One other little ETF item is that the Lithium ETF
Global X is set to begin trading their “Global X Lithium ETF” (LIT) this Friday July 23rd. This will be a first of its kind fund on any exchange as the highly reactive metal isn’t traded on any commodity exchange. The Global X Lithium ETF will seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Global Lithium Index.
The Underlying Index is free float adjusted, liquidity tested and market capitalization-weighted index that is designed to measure broad based equity market performance of global companies involved in the lithium industry, as defined by Structured Solutions AG. As of June 30, 2010 the Underlying Index had 20 constituents, 60% of which are foreign companies. The three largest stocks were SQM, FMC Corporation and Rockwood Holdings. The Fund’s investment objective and Underlying Index may be changed without shareholder approval. Shareholders will be given 60 days’ prior notice of any such change.
The Underlying Index is sponsored by an organization (“Index Provider”) that is independent of the Fund and Global X Management Company LLC, the investment adviser for the Fund (“Adviser”). The Index Provider determines the relative weightings of the securities in the Underlying Index and publishes information regarding the market value of the Underlying Index. The Fund’s Index Provider is Structured Solutions AG.
The one space where I think an actively managed ETF would be a boon to investors is in the financial sector. That may seem surprising given how down I am on the sector and how down I've been on it since before this site started, but that is exactly the reason why an active ETF could make a lot of sense. If you look under the hood of just about any financial sector ETF and what do you see? If it is a domestic fund you see JP Morgan (JPM), Bank of America (BAC) and Citigroup (C). If it is a foreign sector fund you see HSBC (HBC), Banco Santander (STD)--the one from Spain-- and a French bank or two. Further down the list you'd probably see some UK banks.
People have made great trades on a lot of these names but in terms of investing I want no part of them. There is no convincing me there are no more shoes to drop (something I have been saying all along). An actively managed financial sector ETF could potentially bypass or at least underweight US and European banks.
Looking over longer periods of time there have been foreign banks that have had relatively little attention paid to them -- that is, they have not been in the news much -- that have done quite well in what has been a down market.
We have owned the same Australian bank since before this site started and for the last five years it is up 22% versus the Financial Sector SPDR (XLF) which is down 53% in five years. We have had the same Canadian bank since before this site started and for five years it is up 37% and our Chilean bank we probably first added in late 2004 but were out of it for a short period of time and it is up 127% for five years. Additionally all three pay very large dividends. We also own a publicly traded exchange and an index provider.
The catalyst for looking for these banks way back when was, and this will be a repeat for long time readers, that the financial sector's weight in the S&P 500 exceeded 20% which I take as a warning of trouble. This is not intended to be a brag after the fact as I've been writing essentially the same thing since the start of this site in 2004. I've also been been saying that this sort of analysis and then finding stocks that fit the bill is not terribly difficult.
Anyone willing to do some stock picking, there you go, but I realize many people are not comfortable with stock picking but are comfortable investing at the sector level which given the landscape of financial sector ETFs this would be a great spot for an active product. Unlike the AADR mentioned above, you know that six months from now it would own financial stocks. It may or may not own the right ones but it would always be a proxy for the sector.
For what its worth I think the best areas in the sector continue to be banks from countries that no one talks about and certain publicly traded exchanges. Obviously there are other areas where the fundamentals are sound too.
One other little ETF item is that the Lithium ETF is planned for Friday and should have symbol LIT. Amusingly Quimica Minera (SQM) will be the largest holding but only at 20% of the fund, not the 100% I've been joking about. Half the fund will be lithium miners and the other half will be lithium users (think batteries) so the fund will be heavier in the US than I was expecting. I plan to do a write up for theStreet.com that should run next week.