This Week In ETFs: February 26th Edition

by on February 26, 2011

This past week was an extremely volatile one in the financial world as continued turmoil in the Middle East rocked equities and sent oil prices surging towards $100/bbl. in mid-week trading. Markets did, however, manage to recoup some of their losses in Friday’s session although major indexes were still off significantly from their highs earlier in the week. Of particular concern to global investors was the rapidly deteriorating situation in Libya where the country’s dictator, Col. Quadaffi, clings to power despite massive protests in a number of Libyan cities and anti-government control of much of the country. While Libya isn’t a very populous country, more people live in New York City than in the entire North African country, it is a major exporter of light sweet crude accounting for roughly 2% of world output. Concerns over this supply, as well as the protests spreading to other autocratic regimes such as Saudi Arabia, caused oil prices to gain more than $10 on the week and look to put a shadow over markets heading into next week. Events in the ETF world were much more positive as a number of issuers debuted new funds and several other companies made extensive filings for new products, demonstrating that the ETF world has not topped out and still has plenty of room for growth in the short-term. With this backdrop, we profile three interesting ETF articles from around the web this week:

Big Losers From The ETF Revolution at The Motley Fool:

While ETFs have helped to democratize investing and open up a variety of asset classes to new investors, many forget about some of the key losers in the Exchange-Traded revolution. Undoubtedly one of the main losers in this shift to ETFs has been Wall Street firms which have seen commodity trading revenues plummet thanks to traders shifting to these often cheaper products as a way to obtain exposure to this asset class. Another sector that has been hurt, that you may not have originally considered, is the mining industry. At first, this may seem bizarre given the large number of mining focused ETFs on the market but upon further review it makes sense. Before, if investors wanted exposure to gold they had to buy a gold mining company, now there are a multitude of ways to invest in the actual metal without the equity risks, forcing miners to compete with a whole host of new products for investor capital.

ETF Mideast Protection Kit at Index Universe:

In this article, Matt McCall discusses the Mideast crisis in detail and several ways that investors can position their portfolios in order to mitigate any further downturn stemming from the turmoil. First, McCall highlights several oil funds that investors may want to consider in order to profit from a shutdown in crude supplies, including the United States Gasoline ETF and the United States Heating Oil ETF, which are also trading at multi-year highs. Matt then goes on to discuss a number of safe haven investments that investors can park cash in while the storm blows over including gold, bonds, and silver. Lastly, Matt gives his thoughts on how inverse and volatility ETPs can become a valuable part of any investor’s portfolio during this time frame as well.

USO vs. BNO: Explaining The Big Gaps In Oil ETF Performance at ETF Database:

Although oil prices have been up across the board over the last few weeks, there have been huge differences in gains among the various types of crude oil. In this article, Michael Johnston highlights the key differences between the two main benchmarks of this important fuel, WTI crude and Brent. Although WTI is often of a higher quality than its European cousin, prices of Brent have spiked more than WTI as of late thanks to ongoing protests in the Middle East which disproportionately impact prices of the European benchmark fuel. Michael also outlines a way that investors could profit if the turmoil subsides and if investors should consider looking to Brent as the global benchmark instead of its American counterpart as the best barometer of demand in the world.

Disclosure: No positions at time of writing.