By Dave Nadiq

Matt’s call for a better bond index is just the tip of the iceberg.

Here is a list of 73 exchange traded funds with at least $100 million market-cap, at least $1 million daily Dollar trading volume, and at least 3% annualized last dividend yield.

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Below is a list of the 20 best performing dividend ETFs over the past year. ETFs were ranked by 1 year performance and were required to have a 3% minimum dividend yield. One year ago, we were on the cusp of a market meltdown. Not surprisingly, since that time US treasury bonds have performed well.

Interestingly, Malaysia, a country many US investors may be unfamiliar with, made the top 10 in the form of EWM. The top performing dividend ETF has been PCY, the emerging markets sovereign debt. This indicates some willingness by investors, even the midst of global financial challenges, to look outside the US for yield. The 200-Day SMA column indicates the percent the ETF is trading above/below its current 200 day simple moving average.

By Matthew Hougan and Dave Nadig

[Editor’s note: The following is the final installment of a two-part series analyzing best practices in using fixed-income exchange-traded funds in the most cost-effective manner as part of a broadly diversified portfolio. This story originally appeared on IndexUniverse.com on August 6, 2009.]

These two tables present those ETFs with over $100M of market-cap and which also have 200-day moving averages that are sloping upward.

If your goal is to own ETFs that have a rising primary trend, then these ETFs are probably a reasonable place at this time to find opportunity.

We recently scanned the 800+ ETFs for those that trade at least $1 million per day. There were 270 of them. Today we scanned that list of 270 for those that exhibit strong upward price pressure in the form of the price, the 5-week average, the 10-week average and the 20-week average all being above the 40-week average.

There are 35 ETFs overall showing that condition; 12 with a downward sloping 40-week average, and 23 with an upward sloping 40-week average.

Visually inspecting charts is essential to “get the picture”, but using a computer to quantitatively screen for ideas that can be reviewed in depth, one-by-one is very helpful. It allows you to work with a large universe of possibilities that the computer can narrow down to a manageable list.

Just as financial fundamentals and valuation can be quantitatively screened using computers, so too can charts. While ordinary computers cannot pick up the near infinite variety of information that the human eye can see, they are much better than humans at testing large numbers of charts for a few specific quantitative features. Computers are millions of times faster, are totally objective, and don’t make mistakes.

Hedge fund Replication

After all the crazy exchange traded funds (ETFs) that have been released over the past few years, we thought we had seen it all. But, leave it to IndexIQ to take it to the next level . They've released the IQ Hedge Multi-Strat ETF, ticker QAI. This new ETF is not a hedge fund itself and does not invest in hedge funds. However, it seeks to replicate their hedge fund multi-strategy index, where they use long/short equity, global macro, market neutral, event-driven, emerging markets, and fixed income arbitrage. We thought this was an interesting offering seeing how we track hedge fund portfolios here at MarketFolly. But, upon further examination, we found a few flaws with this vehicle.

Basically, IndexIQ has laid out exposure to all the major hedge fund strategies and will try to seek solid returns based on a collection of these strategies. What is interesting about this ETF is that it is investing in other ETFs as part of its strategy. Some of their top holdings include: iShares Aggregate Bond (AGG): 23.91%, iShares Barclays 1-3 Year Treasury (SHY): 18.31%, and iShares Emerging Markets (EEM): 11.04%. The immediate criticism here would be investors asking, "Why do I need to use this ETF when I can just look at your top holdings and allocate my money appropriately to the ETFs QAI is using?" And, that makes perfect sense. (After all, IndexIQ will post daily holdings to their website and will rebalance on a monthly basis). Investors could simply buy the same ETFs QAI is invested in.

Based on historical patterns, the following list of dividend-paying asset classes is a good starting point for retired investors wishing to construct a well-diversified retirement portfolio for income.

The WSJ's Brett Arends has learned his lessons this year, and shares them with us, including these:

4. Invest more, not less. Is that a guffaw from the peanut gallery? I don't blame you. Your savings just fell 40% or more. But higher risk and lower returns means you need to invest more to reach your goals.
6. Your grandma was right after all. A penny saved really is a penny earned. Debt really is dangerous. And an economy where it's easier to borrow $10,000 on a credit card than find a working electrician is heading for trouble.
8. Own plenty of bonds. Yes, they're less exciting than stocks. Turns out, that's the point. There's little use keeping everything in stocks "for the long run" if they kill before you get there.

By Eric Roseman

Several segments of the credit markets have come back to life in December after crushing losses recorded in September and October. Though it’s too early to celebrate a broad based credit revival, the largest issuers of investment grade debt surged this month as yields plunged. Mortgage-backed bonds, or agency debt, have also rallied sharply in December on the heels of government guarantees and the Fed’s plan to spend $500 billion dollars to shore up the sector.

Stocks are pricing in a recession, and bonds are priced for a depression.

That’s what Bill Gross, Managing Director of PIMCO and the world’s “Bond King,” has been telling anyone who would listen for months now.

Only three of the more than 80 State Street Global Advisors exchange-traded funds expect to pay capital gains to investors at year-end, another example of a large ETF complex that has managed to strictly limit the percentage of its portfolios passing on any capital gains to investors.

This is the time of year in which ETF companies attempt to show their tax advantage over traditional mutual funds through the limited capital gains passed on to investors.

Many of our readers at AboutETFs.com have shown increased interest not only in US Government backed bonds, but in Investment Grade Corporate bonds as well. The prevailing question seems to be “should I shift entirely out of corporate bonds, even investment-grade corporate bonds, and move my bond allocations into US Government paper?”

There are two areas of bond investing that have seen large inflows this year: international bonds and domestic high yield, otherwise known as junk.

The table below displays the results for the international ETFs available in 2008:

In retrospect, 2007 was the year of the bond ETF, and it was the year the bond war began. You can’t have a war with only one army, of course, and prior to 2007, Barclays had the field to itself. They introduced their first two bond ETFs in 2002 (iShares Lehman 1-3 Year Treasury Bond ETF (SHY) & iShares Lehman 20+ Year Treasury Bond ETF (TLT)), and added their third and fourth by the end of 2003 (iShares Lehman Aggregate Bond ETF (AGG) & iShares Lehman TIPS Bond ETF (TIP)). From then until January, 2007, there was not much to write about in the way of new products. Barclays simply consolidated their position and girded for the battle they had to know was to come.

Then came 2007. Barclays led off with nine new fixed income ETFs on January 5th and added six more by the end of the year. Oddly enough, looking at these developments, the first four iShares' funds now account for over $28 billion in assets under management--over half of their $40.2 billion in Barclays fixed income assets. The fifteen newer additions make up the balance.

Prices of Treasury coupon securities registered solid gains today as a host of factors contributed to the market's firm tone. The principal factor in the firmness in the bond market was the reemergence of the risk aversion trade. Spreads in most other investment grade assets classes are widening as the shedding of risk motivates portfolio managers and traders.There is also renewed concern about growth as both the domestic economy and our foreign partners confront financial distress and consumer retrenchment.

The slide in energy prices and other commodity prices has forward looking investors thinking that if those prices can stay in a range around current levels, then inflation reports in the months ahead will moderate and provide central banks with some cover to possible reduce rates.

Back from Key West thirty six hours late, thanks to Delta. I had the opportunity to read lots of financial clutter in paradise - a tedious task the Keys made pleasant. Between the Mohitos,fresh fish and other assorted culinary delights, I navigated a conclusion that earning a nice yield (assuming a stable dollar, more reasonable fuel cost expectations and other commodity cost stabilization) with ETFs and stocks that are less thrilling than the double shorts and other eclectic plays should be just fine for Mr. and Ms. Investor. And perhaps for more sophisticated investors such as yourself.

The following ETFs are higher yielding securities that one may consider to fulfill this theme:

The economic outlook for this year changed dramatically with the release of the December unemployment numbers on January 3. The expectation of a moderate recession or slowdown for the year was based on the assumption that unemployment would stay low. But, the December rate jumped from 4.7% to a full 5%. Historically, this is huge. Since 1949 any jump of this magnitude was followed by a recession, so it doesn't look good for the economy and it doesn't look good for investors for 2008. It also looks dismal for those who are employed for wages. Jobs will be scarcer, wages will tend to be stagnant, overtime trimmed, and benefits reduced.