Not All ETF Christmas Wishes Come True

Matt Hougan from IndexUniverse drew up his Christmas wish list of ETFs this week.

It's a great posting and list, and I thought I would add a little color to a couple of the items he mentions.

He notes that among the ETFs that should come in 2008 is one pertaining to EU Carbon Allowances from a company called AirShares.

I don't know much about this, and your first reaction might be that this has nothing to do with the stock market. But that's exactly why it might be interesting.

If it is more cost effective to buy carbon credits than to operate a business more cleanly, then businesses will buy carbon credits. The demand for carbon credits could increase independently from whatever is going on in the stock market.

If this becomes an ETF that owns futures with mostly t-bills you might be buying something for which there is demand, has a low correlation to the stock market, and kicks off a little yield. If that is how it actually shakes out, well that might be OK.

Another item on Matt's wish list is the coming SPDR Barclays Global TIPS Fund. I too like the concept but....at the recent Super Bowl of ETFs I moseyed on up to the SSGA booth to ask about foreign fixed income ETFs and none of the three guys there knew anything about global TIPS (like they hadn't even heard of it). It has been filed for months but I take this encounter to mean it ain't coming anytime soon. Hopefully I am wrong.

Matt included the potentially coming 130/30 fund filed by ProShares. The constraints on this particular version of the strategy are not ideal. If I wanted 130/30 at all I would not want to be restricted to the S&P starts ranking system. I would want the people running the fund (if that is what I was using) to go short whatever they felt was a short and overweight whatever they thought was a good overweight. The S&P stars system, like any other similar ranking system has biases. At times the biases will be a disadvantage.

Lastly Matt holds out hope for a VIX product of some sort, as I have mentioned once or twice before also. Similar to a post of mine from a week and a half ago Matt wonders if the answer for this issue is an ETN. Matt goes further to offer that a combo of a VIX ETF/ETN/whatever and a bond ETF could be a better hedge for an equity portfolio than gold. I'll have to think on that one for a bit, but I agree, big picture-wise, that new types of products will allow for very sophisticated strategies to be executed by do-it-yourself investors who are willing to take the time to learn.