ETF Update: E. European Risk, Bond Dip, Soaring Yen, Campus Solar, Trash Talking

Eastern European Risk

Emerging economies and ETFs were among those the hardest hit last Friday as the financial turmoil seemed to touch down on every corner of the globe.

Eastern Europe is considered one of the more vulnerable regions right now. For countries that have benefited from big flows of outside money, undermined by a highly leveraged global financial system, the mix of problems looks doubtful, and many are living beyond their means as current account deficits look large, reports The Economist.

The three major points that are worrisome for Eastern Europe are:

• The counterpart of soaring foreign investment has been gaping current account deficits.
• Their central banks and governments are lacking the financial power to such as those in the West.
• Stock markets have already plunged, credit-default swaps isn’t solid, and savings and balance sheets are wiped out.

So far, the drop has been long and hard but orderly. Whether or not a catastrophe is looming is not known but theoretically, the external imbalances should unwind  of their own accord. Most Baltic states do not have public debt to pay off, which should help, and their governments are bragging investment-grade credit ratings.

Turmoil in the region has been most evident in Russia, where the stock market has plunged more than two-thirds since its May high. But other areas are feeling pain, as well: Ukraine’s market has fallen nearly 80% this year and inflation is at 25%; in Hungary, public debt is 60% of the GDP.

The SPDR S&P Emerging Europe (GUR) is down 71.1% year-to-date.

Corporate Bond ETFs Dip on Economic Fears

The Wall Street breakdown has given long-term corporate bond ETFs a chance to surface, revealing benefits that can give value.

The long-term investment perks of bonds are safer than one may think and have potential for plenty of gains in the future. Michael Kahn for Barron’s explains that the corporate bond is a debt obligation of a corporation and their prices reflect the interest rate levels and the credit worthiness of each issuer, case by case.

Investors are no doubt concerned about the health of corporate America, so the corporate bond may not sound appealing to all. But can crisis give way to opportunity? Kahn believes there are signs to imply the chaos is over and better things are to come.

For one, positive technicals are showing, meaning sustainable gains are near. Waning downside momentum has taken away the urgency to sell, one of the first signs of a shift. The trading volume is spread evenly, once again pointing to the loss of urgency to sell.

Depending on your investment objective and risk tolerance, a corporate bond ETF could be worthy of consideration once it crosses its long-term trend line.

iShares iBoxx $ Investment Grade Corporate Bond (LQD) is down 16.2% year-to-date and has a yield of 6.21%, an average maturity of 10.96 years and an average S&P rating of A+.

Yen ETF Soaring

The Japanese yen ETF (FXY) is soaring to new heights, while the currency backing it is hitting levels not seen in 13 years and producing unheard-of volatility.

A worldwide stock selloff has led to investors dumping high-yielding assets and pay back low-cost loans in Japan, say Ye Xie and Agnes Lovasz for Bloomberg. The unwinding of the carry trade led to the yen surging to its highest point against the euro in six years.

It’s been an overall stellar week for the yen ETF, which is up 4.6% and up 8.3% in one month. The yen itself is up 8.6% against the dollar this week, the biggest gain since October 1998. It’s up 13% against the euro, the biggest weekly gain ever. The euro is down 5.1% against the dollar.

Back in 1995, the yen touched a post-World War II high of 79.75 against the dollar that prompted the G7 to intervene by buying the dollar in order to stabilize the markets. Today, the yen is 93.19.

The flight to the yen makes sense in volatile markets, as it’s considered among the safest currencies, reports Parmy Olson for Forbes. The biggest currency declines this week have been in Europe: the Turkish lira is down 12% against the dollar, the Polish zloty by 12%, the Brazilian real by 11%. Emerging market currencies have fallen between 6% and 7%. The Hong Kong dollar has fared the best, because it’s pegged to the greenback.

Guvanator's Decision Could Heat Up Solar ETF

If the steps California’s colleges are taking to incorporate solar power become the hot new trend, solar ETF could begin to heat up.

Gov. Arnold Schwarzenegger announced a public-private partnership to bring solar power to 15 California State University campuses, says Gale Holland for the Los Angeles Times.

Under the agreement, private company SunEdison will finance, build and install solar panels on rooftops, parking canopies and other ground-mounted displays. The firm will also operate and maintain the panels for 20 years, selling the power back to Cal State at or below market rates.

The project is expected to generate power equal to the annual energy consumption of 1,256 households. But the CSU system is no laggard in the green energy department: it already gets 20% of its power from green sources. This new project will bring it up to 25%.

With thousands of colleges throughout the United States, if this idea catches on it could be a real boon to the solar power industry.

A challenged market and falling oil prices might slow the growth of the alternative energy industry for the time being, though. Wait and see.

The Claymore/MAC Global Solar Energy (TAN) is down 64.7% since its April 15 inception.

Trash Never Goes Out of Style

One thing that never goes out of fashion no matter how bad times get is garbage, giving a trash ETF a chance to outperform the broader market in a recessionary period.

Market Vectors Environmental Services (EVX) certainly has potential, and the United states generates 750,000 tons of garbage daily. While it’s outperforming the S&P 500 only slightly, down 35% year-to-date vs. the S&P down 38.9% year-to-date, there are some things happening in the world of garbage that could give this fund a boost down the line.

Many landfill companies are planning on banking on their pileup as methane gas has been proven to to be a vast energy source, which is extracted as the trash decomposes. Local power companies can purchase the gas, and the smell from the landfill is lessened.

Landfills are looking to expand and as you can imagine, there will always be a need for them.