETF Investing at ETF Database:
We discuss some of the many differences between the variety of commodity funds on the market today, giving special attention to the fund structures currently available to investors in the commodity space. Currently investors can purchase physically backed commodity ETFs, look to futures-based funds, or invest in commodity producing equities. One other option for investors is to take a look at IndexIQ ARB Global Resources ETF (GRES) which invests in global companies that operate in commodity-specific market segments, but also includes short exposure to the S&P 500 and MSCI EAFE Index, essentially isolating the return component generated through movements in commodity prices.
Munis: After Tax Yield, Stability at ETF Zone:
This article focuses on the benefits of investing in municipal bond ETFs and discusses how these securities have been impacted by recent market events. Munis have been relatively unscathed over the past two years; they are generally not a destination for hot money (which prevents bubbles from building), they have had low default rates, and they offer lower volatility than their Treasury bond ETF cousins. One interesting choice that the author highlights is the PowerShares VRDO Tax-Free Weekly Portfolio (PVI). This fund has an extremely short duration which is achieved by contractually modifying long-duration bonds to reset their interest rates on a weekly basis. The principal is protected with a put feature and/or insurance. PVI pays around 3% yield and, according to the author, could be a smart choice for the sophisticated investor who is wary of interest rates but confident that credit markets will not disintegrate.
March Madness In Natural Gas at Hard Asset Investor:
According to data stretching back to 1989, natural gas prices surge more than 7% on average in March. However, the futures curve does not follow the same pattern, producing a strange contango curve that has destroyed profits for most natural gas investors. In fact, if you had been able to invest in spot natural gas over the past year you would be up about 2% but due to contango, investments in United States Natural Gas Fund (UNG) over the past year would have produced a loss of about 50%.
Disclosure: No positions at time of writing.