Looking at Commodity and Foreign ETFs in 2007

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Includes: DBA, GLD
by: Roger Nusbaum

Roger Nusbaum submits: The folks at ETFTrends.com have a top ten list of trends they see for 2007 and asked for my two cents on any of them. So, #2 yes, #5 no and #7 maybe. Humor attempt.

Number one is that foreign will continue to beat domestic. I'm not so sure that will be the case, or more specifically I tend to think it will be a shades-of-gray difference not favoring either one very much. I expressed some concern in my 2007 prediction video that emerging markets might not have such a great year. I have no concern about the long term, but emerging markets have had a great run over the last few years.

Number 3 was that the ranks of ETFs will continue to explode. Based on what is in registration this is already true. I also hope some of the me-too funds with no assets close. The funds in registration offer a lot of new things, but we have a lot of mid-cap value ETFs these days.

Number eight is about narrow commodity funds. Seven just listed, and I hope more come. Unfortunately many folks will use these to speculate; the possibility that the next year won't be so hot seems reasonable, and they may get a bad rap.

If you read this site, chances are you are stock investors. I know I am. I am not a commodities investor. I am a commodity diversifier, and there is a difference.

I have 3% in streetTRACKS Gold Trust ETF (NYSEARCA:GLD) for clients, I disclosed the possibility of adding PowerShares DB Agriculture Fund (NYSE:DBA) (a personal holding) at a 2% weight in a couple of months once I get a feel for how it trades day to day. That would total 5%. This is an effort to capture low correlation. It is not a complex commodity strategy. I have in the past and continue to now urge moderation in commodity ETF use.

Here is one of my own: I think the fixed income market is ripe for better ETF products. I do not think more treasury ETFs are the thing that would make this happen. Indexes already exist for many foreign bond markets along with other fixed income products. This seems so obvious that I am surprised more has not been done so far.