This Week In ETFs: November 21st Edition

by on November 21, 2010

American equity markets experienced another rocky week as a rough start to trading on Monday and Tuesday eventually gave way to a solid Thursday which helped to cancel out much of the market’s losses. A flat day of Friday trading then meant that American markets finished out the week right back where they started; a pretty remarkable feat considering the ongoing turmoil overseas. This was highlighted by troubles in Ireland where the country remains on the brink of either a default or bailout in order to restructure the struggling economy. A bailout package seemed to be imminent on Friday with some anticipating an infusion of tens of billions of euros by both the EU and the IMF but no word yet on its acceptance or the final terms of the plan have crossed the wires. One sticking point remains the country’s ultra-low corporate tax rate– 12.5%– which will likely have to be changed in order to placate countries such as Germany who believe that the low rate gives the Irish an unfair advantage. Yet Ireland seems unwilling to budge on this issue, possibility setting up a roadblock in the negotiations for a final package.Meanwhile, fears over inflation and reserve requirement ratio hikes in China helped to spook emerging market investors and those in more developed economies as well. Without China driving the world economy many are now wondering where the growth will come from, especially if China raises its benchmark rate as many are now forecasting. However, a successful IPO by the once iconic General Motors helped to buoy markets in Thursday trading as the company set a record for American offerings by raising more than $20 billion. This triumphant return to the NYSE helped to reduce the government’s stake in the company and looks to be the first step on GM’s long road back to greatness. This choppy and eventful week of trading gave analysts plenty to discuss and below we have highlighted three of the best ETF stories from around the Web during the last week:

Are ETFs A Menace– Or Just Misunderstood? at The Wall Street Journal:

In this article, Jason Zweig discusses the recent attacks on ETFs and if the accusations hold any water under further scrutiny. He focuses in on three issues that have been brought up by the now infamous ‘Kauffman report’ including ones regarding ETF dominance of certain securities, trading failures, and the possibility of ETFs leading to another flash crash situation. While Jason doesn’t believe that ETFs pose a ‘systemic risk’ to markets he does believe that continued research and education needs to take place in the space so that more investors can better understand the pros and cons of these up-and-coming securities.

URA Vs. NLR: Best Uranium Exposure? at Hard Asset Investor:

Matt McCall discusses the newest ETF from Global X in this column, the Uranium ETF (URA) which focuses in on 23 firms engaged in mining of the potent commodity. McCall then compares this to the more established and diversified Market Vectors Nuclear Energy ETF (NLR) which in addition to offering exposure to uranium miners, has large allocations to nuclear power generation companies as well as uranium storage firms. However, although NLR offers investors more allocations, Matt believes that URA is probably the better choice for investors seeking to leverage the increasingly favorable supply/demand dynamic for this important commodity.

MLP Exposure: ETF Or ETN? at ETF Database:

One of the more popular market segments for ETF investors in the past year has undoubtedly been the MLP sector where investors have been quick to scoop up new offerings. However, this interesting security has reignited the debate between ETFs and ETNs and which product is best to play this corner of the market. Of particular concern in this article is the way that MLP ETFs have been treated in the press and some common misconceptions that investors might have about playing MLPs in the ETF wrapper. Senior Analyst Michael Johnston dispels these myths about MLP ETFs and also weighs the pros and cons of each structure in order to help investors figure out which is more appropriate for their portfolios.

Disclosure: No positions at time of writing.