ETFs Goings On

Just a few items to start the day.

The American Stock (options) Exchange is going to start trading options that expire on a quarterly basis for iShares Energy (IYE), iShares Russell 2000, SPY and QQQQ. This is interesting to me. The options that retail investors trade are listed options. There is another options market that is an OTC market. In this market, investment banks create options for institutional that are described as being OTC. The options will meet a specific need for the client. The bank will then either sell the other side of that trade to another client or very rarely just take the other side of the trade. The quarterly option concept could be a bridge of sorts between regular listed options and some of the strategies executed in OTC options.

For now these are not that different but may be a first step to more innovation for retail investors.

Seeking Alpha's ETF page has a good article up on Singapore as a haven of stability. This is an interesting idea. I wrote an article about this for TSCM in May. One point I would note is that Singapore will not be immune from emerging market woes, as they come every now and then. The iShares Singapore (EWS) held up better than iShares Emerging Market (EEM) during the spring selloff but it did decline a noticeable amount.

Bill Cara laid out a scenario for a global bear market starting within 60 days with Australia being the maker or breaker. I have been writing about Australia since I started this blog and while I think it is an important investment destination I am not sure it is capable of global leadership of that magnitude.

One reader comment asked about the election in Sweden and how it could impact the krona. While I am no political analyst, the less liberal candidate is favored to beat the more liberal incumbent. This is all relative of course but a slightly more conservative winner is being viewed as krona-bullish by the forex market.

Another reader asks whether ADRs provide a hedge against a falling dollar. I have written about this a few times and the short answer is I believe they do. To see this in action you can overlay the ADR, with the ordinary share and the currency in question to see this at work. The differences between the ords and the ADRs are accounted for by moves in the currency. ADRs are not a perfect hedge but I think they go a long way to getting the job done.

Kennycan had another good point about 1966-1981. He asks if the average investor is better equipped to handle a repeat of that type of action. Good question and while I don't know the answer I think he might be better equipped, maybe you are too.

A reader who goes by m00m said that he sees the coming period looking more like the 1930's. The up years in the 1930's were huge. He goes on to say that he sees a bull market in the next decade of less magnitude than what we had from 1982 to 1999. What I think is not said is that we would have a lot of net sideways action between now and then?