This Week in ETFs: October 23rd Edition

by on October 23, 2011 | ETFs Mentioned:

Growing concerns over the European debt crisis resurfaced this week as rumors hurled the markets into volatile swings. Thursday saw perhaps the worst volatility as major stock indices sold off rapidly only to  rally  in mid-day trading after new hopes arose for this weekend’s E.U. summit. The week ended with strong gains for U.S. stocks on the back of Europe’s own stock market rally while oil and gold proved to be winners in the commodities space, as the weakening dollar and optimism for the resolution of Europe’s debt crisis created opportunities for some major gains. Although investors are hopeful for a potential solution to be presented at the E.U. summit, there are still concerns over the impact of Europe’s decision to either use leveraged funds to bailout Greece or to write-down the debt of the deeply troubled nation. Investors hope that after this weekend’s summit, a clearer plan to solve Europe’s debt crisis will help create more stable market conditions and allow investors to once again focus on corporate earnings.

Meanwhile, in the Exchange Traded Fund Industry, products faced major scrutiny this week as The Securities and Exchange Commission started to take a closer look at the complex nature of some ETFs. Leveraged and inverse ETFs, in particular, are being criticized for their lack of transparency and higher risk profiles. The SEC plans to evaluate whether or not these complex products have an impact on prices and market volatility. Investors are keeping a close eye on this issue as the SEC’s decision could bring on majors changes to the ETF world.

Below, we outline the best ETF stories from around the web this past week:

No Bear Market For These 5 ETFs at Market Watch:

2011 has proved to be a difficult year for traders amidst market turmoil. They claim that this year’s market volatility has given them proof that the traditional buy-and-hold method is now extinct. Although some may have lost faith in this strategy, there are still plenty of long-term investments that have successfully weathered through these stormy markets. In this article, author Jeff Reeves outlines five ETFs that have delivered gains of over 120% in the last three years.

TBAR: Too Expensive Or A Great Bargain? at Gold ETF:

Over the years, innovation has led to a wide array of products that offer investors different ways to gain exposure to gold. ETFs, in particular, have allowed investors to acquire this precious metal’s exposure with futures contracts, physical based funds, and with equities invested in mining and exploration companies. The relatively new Gold Trendpilot ETN (TBAR), offers yet another way to play gold by employing a systematic trend-following strategy. Although TBAR has caught the attention of many gold investors, it has been criticized for its unusually high expense ratio.  This article, by Jared Cummans, makes a case for why TBAR can actually be a great bargain for some investors.

BlackRock Irks Rivals In Push Against Riskier ETFs at Reuters:

The ETF world has developed rapidly over the past two decades, churning out an array of products that the average investor might find overwhelming and confusing. Of the most recent innovations, leveraged and inverse ETFs have been under scrutiny for their complex structure and their potential impact on the markets. Critics of these complex products, such as BlackRock, argue that leveraged and inverse ETFs carry far too great a risk for the average retail investor. In this article, authors Sarah N. Lynch and Jessica Toonkel outline BlackRock’s case against these ETFs and how the Senate and SEC are responding to this issue.

Disclaimer: No positions at time of writing.