General ETFs

Over the past few weeks the biotechnology sector has witnessed a significant uptick in mergers and acquisitions as large cash-heavy biotech companies are looking to diversify and broaden their horizons.  To put this activity in perspective, in a two-day span nearly $3.1 billion in biotech-related deals were announced and some suggest more activity is to come.  Big Pharma front runners such as Pfizer (PFE), Sanofi-Aventis (SNE), Amgen (AMGN) and Merck (MRK) are expected to find themselves in somewhat of a rut as expiring patents and lackluster pipelines are imminent.  In order to overcome this, Big Pharma is likely to look at smaller, more nimble companies which are focusing on specific treatments and specialties in the medical sector.  Another force that is likely to increase M&A activity in the sector includes the ability to remain globally competitive and gain access to the ever-so-growing emerging market consumer, enabled  though the acquisition of the aforementioned group of acquisition worthy companies who are focusing on specifics...

Small cap and mid-cap stocks and ETFs have been known to be at the forefront of growth during times of economic recoveries, and over the past few months, they have been leaving large caps in the dust.  In fact, historical data shows that small-cap stocks have outperformed their large-cap counterparts during three of the past five recessions, while mid-cap stocks have outperformed their large-cap counterparts in each of the past five recessions.  A major reason behind this outperformance is due to the flexibility and nimbleness of small and mod-cap companies.  These companies are generally able to quickly ramp up headcount and production as the economy improves, which further enables them to take advantage of a growing environment and produce gains in revenue and earnings.  A second force which enables small and mid-caps to outperform large-caps is the inherent performance boost they witness when mergers and acquisitions activity increases as valuations become favorable and larger companies with excess cash on their balance sheets...

As the end of the year rapidly approaches, it is important to understand how Uncle Sam will treat one’s ETF and ETN holdings.  With the vast array of ETFs to choose from, taxes can get tricky.  In general the tax treatment of ETFs is relatively simple and is applicable to long-term and short-term capital gains rules and rates.  For example if one held the SPDY (SPY) for less than one year, any gains would be subject to short-term capital gains rates and if held for longer than one year, then the gains would be subject to long-term capital gains rates. It gets tricky when one starts dealing with commodities ETFs.  These ETFs shoot of Schedule K-1’s, which track the gains and losses of the fund for the year, because they are actually limited partnership interests in the fund.  For example, United States Oil (USO) is formed as a partnership interest, so those who own the ETF have a partnership interest in the...

By Aaron Pressman BOSTON (Reuters) - Gus Sauter, Vanguard Group's chief investment officer, vividly recalls the first time he proposed exchange-traded funds to his boss. "That's the dumbest idea you've ever had," then-CEO Jack Brennan told him after a five minute discussion back in 1998. Sauter persisted. Eventually he convinced Brennan that these newfangled ETFs -- index-tracking funds that trade in real time at ever-changing prices on a stock exchange -- were a natural fit for Vanguard, the largest manager of traditional mutual funds that mirror various indices. Today, Sauter's "dumb" idea has grown to about $135 billion of Vanguard's $1.5 trillion of assets under management. And after years of trailing in the race to attract new money from ETF investors, the fund giant is poised to take the top spot this year. In the first 10 months of 2010, Vanguard grabbed $31 billion versus $18 billion for iShares, now owned by New York money manager BlackRock Inc BLK.N and the market leader for...

As commodity ETFs have witnessed increased investor demand and increased returns over this year, there have many new resource-specific ETFs brought to market and now the United States Commodity Funds plans to introduce three more funds giving exposure to copper, agriculture and metals. The three aforementioned resource-specific commodity sub-sectors have been at the pinnacle of performance during the last 12 months and are expected to continue to shine in the near future. Copper, which is used in pipes, tubing, wires and other industrial uses, is expected to witness increased demand over the next few years as global economies, in particularly in emerging markets like China and India, continue to grow. In fact, global demand of copper is expected to outpace supply in 2011, the first time in four years, giving the metal even further positive price support. As for agriculture, there is expected to be a major imbalance in global food supply and demand. Unfavorable weather conditions around the world have resulted...

Heavy rainfall and inclimate weather have taken its toll on India’s second largest producing state having many investors worried that global supply for sugar will not meet demand sending prices higher and providing positive price support to the iPath DJ-UBS Sugar TR Sub-Idx ETN (SGG), the PowerShares DB Agriculture Fund (DBA) and the UBS E-TRACS CMCI Agriculture TR ETN (UAG). Elevated demand for sugar has resulted in a diminishing supply of global sugar stock levels, pushing levels to their lowest point in 20 years and prices of raw sugar prices back up towards their 30-year high levels. Furthermore, yields in Uttar Pradesh, which is India’s second largest sugar producing state, have been cut enhancing fears that India may not produce the expected 25 million ton crop that the global market place has been hoping for, reports Caroline Henshaw of the Wall Street Journal. As for the near future, global demand for sugar is expected to remain elevated and continue to increase as...

By Aaron Pressman BOSTON (Reuters) - Inflation-wary investors worried about low returns in basic U.S. fixed-income and equity funds are flocking to some of the newest highly specialized exchange traded funds focused on exotic locations and products. Investors are piling into new ETFs focused on precious metals, Indonesian stocks and global companies active in lithium mining, according to data compiled by Lipper, a unit of Thomson Reuters. Yield-hungry investors also favor new ETFs focused on master limited partnerships, emerging market debt and closed-end funds. "The inflation story is driving investors towards companies and places leveraged to physical commodity prices," Morningstar analyst Scott Burns said. "And clearly, investors are gravitating towards higher yielding plays." By contrast, some of the least-attractive new funds launched this year focused on broad U.S. equities markets. Some funds that tried to magnify their returns with futures contracts and, at the same time, invest in volatile niche markets also appear to have gained little interest. The lack of flow to broad U.S....