The U.S. housing market, after having been battered and bruised during the recent recession, had staged an impressive recovery in recent months as belief that the market has finally hit bottom seemed to gain support. But new data reveals the true fragility of the housing recovery, and indicates that the potential for a “double dip” in this industry is very real.

New home construction fell sharply in October, as housing starts declined 10.6% compared to the previous month to a seasonally adjusted 529,000. When compared to last October, the results reflect a disastrous 30.6% drop. The steep decline came as a surprise to many analysts who had been anticipating an uptick for the month. The surprise loss shows the true impact that uncertainty over whether Congress would extend the $8,000 tax credit for first-time home buyers beyond its initial November 30 deadline.

For investors looking to make a play on the technology sector through ETFs, there are a number of options offering varying degrees of exposure. The PowerShares QQQ Trust (QQQQ) tracks the Nasdaq 100 Index, meaning it is tilted heavily towards the technology sector (about 65% of its holdings), but maintains moderate exposure to health care and consumer discretionary companies as well. For investors looking to make a pure play on technology, there are several broad-based technology funds, such a Technology Select Sector SPDR (XLK) and iShares Dow Jones U.S. Technology (IYW), that invest in various technology-related companies. But there are also technology ETFs offering far more specialization, including funds focusing on software iShares Goldman Sachs Software Index (IGV) and PowerShares Dynamic Software (PSJ), internet architecture HOLDRs (IAH), PowerShares Lux Nanotch (PXN), and several other.

One of the most popular corners of the technology sector focuses on semiconductors, a key component of almost every modern electronics product. Named because their electrical conductivity is between that of a conductor and an insulator, semiconductors are useful as sensors in countless gadgets. About 40% of demand for semiconductors is linked either directly or indirectly to computer sales, creating a strong relationship between PC demand and the health of the semiconductor industry. Cell phones also account for a significant portion of demand, and the introduction of new versions of smartphones has helped to prop up the semiconductor market.

Barclays Global Investors announced on Friday the launch of the iShares S&P India Nifty Fifty Index Fund (INDY), a new ETF tracking an index composed of the 50 largest and most liquid Indian securities listed on the National Stock Exchange of India. INDY will compete with several existing India exchange-traded funds, including products from iPath, WisdomTree, and PowerShares.

“We’re pleased to provide investors with an iShares ETF that tracks one of the most investable and well-known India indexes,” said Noel Archard, head of U.S. iShares Product Research and Development. “Demand for Indian equities continues to be strong as India has a differing set of companies and industries.”

The recovery showed signs of falling into chaos on Thursday, with Treasury Secretary Geithner facing a firestorm in Washington as lawmakers called for his resignation and Dell reported a decline in profits of more than 50%. Elsewhere in the world, EU leaders (as expected) selected Belgian Premier Herman van Rompuy as the bloc’s first full-time president.

The ETFdb 60 Index, a benchmark measuring the performance of the universe of investable assets available through ETFs, dropped 9.58 points, or 0.9%, to close at 1,015.39. The day’s largest decliners featured a trio of small cap ETFs, as the iShares Russell 2000 Value Index Fund (IWN) shed 2.6%, the Russell 2000 Index Fund (IWM) lost 2.5%, and the Russell 2000 Growth Fund (IWO) shed 2.4%. Mid cap indexes lost about 2%, while S&P ETFs lost about 1.3%.

Technology ETFs have hit a wall in recent days, slumping on news of an analyst downgrade to Research in Motion, slashes in projected semiconductor demand, and weak earnings reports from several internet companies. With an uncertain holiday shopping season ahead, the fate of the technology sector is very much up in the air, and technology ETFs could be on the move in coming weeks.

BMO Capital Markets cut their rating on Blackberry maker Research in Motion (RIMM) on Wednesday, pointing to increased competition from Verizon (VZ) as consumers opt for less expensive smartphones. Also weighing on the tech sector were weak results from Salesforce.com (CRM) and Autodesk (ADSK), which lost about 3% and 10%, respectively, during yesterday’s session.

U.S. Commodity Funds, the issuer behind ultra-popular commodity ETPs such as UNG and USO, has launched the United States 12 Month Natural Gas Fund under the ticker UNL. The investment objective on UNL is to reflect the changes in percentage terms of the spot price of natural gas delivered at Henry Hub, Louisiana, as measured by the changes in average of the prices of 12 NYMEX natural gas futures contracts, consisting of the near month contract to expire and the contracts for the following 11 months. UNL will “roll” near month futures contracts when they are within two weeks of expiration.

UNL is very similar in some ways to the United States Natural Gas Fund (UNG), but very different in others. UNG has become one of the most popular exchange-traded commodity products this year as investors have sought out ways to gain exposure to natural gas prices. Due to the physical properties of natural gas, storage by an ETF issuer is nearly impossible (and would be prohibitively expensive). So in order to gain exposure to natural gas, UNG invests in near month futures contracts, rolling its holdings to the second month futures contracts as expiration nears.

The rise of the ETF industry has been impressive, expanding from virtually no listings ten years ago to about 900 today. And there is still plenty of room for growth. As we head towards the end of a wildly successful year for the ETF industry, ETF Database is taking a look forward, making our predictions for what the future holds. To us, the industry’s future is a bit of a paradox: we are certain that it will continue to expand at an impressive rate, but uncertain as to which new or existing product areas will drive this growth.

Earlier this week, we took a look at the first area of the ETF market that we expect to expand significantly in coming years, delving into the relative paucity of targeted ETFs focusing on economies outside of the U.S. (which we published before IndexIQ filed details on 13 new ETFs, including nine country-specific small cap funds). Today, we shift asset classes to another look at another corner of the ETF market that we feel is severely underdeveloped: corporate bonds.

Signs of weakness in the impressive equity market rally began to show on Wednesday, as housing starts unexpectedly plummeted and concerns about earnings from the technology sector began to pop up. Most major benchmarks lost ground for the session, as did the ETFdb 60 Index, which shed 2.28 points to close at 1,024.96. Losers outnumbered winners by more than two-to-one in relatively light volume.

One of the biggest decliners on Wednesday was the United States Natural Gas Fund (UNG), which lost 3.3% as continued concerns over a glut of supply weighed on prices. Natural gas inventories have reached all-time highs in recent months as the impact of new discoveries and implementation of new technologies has worked its way through the markets. UNG has now lost more than 65% over the last year, but continues to be one of the most active exchange-traded products. Volume on Tuesday topped 37 million shares.

Oklahoma City-based Geary Advisors, LLC announced today that they are in the process of reducing the fund fees for their two state-specific ETFs, including the TXF Large Companies Exchange-Traded Fund (TXF) and the Oklahoma Exchange-Traded Fund (OOK). When these ETFs were initially launched (OOK in late October and TXF in early November), both charged fees of 85 basis points, making them significantly more expensive than most large cap domestic funds.

Following the significant reduction, the state-specific ETFs will be competitive with both broad-based large cap ETFs and sector-specific energy funds. Following the change, both OOK and TXF will be cheaper than the SPDR Energy Select Sector Fund (XLE), which charges an expense ratio of 21 basis points. “I believe these funds are excellent way to invest in Oklahoma and Texas companies, many of which are related to the energy sector,” said Keith Geary of Geary Advisors. “We are in the process of lowering the management fees in pursuit of competitive excellence. We feel we have a great product and want these funds to be competitive with similar funds.”

In the latest sign that this recovery just might have some staying power, several major retailers reported strong earnings reports for the third quarter. But along with these pleasant surprises came warnings of tough times ahead, indicating that forecasts for the upcoming holiday remain murky. The major retail earnings announcements made so far this week range from high end stores to borderline bargain basement centers.

High end retailer Saks (SKS) posted a surprise profit for the first time in six quarters by cutting expenses and avoiding the temptation to push promotions and clearance discounts amid falling sales. Instead, Saks has been working with suppliers to lower prices on designer goods, allowing the company’s stores to sell more luxury brands starting at lower prices. “I think there have been some changes in the luxury consumer,” Chief Executive Steve Sadove said on a call with analysts. “People are very much focused on value.”

Bethesda, Maryland-based ProShares announced on Tuesday that it expects to pay zero 2009 year-end capital gains distributions on all 77 of its leveraged and inverse equity and fixed income exchange-traded funds, putting at ease any investors who had been questioning the tax efficiency of leveraged funds. “While we manage ProShares to minimize capital gain distributions, a myriad of factors may impact the level of capital gains that tax regulations require to be distributed,” said Michael L. Sapir, Chairman and CEO of ProShare Advisors LLC, ProShares’ investment advisor. “In contrast to last year when the funds were faced with a confluence of highly unusual circumstances with respect to such factors, this year presented circumstances that we view as more typical.”

In 2008, several leveraged ETFs made significant year-end capital gains distributions, most notably the Rydex 2x S&P Select Sector Energy (REC) which paid out more than 80% of its NAV. This came as a very unpleasant surprise to many investors who embraced ETFs in part because of their enhanced tax efficiency relative to traditional actively-managed mutual funds.

President Barack Obama embarked this week on a critical trip to China, seeking to gain support for tougher economic sanctions against Iran during meetings with Chinese President Hu Jintao. But as the U.S. president was setting out to present his case, the controversy over the relative value of China’s currency, a delicate issue for U.S. officials, fired up once again.

Yuan Controversy

Between 1997 and 2005, the yuan was pegged at a rate of 8.27 yuan per U.S. dollar before the government allowed the currency to float at a band of 0.3% around a rate published by the People’s Bank of 2007 (the band was subsequently increased to 0.5%). For the last 18 months, the yuan has been held in place against the dollar at a rate of approximately 8.83 yuan per dollar, a policy that has irked many U.S. officials, most notably Treasury Secretary Timothy Geithner.

Wheaton, Illinois-based First Trust, a leading issuer of intelligent indexes, has plans to launch the first ETF focusing exclusively on the grid and electric energy infrastructure sector. The First Trust NASDAQ CleanEdge Smart Grid Infrastructure Index Fund will trade on the NASDAQ Exchange under the ticker GRID and will charge an expense ratio of 0.70%.

In order to be eligible for inclusion in the underlying index, a company must be classified by Clean Edge as a smart grid, electric infrastructure, and/or other grid-related activities company. There are also standard liquidity thresholds that must be met in order for a company to be included. While the benchmark includes niche companies such as National Grid PLC (NGG) and SMA Solar Technology AG (SMTGF.PK), it also features allocations to multinational mega-caps such as General Electric (GE), Siemens AG (SI), and WESCO (WCC).

The fundamentals-defying market rally took a brief pause on Tuesday, with most major benchmarks finishing slightly up as investors kept an eye on China’s stubborn stance towards the yuan and digested strong results from several retailers. The ETFdb 60 Index, a benchmark measuring the performance of investable assets available through exchange-traded products, lost 0.28 points to finish at 1,027.24.

The iShares MSCI Brazil Index Fund (EWZ) was one of the day’s biggest winners, gaining 1.3% following comments from the Ministry of Finance indicating a bright outlook for GDP growth over the coming decade. Finance Minister Guido Mantega said Brazil’s GDP should grow steadily between 6.0% and 6.5% between 2010 and 2016, with investment increasing as much as 15% next year. Brazil ETFs have been volatile in recent weeks, but have delivered big gains so far in 2009. EWZ is up more than 120% year-to-date, compared to about 70% for the iShares MSCI Emerging Markets Index Fund (EEM)

IndexIQ, the ETF issuer behind the first hedge fund ETFs, has brought its fifth exchange-traded product to market, the IQ ARB Merger Arbitrage ETF. The fund began trading Tuesday on the NYSE Arca Exchange under the clever ticker MNA. The new ETF will track the IQ ARB Merger Arbitrage Index, a benchmark that includes global companies for which there has been a public announcement of a takeover by an acquirer. The index also includes short exposure to global equities as a partial equity market hedge.

Even after a deal is announced, most publicly-traded target companies generally trade at a discount to the stated offer price, reflecting some degree of uncertainty that the deal will ultimately close. While the vast majority of announced transactions are ultimately consummated, it is not unheard of for regulatory hurdles, lawsuits, and financing issues to derail deals.

While the differences between traditional actively-managed mutual funds and exchange-traded products include several somewhat complex distinguishing characteristics, most investors focus on the relatively simple issue of expenses when making comparisons. Due to their passive nature, ETFs generally offer much lower expenses than mutual funds that can employ teams of analysts and conduct thorough research in an attempt to beat the market (a goal that has proven elusive).

If costs are a determining factor for investors when selecting between an investment in an ETF and a mutual fund, one would expect it to also be given primary consideration when choosing between otherwise similar ETFs. Surprisingly, this isn’t always the case. In fact, quite the opposite seems to be the norm in the ETF industry, as there are several examples of investors clearly favoring more expensive ETFs over otherwise comparable funds. Below is a closer look at four such funds, and their “bargain” competitors.

Newport Beach, California-based PIMCO announced Tuesday the launch of its first actively-managed bond ETF, the Enhanced Short Maturity Strategy Fund. The new ETF will trade on the NYSE Arca Exchange under the ticker MINT and charge expenses of 0.35%. MINT is intended to be a higher yielding alternative to money market funds, and will invest primarily in short duration investment grade debt securities. MINT will not include options, futures, or swaps in its holdings.

The new PIMCO ETF will be managed by Jerome Schneider, deputy head of the company’s money market desk. “Investors are holding a lot of cash, and are compelled to look for something beyond the near-zero yields that money market funds offer,” said Schneider. “MINT aims to maximize investors’ current income by accessing PIMCO’s discipline, risk management and market expertise within a highly liquid and transparent ETF.” MINT will be managed in the mold of countless other PIMCO bond funds, relying on both a top-down analysis of financial, political, and social trends as well as a bottom-up credit analysis.

Invesco PowerShares is scheduled to launch its Build America Bond Portfolio (BAB) on Tuesday, the first exchange-traded product to offer exposure to a new class of fixed income securities. Build America Bonds are different from traditional fixed income securities in several ways, with the potential to deliver attractive real returns with minimal risk of default to investors.

Simple Formula

Build America Bonds are relatively simple securities: taxable bonds issued by state and local governments, with interest from the bonds subsidized by the U.S. Treasury. The Build America Program was introduced under the American Recovery and Reinvestment Act of 2009 with the objective of reducing borrowing costs for municipalities looking to pursue necessary capital projects, such as work on public buildings, courthouses, schools, roads, and utilities.

U.S. equity markets kicked off the week with a strong performance, as investors were apparently encouraged by a commitment to low interest rates from Ben Bernanke and willing to overlook a big loss from GM, a critical audit of the New York Fed, and difficulties in easing relations with China. The ETFdb 60 Index, a benchmark of the universe of investable assets available through ETFs, gained 13.06 points, or 1.3%, to close at 1,027.52. Only five components of the Index finished the day in the red, as almost all asset classes delivered a strong performance to kick off the week.

The United States Natural Gas Fund (UNG) added 3.8% for the day, as futures gained following hopes that a sustained economic recovery would boost demand for both natural gas and crude oil. In addition to industrial demand, natural gas prices also responded to forecasts for below-average temperatures throughout most of the U.S. in coming weeks. UNG closed at $9.40 on Monday, reflecting a 3.3% premium to its NAV.

San Francisco-based iShares, the market leader with more than 185 U.S. listed ETFs, announced on Monday the launch of its latest product, the iShares Diversified Alternatives Trust. Unlike most iShares products that seek to track the performance of an underlying benchmark, the Diversified Alternatives Trust seeks to maximize absolute returns from investments with historically low correlations to traditional asset classes. The new product will trade on the NYSE Arca Exchange under the ticker ALT and charge an expense ratio of 0.95%.

The construction of ALT will be somewhat fluid, based on a process that ranks each potential strategy by expected return, volatility, and trading cost. Potential strategies include: