Geoffrey Lordi

A New Eastern Europe ETF from iShares

Thanks for the notice, Patrick.

Appreciate the commentary, Paul.

I think I'm forced to agree with you, Alan.

GUR and ESR are so similar as to make them non-differentiable. RSX is the pure play there, and dominant. Sure, there are slight differences in composition, cost, and focus. But not enough to make a difference in terms of performance correlations. Even a popular CEF, Morgan Stanley's "RNE", is barely dissimilar enough to make a difference (<1% in Kazakhstan is meaningless).

For those who are interested, the only fund I found after a quick review that gets folks less than 60% in Russia is the Central Europe & Russia fund (CEE). Rus still represents ~59%, but at least there's ~13% in Poland, and roughly 10% each in the Czech Republic and Turkey. (Total fees are as follows: RNE=2.16% (ouch!); CEE= 1.1%.)

At one point, I think WisdomTree's product registration included several EE currencies. Those might have been a way in that wasn't equity-based but those submissions have yet to materialize. CurrencyShares offers a Russian currency tracker, XRU, as many know.

One Basic Portfolio, 5 ETFs

As someone who builds non correlated models for a living, the difficulty with these low count packages is reconciling the fact that VTI and VEU, even over ~2.5 years, trade as a team. Sure: one's outperformed the other at times, and active trading could've benefited from this. But this kind of "domestic" vs "international" diversification is a misnomer: when the correlations are in the neighborhood of 97%+, that's not a diversified strategy.

DBC got you a little out of the norm (+) prior to May '08; VNQ got you a little out (-) through the same date. But a portfolio with so few elements really can't diversify into enough classes that would've generated positive returns when the majority (not all) of investable classes neared an r^2 of 1.

Playing Defense with ETFs and Preferred Stocks

Some good points here, but recommending preferreds, exchange traded debt, TPTCs, other other debt-based income vehicles because of their historical recovery from the October2008/March2009 lows is troubling since there is a small probability that folks will have that opportunity again in the short term, or that they would get out of their current preferreds only to re-enter in the single digits.

Furthermore, recommending non-cumulative preferreds is a potential mess: as someone who has invested in this range of products for years to build unique portfolios, I've seen far too often situations where non-cumulative preferreds cause loads of trouble for folks seeking high yields when they really don't understand the product, haven't read the EDGAR filings, and don't spend the time to study the indentures (for debt vehicles)...

Tread carefully...

The Case for a Defensive Equity ETF

Agreed, Joe.

Another part of the problem with DEF is its horrific volume. With spreads like this, and no takers on either side of the aisle, an otherwise reasonable strategy could end the day so far off that comparing its performance over the short- and intermediate-terms proves largely irrelevant.

And, technically speaking, prescient investors - or traders - weren't necessarily looking for uber-defensive plays following the March lows as so much had already been choked from folks' accounts. To wit: the S&P outperformed DEF by 11% in the froth back up, and Vanguard's all-world, ex US, pummeled DEF to the tune of 40%.

I think the idea of this ETF wasn't bad, but I think tracking, volume, and competition make it a nondescript choice.

CUT vs. WOOD: Timber ETFs Square Off

The problem with CUT & WOOD is that they don't track timber, per say, but timber and paper companies, as the index states. A .76 correlation to MCAFE and a .69 to (I assume, based on your statistics) the S&P or equivalent - even over 15 years - is not a low correlation value. In fact, both of these ETFs have traded in near lockstep over most major measurement periods since their inception.

I certainly do not disagree with the premise of owning timber, and our neutral fund regularly invests in highly non-correlated assets. But raw land, for those inclined, gives folks an (arguably) better non-correlated appreciation than these two, largely mainstream, equity trackers. Even Plum Creek (PCL) - a favorite of fellow portfolio builder R. Nusbaum - exhibited a .91 correlation to the S&P over the last year, with WOOD at .99 and CUT at .96.

The Ultimate Guide to BRIC ETFs

Nice summary. Don't forget the availability of a Chinese-focused real estate ETF: Claymore's TAO.

ETF Death Toll Climbs to 113: On Pace to Set Another Record for Closures in 2009

I'm quite to pleased to see some of the redundancy removed...After all, part of what created the bloat in offerings was the "me, too" nature that pervaded various offerers. With models refined, too many products essentially tracked each other, with out- or under-performance attributed largely to fees and volume: not what we need.

Latest from WisdomTree: An Emerging Market Currency Basket ETF

The issue of currency etfs not returning the local interest rate has been hashed out among contributers many times at SA: no Wisdom Tree currency fund owns direct holdings in the underlying tracked currency. There are other reasons why you should not expect local yield, as well, but this characteristic is one of the more salient ones.

WisdomTree Emerging Currency ETF 'Fills Void in ETF Landscape'

I've been in touch with WisdomTree's product folks: there's no fact sheet PDF yet available that details holdings weights/proportions. They described the timing of one's availability as "uncertain" (as of 05.06.09), but want us to check back frequently: www.wisdomtree.com/etf...

Multiple Asset Class Short-Term Returns

I second sbenard's comments: I've used LSC, as well. Great utility in its flexible L/S schedule.

The Top 10 ETF Model Portfolio

Nice consideration of mainstream etfs, Matt. Your article provides an excellent foundation for those interested in building etf portfolios for the intermediate to long term.

I'm a little concerned about high correlations among the above selections, however. With few exceptions, most of those choices - regardless of money flows - are highly correlated with one another over 1 and 3 year periods. And while many folks might hold them for longer, a large chunk of their portfolios would still be locked up in pretty high r^2 choices in the 4+ year (and beyond) range.

(Remember, anyone interested may 1) download data (closing price) for an etf in a prescribed period from Yahoo Finance to a spreadsheet, 2) align that data column near one for SPY, DIA, or QQQQ (or whichever other average for which you seek correlation data), and 3) use the CORREL command to check comovement: as such "CORREL(A1:A100,B1:B10... Performing your own correlation checks often 1) yields more varied period options than you'll see in the various etfs' glossy literature and 2) allows you to build tables that better help you analyze the r^2 of your portfolio.)

May I recommend an alternative to FXI? Loaded with financials (49%), one could argue for alternatives unless one seeks that bias. CAF, since its inception as a Morgan Stanley CEF, has outperformed FXI. It also does so on the 1- and 2-year time scales (even with roughly double the yearly fee), and holds less of a financial disposition (34%) to boot. (Note: The fund currently has 14% in cash.)

I do like LQD, own GLD, and have owned VTI long enough in several accounts that it has performed as advertised.

QQQQ is a relatively diversified pick, as well, for a popular average (0.84 r^2, depending on the period) because of its relatively large health care allocation: 20% (Amgen, Gilead, Teva); and, consumer discretionary: 12% (Costco, Starbucks, and DirecTV).

Readers wishing to add additional etfs for consideration to Matt's thoughtful presentation might want to study those in international energy or real estate, a currency hedge vehicle (DBV or ICI), or some commodities (but be mindful of the oils' waitings: unless you're content with over saturation, and equal-weight product such as Greenhaven's GCC might be more your style). A few other considerations might be to include an allocation to municipal and junk bonds, international or domestic utilities, or alternative style etf constructs (I'm thinking mainly of WisdomTree's dividend-paying based models as alternatives: for example, DEM instead of EEM or VWO).

Will Russia ETF Disprove Bleak World Bank Report?

Thanks Tom, and Max, for this update. I believe there are a great many folks who don't follow closely enough the emerging markets in which they invest: while such grim news is often characteristic of nascent economies, or ones that have undergone fundamental shifts (but not limited to these), it is often forgotten when it's easy to simply purchase an ETF, forget about the corporate entities (and their interrelationships) that it tracks.

Consider Wisdom Tree Brazilian Real Fund for Commodity Exposure

True - BZF might be many things, but a high yielder it isn't: 3.99% Ex on Dec 22nd. And it is the B. real in name only: these WisdomTree currency ETFs, while useful, are not direct investments in international currencies: they're complex products that simulate currency pairs (in this case, USD:BZR).

A Closer Look at Energy Infrastructure CEFs, ETN

According to ETFConnect, TYG didn't pay a distribution on 2/19/2009 - the first time (using ETFC's data) that there wasn't a payout for 11 quarters...Of course, it could be just ETFC, as well: according to them, there's also no data for sector/holdings summary (very odd for ETFC).

CAF: A Better Play on China than FXI

@ Dieuwer: agreed.

For those complacent about options availability, CAF offers less financial sector exposure than does FXI, as well.