ETF Grind's  Instablog

Van Eck has launched the first US traded ETF to focus on the Vietnamese market, adding to its impressive lineup of emerging market single country funds. The Van Eck Market Vectors Vietnam (VMN) tracks a custom index of equities from firms that generate more than 50% of their revenues in Vietnam.

The current 28 holdings place a heavy weighting on energy, materials, and financial names, most of which have small or middling market caps. The fund is expected to be in high demand as Vietnamese shares have been among the best performing in the world this year. The benchmark VN Index - which is broader than the one VNM tracks - is up 61% this year. Investors will pay a premium for access, however, as the fund carries a .99% expense ratio. By contrast, European investors pay only .85% for the db-x trackers FTSE Vietnam (XFVT).

The Vietnam fund is just the latest of Van Eck's single country emerging offerings, and follows on the strong success of the Market Vectors Indonesia (IDX) and Market Vectors Brazil Small Cap (BRF)

Commodity ETFs have been criticized from all corners. Investors have pilloried their inability to accurately track the price of their underlying asset. Industry watchdogs have assailed their inadequate disclosure of risks. And regulators have fretted over their ability to unduly manipulate futures markets.

Yet ETFs like the United States Natural Gas Fund (UNG) and the United States Oil Fund (USO) seem to have thus far gotten away high fees, poor disclosure, and disappointing returns, as investors are still buying them in droves. But regulators are less happy, and commodities-futures ETFs may not survive the coming regulatory onslaught.

Bloomberg is reporting today that the Commodity Futures Trading Commission (CFTC) will open hearings into expanding regulation of speculative trading in commodities. Although the hearings concern all speculators, the regulators are primarly concerned with USO and UNG's ability to move the oil and natural gas markets higher, adding a speculative premium to energy prices. Trading in the UNG was breifly halted as the SEC denied its routine request to issue more shares.

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Investors worried about inflation and high fees poured money into commodities, inflation protected bonds, and cheaper versions of existing funds in June.

The United States Natural Gas Fund (UNG) was the month's big winner with as investors showered 1.7 billion dollars on the commodity futures fund, despite concerns about its tracking accuracy. iShares's TIP Bond Fund (TIP) saw the second biggest cash infusion, with the inflation-conscious sinking $942 million into the inflation protected US bond fund.

Vanguard's MSCI Emerging Markets (VWO) was in third place for a decidedly different reason, as institutional money fled en masse from the iShares MSCI Emerging Markets (EEM) to the VWO's lower expense ratio. Cost conscious investors also rewarded iShares S&P 500 Fund (IVV), to the detriment of State Street's SPY.

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The global financial crisis started in the United States, and the US economy has consequently suffered more than most. Although total output has fallen less than the global average, the rise in America's unemployment rate has been the steepest in the OECD. It has the world's largest budget deficit as a percentage of GDP, save the UK. And although US shares didn't fall as far in 2008, they have hardly risen in 2009 - left in the dust by recovering emerging markets. The economic landscape leaves little for America to celebrate this Independence Day weekend. And considering Thursday's depressing jobs report, the US economy may remain in the doldrums for a long time to come.

Yet even amongst capital-raising entities that operate entirely in the America, there are opportunities. The insured municipal bond sector, for instance, looks like a good place to get high yields with relatively little credit risk. And several industries including home-building and community banking are so far off their highs that valuation alone may make them decent long term choices.

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The only exchange traded fund to focus on community banks started trading this morning on the NASDAQ. The First Trust Nasdaq ABA Community Bank Fund (QABA) from First Trust Advisors focuses on banks with a local focus, using a strict index criteria to exclude larger regional banks and banks that otherwise derive revenue from outside their home markets (eg credit card servicing).

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Both billionare investor Warren Buffet and former Fed Chairman Alan Greenspan issued strong warnings on future inflation this week. In an interview with CNBC, Mr. Buffet dismissed concerns of deflation and instead argued inflation was the greater threat. "We're flooding the system with dollars. We're monitizing debt. We're doing all the things that lead to that", adding that he nonetheless supported the Feds actions saying "There really is no choice. But we could see a lot of inflation."

Meanwhile in today's Financial Times, Mr. Greenspan also lays out his case. With a hint of irony, Greenspan warned "If political pressures prevent central banks from reining in their inflated balance sheets in a timely manner, statistical analysis suggests the emergence of inflation by 2012; earlier if markets anticipate a prolonged period of elevated money supply." The former fed chairman is widely seen to have bowed to such pressure himself in 2001 when he lowered interest rates to cushion the blow of the Dot Com bubble's collapse, the most egigious example of the "Grenespan Put".

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