IndexUniverse is reporting a couple of interesting ETFs in the works from StateStreet including an equity fund for frontier Africa, an equity fund for GCC and a convertible bond ETF.
Obviously Africa and GCC aka the middle east would be new exposures for US based investors and the convertible bond fund while not new offers the potential for a superior wrapper.
The exposure for now through CEFs is ok but in the last few months or so the flaws of the CEF structure have really been spotlighted. I would imagine that a convertible ETF would have to do a lot of index sampling and I'm not sure what sort of impact that would have on performance but I am hopeful that it turns out to be better than the CEFs. Individual issues in this space are one of the more difficult types of bonds to analyze and then pick, at least for me anyway.
There was an interesting article in Barron's by a couple of decision makers at Comstock Partners about operating earnings versus reported earnings and how people pick the one that supports their bullish or bearish argument.
I have never believed that the PE ratio was much of a predictor of price. It obviously helps with valuing companies but PEs can be high and prices go up and be low and prices drop.
The accompanying chart of of the S&P 500 from the first six months of 2003 which saw a meaningful lift in prices that seemed to start when the PE was above 25. There are obviously other periods like this.
You might look at the chart, consider what happened over the previous couple of years and come up with a pretty good yeah, but which I think would only support the notion of PEs not being reliable predictors of future price action. First quarter 2003 was a major turning point in the market yet the PE was very high.
Charles Kirk had a couple of links that caught my eye.
First was this little ETF article from Morningstar about ETFs that they feel are candidates for closure due to insufficient assets and poor performance. The article is another example of their total lack of understanding of what ETFs are.
Obviously if a fund is not economically viable it runs the risk of being closed. I have read different numbers as to where they become profitable so while I do not know the exact number it is safe to say a $20 million fund is not a profit center.
But the notion of poor price action is not enough to determine whether an ETF has "stunk up the joint" or not. I counted 47 funds on the deathwatch list (if I miscounted feel free to leave the correct number). In eyeballing the list I don't believe there are any on there that I ever considered buying but included in there were several pure beta exposures.
Apparently the ProShares Ultra Russell 2000 Value (UVT)--so double long SCV--is on the list because it only has $9 million in assets and is down almost 34% over some period of time. Again if ProShares can't justify keeping a $9 million fund open then they should close it but the idea of poor performer makes no sense.
The fund listed in February, 2007. 2007 was a bad year for small cap. So the fund provides double long exposure to a segment that has done poorly (very normal for small cap in a bear market), of course the fund is down a lot. Do you think the next time small cap value leads UVT will be one of the best performers?
All this fund is is beta. Today is either a good time to own this specific beta or it isn't. Two years from now will either be a good time or a bad time to own this specific beta. Assuming the fund tracks what it is supposed to track, UVT will never be a good fund or a bad fund it will simply be exposure and the investor will either be correct or incorrect with his timing.
One last little tidbit where Daniel Gross debunks the idea that 1.3 million people are making a living on eBay. Personally I buy two or three things a year on eBay but this is one I hope can work out. I know one or two people who who make money on eBay (I do not know if they make enough to be more than walking around money) but there is demand for a lot of the stuff on there the variable is whether it is viable as a part time job or not. The idea of building a small stream of income by eBaying stuff seems ideal for retirement but perhaps this article is telling us it is not realistic for most folks.
The picture is