The dividend indexing firm, which launched its first twenty ETFs earlier this month, has filed with the SEC for the right to launch ten additional funds. The new funds will focus on ten international sectors, and will be the first purely international (i.e., ex-U.S.) sector-based ETFs.

TRAKRS differ from other futures contracts in that they are not leveraged (you must put down their full value when buying them) and (in the United States) they may be held in a regular brokerage account rather than a special futures account. These latest TRAKRS mature on October 26, 2010. At that date, the value of the TRAKR will equal the accumulated value of the Rogers Index, less a 1.95% per year fee (similar to an expense charge on a mutual fund or ETF).

As a practical matter, this difference in weightings turns out to be somewhat less than this table would suggest; between 1992 and 2004, the correlation between the GSCI and DBLCI was an impressive .91; their respective correlations with the DJAIG were .89 and .86. Moreover, the standard deviation of the returns on the GSCI and DBLCI were indistinguishable over this period, at, respectively, 17.60% and 17.63%, compared to 11.88% on the DJAIG.

I have an uneasy feeling that some of the latest index product introductions fall into this latter category. Specifically, the U.S. market has recently seen the launching or registration of new "sub-sector" ETFs, focused, for example, on insurance, oil and gas exploration and production, or biotech companies.

But recently Arnott has become best known for the turmoil he created in the indexing industry with the publication of his paper on "Fundamental Indexation" (co-authored by Jason Hsu and Phillip Moore). In essence, Arnott found that a portfolio of companies weighted by various measures of size (e.g., revenues, cash flows, book asset value) outperformed (in the past, at least) a portfolio weighted by companies' equity market capitalization. Arnott's findings imply that, in aggregate, investors have been systematically undervaluing large companies (based on sales, assets, and/or cash flow) relative to small companies.

The logic behind this is as follows: Theoretically, the fair price of an asset (also known as its fundamental value) is equal to the present value of the future cash flows it is expected to produce, discounted at a rate that reflects their relative riskiness. Current economic conditions affect the current cash flow an asset produces. Future economic conditions affect future cash flows and discount rates.

Our government bond market valuation update is based on the same supply and demand methodology we use for our equity market valuation update.

Our market valuation analyses are based on the assumption that markets are not perfectly efficient and always in equilibrium. This means that it is possible for the supply of future returns a market is expected to provide to be higher or lower than the returns investors logically demand.