ETF XRAY

Favre Torches Vikings, Sets NFL Touchdown Record

By Robert Delfeld, author of How to Raise a Packer Fan: Even in Denver or Boston

After a pre-game dinner of a cheeseburger and fries and half a box of doughnuts for breakfast, Brett Favre and the Pack marched to a 23 to 16 victory over the Vikings in the Metrodome. More importantly, Brett Favre threw touchdown pass number 421, surpassing Dan Marino's earlier record of 420 touchdowns.

He would throw touchdown pass number 422 down the sideline to James Jones in the fourth quarter, putting the game away for Green Bay. For the day, Favre completed 32 of 45 passes for 344 yards with 2 touchdowns and no interceptions. Favre also passed another milestone throwing for 300 yards or more in 50 games.

The Packers are now 4-0 for the first time in nine years and face their arch rival Bears next Sunday night at historic Lambeau Field. I predict another victory as the Packers march to showdown with the Dallas Cowboys.

September ETF Performance

By Carl Delfeld of the Chartwell ETF Advisor

Broad U.S. equity exchange-traded funds gained about 4-5% during a rocky September while many international and sector ETFs did much better. ETF Trends well organized performance report gives you a comprehensive look at how many ETFs fared.

The World Ex-US (VEU) was up 7.9% for the month and here is a sample of how some other country ETFs performed during september, Canada (EWC) up 9.9% on the back of a strong currency, Germany (EWG) up 8.9%. China (FXI), up 21.3%, Australia (EWA), up 14.4% and Brazil (EWZ), up 24.4%.

Top performing sectors for September included steel and gold miner ETFs, each up 22%. The homebuilding sector continued to its downward trend, losing 12%.

Get started capturing the growth in these markets through ETFs by joining the Chartwell ETF Advisor.

Is Hot Korean ETF (EWY) Still Cheap?

By Carl Delfeld of the Chartwell ETF Advisor

South Korea's benchmark Kospi index and the MSCI iShares (EWY) exchange-traded fund that tracks it is the third-best performing mainstream ETF so far this year. Up 29.6% through last Friday, EWY has only been bested by China and Thailand. The key question is whether the market is still attractive from a valuation perspective. It seems still cheap - Korea trades at a 24 per cent discount to the region on a price-to-book-value basis.

As the Financial Times point out, foreign investors have plenty of reasons to be wary about putting their money into South Korea. Asia's third largest economy is becoming an increasingly volatile place to do business - rules are changed retrospectively, tax treaties ignored, and the legal framework can be ignored when nationalism directed at foreign enterprises catches fire.

Recent gains have been largely fueled by Korean investors, foreign investors have been selling. Find out five reasons why and whether you should follow the locals or fund managers sitting in front of laptops in New York, Boston and London. Click here for more.

Are ETFs Safe or Insured?

By Carl Delfeld of the Chartwell ETF Advisor

A natural concern of and common question by investors about exchange-traded funds is are they safe, guaranteed or insured? In other words, are they structurally sound?

ETFZone has a good Q&A piece that addresses this issue as well as some other common ETF related questions.

Here it is with some editing and additions. There appears to be little risk of abuse of the ETF structure as an investment vehicle. In the U.S. the Securities Exchange Commission thoroughly examines any application to create an ETF, and only large and closely watched firms are allowed in on the creation and redemption process of an ETF certificate. Finally, the same government agency (the Depository Trust Clearing Corporation) that ensures that individual stock certificates end up in the right investor's hands after a trade also ensures the ETF certificates are assigned correctly in a trade. In a decade of trading billions of dollars worth of ETFs, to our knowledge, no US investor has ever lost money from fraudulent ETFs.

The risk of the underlying asset is quite another matter. There is no guarantee that the underlying assets in an ETF will perform as the investor expects. An ETF is merely a basket of securities and each security will fluctuate with the market. Each asset class must be examined separately, and risk profiles of assets may change over time. Stocks are clearly risky, and ones in technology or emerging markets particularly so. Long-term bonds will flucuate with interest rates and asset classes like real estate, precious metals, and are also risky in their own way. Short-term investment grade bonds, however, have generally proven quite safe.

A good rule of thumb for ETF investors is never to invest in an ETF unless you look to see what securities are in the ETF basket.

Learn more about ETF basics and how to build an ETF portfolio at Chartwell ETF

Carlos Slim Owns Has Big Stake in Mexico ETF (EWW)

By Carl Delfeld of the Chartwell ETF Advisor

It should be no surprise to sophisticated global investors that many of the emerging market country exchange-traded funds are dominated by the top weighted companies in the index. But behind Mexico's ETF (EEW) is the incredible story of one man, Mr. Carlos Slim, arguably the wealthiest man in the world.

In an excellent article in the Financial Times by Adam Thomson is a description of his empire which makes up more than a third of Mexico's stock exchange index capitalization. According to Forbes, which last put his fortune at $53.1bn, Mr. Slim's net worth last year increased by $19bn, or $52million a day. Excuse my language but that is one hell of a cash cow.

At the core of his empire are Telmex and América Móvil (AMX), his telecommunications giants. These two companies alone make up 35% of the iShares Mexico ETF (EWW).

Telmex dominates the landline telephone business in Mexico, accounting for more than 90 per cent of the market. It is also extremely profitable: Adam's points out that every year it generates enough in top-line earnings to pay for its original acquisition price. Somehow Mr. Slim was able to persuade the Mexican government to allow him to enter the wireless market, a business he would later spin off into América Móvil, which he controls.

The company has increased its subscriber rate by an average of 65 per cent a year since 2000, according to Mr. Slim, and now has more than 125 million clients in over ten countries. The company has obviously been extremely active and successful in penetrating tough but lucrative emerging markets all over the world.

In many ways, companies like Telmex and America Movil are already ETFs being a basket of companies under one roof.

Find out more about using ETFs to tap into incredible growth stories like Mexico by joining Chartwell ETF today.

The Big Daddy of Green Indexes

By Carl Delfeld of the Chartwell ETF Advisor

While the PowerShares WilderHill Clean Energy (PBW) exchange-traded fund has done well for a while, get ready for an ETF tracking the world’s biggest climate change index. The index was launched earlier this week and may give investors the opportunity to profit from companies that fight global warming.

HSBC, the world’s third largest bank, developed the index to track 300 companies worldwide that make money from fighting climate change, such as wind turbine and solar panel manufacturers and biofuel companies. Unlike some other climate change indices, investment funds will be able to buy or sell the index in the same way that they can trade mainstream equity indices such as the UK’s FTSE 100 index or the US’s S&P 500.

The 300 companies in the index – the HSBC Global Climate Change Index – have sharply outperformed mainstream benchmarks signaling the growing demand from investors for securities that fight global warming.

For example, since January 2004 the 300 companies in the index have produced nearly twice the profits or returns of other stocks as measured by the MSCI World Index, which tracks equities across the globe including in the US, UK, Japan and Germany.

Chartwell ETF has had PBW in its New Venture model portfolio. Find out about all of Chartwell seven model portfolios today.

Time to Cut Taiwan Knot

By Carl Delfeld of the Chartwell ETF Advisor and Council on Asian Relations

It is time for Taiwan, China and America to stop kicking the can down the road a few feet each day. Let’s kick the can way down the road by agreeing to a twenty year period of guaranteed autonomy for Taiwan thereby deferring and defusing the combustible independence issue.

There is little doubt that for the leadership of the Chinese Communist Party, Taiwan is a bone in their throat - a constant irritant – and most likely an obsession for some hard-line factions determined to bring Taiwan back into the fold of the motherland. At a September 6th meeting, Chinese President Hu Jintao told President George W. Bush that the next two years will be a time of "high danger" for Taiwan because of the independence referendum issue, and that Taipei should receive "stronger warnings" from America.

Mr. Hu was referring to Taiwanese President Chen Shui-bian's plans to conduct a referendum in March on seeking U.N. membership for Taiwan. This could trigger an emotional response but despite its fury at this latest development, Beijing is very reluctant to take military action against Taiwan for five reasons.

First, any military conflict with Taiwan would surely cancel the Beijing’s showcase 2008 Olympics. This would be a devastating setback for China’s leadership and people

Second, Beijing’s approach of working quietly to support more friendly political factions within Taiwan seems to be working. In addition, Taiwanese President Chen Shui-bian’s term will end in 2008 and Beijing is betting on a less strident and independent successor.

Third, although China is rapidly modernizing its military forces, U.S. treaty obligations to Taiwan in the event of an invasion cannot be discounted. In addition, President Chen, citing China’s expanded missile program in his annual New Year’s Day address, called for the legislature to approve plans to purchase more weapons from the U.S. to offset the buildup. The Pentagon on September 12th announced plans to sell $2.23 billion worth of "surplus" submarine hunting aircraft and air defense missiles to Taiwan. The deterrent remains strong if the U.S. stands firm and sends a clear message.

Fourth, a 2005 joint statement by the Japanese and U.S. governments that both countries had a “common strategic objective” to “encourage the peaceful resolution of issues concerning the Taiwan Strait through dialogue,” raises the possibility of Japanese intervention making the military option even more risky and improbable.

Lastly, any military action would derail China’s double digit economic growth not to mention the economic integration of Taiwan into China which is moving ahead at a breathtaking rate. Cross-Straits trade has doubled since 2000 to reach $80 billion in 2006, about 1 million Taiwanese have re-located to work in China, and Taiwanese companies now account for about 65% of hardware output from the mainland.

My view is that while calls for independence are not practical near term, the desire for a high degree of autonomy from China by Taiwanese citizens is still very strong. There may be one greater China but there are three systems – China, Hong Kong and Taiwan. A period of Taiwanese autonomy will allow its citizens to observe if China’s system evolves into a more open, transparent system with rule of law and democratic institutions. This cooling off period would help China, Taiwan and America defuse rising tensions that could lead to open conflict if conventional thinking continues to dominate the debate.

In addition, right now politics rather than economics is unfortunately the prime concern for most investors considering investing in Taiwan. For the next couple of years, both could lead to a window of opportunity for investors with nerve and foresight. The same goes for American diplomats if they shift the focus from Taiwanese independence to autonomy.

Taiwan with a population of 23 million and an area of 14,000 square miles (half the size of Ireland) is a remarkable success story. However, but Taiwanese companies will need to constantly innovate, make Taiwan a major R&D center and build strong consumer brands to avoid the it’s economy from being swallowed by the mainland.

If you can get over the political risk, Taiwan’s stock market, which is up 17% so far this year, represents good value though you should expect some volatility. Take a look at the iShares Taiwan (EWT) exchange- traded fund. It has a 23% exposure to the semiconductor industry and Taiwan Semiconductor accounts for 14% of its holdings but it includes significant exposure to technology hardware, materials and banks.

For global investors, an autonomous Taiwan could be the purest China play of all. Learn more about the best way to play Chinese economic growth by joining the Chartwell ETF Advisor.

Packers Undefeated as Favre Ties Marino NFL Touchdown Record

By Robert Delfeld, author of "How to Raise a Packer Fan: Even in Denver or Boston"

Brett Favre managed yesterday a thrilling come from behind victory over the San Diego Chargers with three touchdown passes to tie the NFL record. This comes just one week after Favre beat John Elway's NFL record of most NFL wins.

Favre found Greg Jennings on a slant pattern for the record-tying 420th touchdown pass of his career. The 57-yard completion with just over two minutes left rallied the undefeated Packers (3-0) to a 31-24 win. Favre is now tied with Dan Marino for the most touchdown passes in NFL history after two consecutive games with three touchdown passes.

As I predicted in my book, Brett Favre will lead the Packers into the playoffs this year and I am praying for another showdown with the Dallas Cowboys in Green Bay just like the Ice Bowl.

You can get my book at Amazon.com and learn why the Packers are the best team in the NFL.

Beijing Backsliding Will Hurt China ETFs

By Carl Delfeld of the Chartwell ETF Advisor

China exchange-traded funds investing in "H" shares such as the iShares FTSE/Xinhau China 25 ETF (FXI) and the iShares MSCI Hong Kong ETF (EWH) have set a torrid pace during the last month fueled by two powerful engines. One has been the valuation gap between the "H" shares and the "A" shares which can be purchased only by Chinese and certain qualified foreign institutional investors. The other was the announcement by the State Administration of Foreign Exchange (SAFE) that it would allow Chinese investors to invest directly into "H" shares.

Since that announcement on August 20th which was anticipated by a few months by the Chartwell ETF Advisor, the benchmark Hang Seng Index has risen 26%.

But now turf battles between SAFE and the China Banking Regulatory Commission (CBRC) may result in significant backsliding on this crucial issue..

For more on this battle between those who want to open markets and the Chinese mandarins bent on controlling market forces, click here.

Weekly Global ETF Calendar

By Carl Delfeld of the Chartwell ETF Advisor and Council on Asian Relations

There is a lot happening this week that could affect your exchange-traded fund portfolio.

On the U.S. front, this week’s US economic calendar is busy and the markets will continue to carefully watch the credit crisis situation. Today brings comments by Fed Chairman Bernanke on education. Tuesday brings September US consumer confidence and August existing home sales. Wednesday brings August durable goods orders and the Treasury’s 2-year T-note auction. Thursday brings weekly initial unemployment claims, the Q2 GDP revision and August new home sales and comments by Fed Chairman Bernanke. Friday brings August personal income and spending and core inflation number and the final September US consumer confidence report from the University of Michigan.

On the international front, it is rather a slow week with Gordon Brown today making his first address to the Labor party's annual conference. On Tuesday, the UN General Assembly reopens and on Wednesday the Group of 77 representing the world's least developed nations will meet in New York. On Thursday the Chicago Fed and IMF hosts an international banking conference and on Sunday the UK Conservative party will hold their annual conference.

Find out how these events will affect your global portfolio at the Chartwell ETF Advisor

Weekly ETF and Market Update

The following exchange-traded fund and market update is complements of ETF Trends

The Federal Reserve lowered interest rates by one-half of a percentage point on Tuesday, to 4.75%. This delivered a boost to Wall Street, as the Dow Jones industrial average and the S&P 500 rose 2.8% while the Nasdaq was up 2.7%.

Even with this renewed optimism, investors are still paying attention to the rising dollar and high commodity prices, which bring on concerns of inflation. The euro hit a record high this week against the dollar. The Canadian dollar was hovering around parity to the greenback for the first time since 1976. Gold finished the week at $731.40. Crude oil hit record highs this week and settled at $81.62 a barrel.

Foreign markets also benefited from the Fed’s decision. European markets were up about 5% for the week. Chinese ETFs continued to be top performers, up 8%, while other Asian ETFs were up an average of 3%. Latin America rose about 6%. Commodity-based ETFs followed commodity prices up, as ETFs tracking oil, gold and metals gained between 7-9% for the week. Homebuilder ETFs continued on a downward trend as they lost about 1% this week.

After volatile times in the market, the S&P 500 is now 4.8% above its long-term trend line. Many of the ETFs are above their individual long-term trend lines by 1-40%. We are approaching the end of the third quarter which means we’ll be getting earnings reports in less than two weeks.

For help in building a global ETF portfolio, go to the Chartwell ETF Advisor.

ETFs That Benefit From a Falling Dollar

By Carl Delfeld of the Chartwell ETF Advisor

The Federal Reserve’s decision to cut interest rates this week may have buoyed American stocks and exchange-traded funds but is nothing but bad news for the value of the U.S. dollar.

The Canadian dollar rose to parity against the US dollar for the first time since 1976 on Thursday, aided by soaring oil prices. The U.S. dollar dropped to a record low through the $1.40 against the euro, fell 0.4 per cent to $2.0093 against the pound, lost 1.5 per cent against the yen to Y114.44 and dropped 1 per cent to SFr1.1717 against the Swiss franc.

But for investors with a diversified global ETF portfolio, there are some simple strategies that can boost returns in a weak dollar environment.

For some ETF ideas that may work for your portfolio, click here.

Sweden's Privatization Plan Will Shine Light on ETF (EWD)

By Carl Delfeld of the Chartwell ETF Advisor

Part of the allure of the Sweden exchange-traded fund (EWD) which is weighted 1% in the MSCI World index is its fiscal discipline and the promises by the newly elected center-right government to privatize state-owned companies.

Recently, the Swedish government raised $2.7bn from the first privatization through the sale of an 8 per cent stake in TeliaSonera, the Nordic telecommunications company, to around 200 institutional investors. And the deal was oversubscribed by a large margin. The government has pledged to raise SKr150bn ($22.3bn) from the sales over the next three years. I like the fact that the offering was to global investors and a very open and transparent process. The TeliaSonera shares were primarily sold to foreign investors at SKr50 each with 40 per cent going to British investors, 17 per cent to the US, 28 per cent to Swedish and 8 per cent to other Nordic buyers.

I have had the Sweden ETF (EWD) in some of our ETF portfolios since before the election ten months ago. Politics and policy do matter and should be part of the mix when picking ETFs. The Swedish ETF is also full of top flight global companies that trade at attractive valuations and iuts overal market is trading at 12 times earnings according to Thomson Datastream.

The top company in the Sweden ETF (EWD) is the telcom equipment maker Ericsson which accounts for 21% of the basket. This is a good thing since Ericsson is a market leader and is trading at an attractive valuation. Ericsson has a 25% return on equity and a much stronger balance sheet than its peers. Just over 40% of all telephone calls worldwide go through an Ericsson system. Other top companies in the Sweden ETF include Sandvik, Volvo and Atlas Copco.

Another Swedish attraction is its central bank (Riksbank) which has raised rates seven times since the start of 2006. It is the oldest central bank in Europe and is a fierce inflation fighter. Official figures show Swedish inflation running at 1.9 per cent year-on-year in January, up from 1.6 percent in December. You can buy the Swedish Krona through the Swedish Krona currency ETF (FXS).

Build a global ETF portfolio using market intelligence from the Chartwell ETF Advisor

Ireland ETF Thrown Out with Bathwater

By Carl Delfeld of the Chartwell ETF Advisor

It usually pays big dividends to look inside the hood of an exchange-traded fund. I noticed lately that the New Ireland Fund (IRL) was sinking even though the market looked awfully cheap on a relative valuation basis. Ireland has been a great success story but before pulling the trigger, I took a look at the fund's top two holdings.

The first is CRH PLC at 16.5%. It is the highly-acquisitive Irish building materials company which just announced that it is going after $4 billion in Cemex assets and has been aggressively moving into US markets to take advantage of pressure on the housing and construction industry. Good opportunistic strategy in my book.

The second largest holding is Allied Irish Bank (AIB) at 15% of assets. AIB has of course been impacted by the banking issues and in particular with the problem of a mismatch between funding and lending rates. But AIB depends on only around 44% wholesale funding for their lending book compared to 50% at French banks, an average of 66% for German banks and 45% cent for UK banks, according to DBRS rating agency.

The combination of a cooling domestic property sector and more general concerns about banks has hit Ireland, even though Standard & Poor’s reported last week that the Irish banking system “is in good health” and “prospects remain good overall”.

Allied Irish Bank stock took a 7.1% hit early this week and (IRL) is trading at a 8.3% discount to its net asset value. It is up 2.7% so far today.

Find out what to do about the Ireland ETF by joining the Chartwell ETF Advisor

What is the Best China ETF?

By Carl Delfeld of the Chartwell ETF Advisor

The greater China markets and the exchange-traded funds that track them are defying the global credit squeeze and hitting new highs almost everyday. But what is the best China ETF to ride this wave?

The largest and most recognizable ETF is the $6.4 billion iShares FTSE Xinhua 25 (FXI). Its weakness is that it contains only 25 companies, almost all state-owned enterprises, and has 25% of its assets in its top three holdings which is a bit too much for my taste. Another alternative is the PowerShares Dragon Halter USX China (PGJ) which tracks a somewhat limiting index of China-related companies listed on American exchanges.

But I agree with Matthew Hougan writing in Seeking Alpha that the SPDR S&P China (GXC) fund will work best for investors over the long haul. Its underlying index includes over 150 companies domiciled in China giving investors broader exposure and hopefully lower volatility.

Dougan writes more broadly about the challenges that State Street Global Advisors is having drawing attention to its fine line up of international ETFs in a crowded marketplace. I always throw up a slide describing them when I speak on building a global ETF portfolio. Let me do my part here to highlight SSGA's international ETFs.

SPDR S&P Emerging Markets ETF (GMM) Index includes more than 1,500 companies across 26 emerging countries.
SPDR S&P Emerging Latin America ETF (GML) Index includes companies domiciled in Argentina, Brazil, Chile, Columbia, Mexico, Peru, and Venezuela.
SPDR S&P Emerging Middle East & Africa ETF (GAF) Index includes companies domiciled in Egypt, Israel, Jordan, Morocco, Nigeria, and South Africa.
SPDR S&P Emerging Europe ETF (GUR) Index features companies in countries that are nearing acceptance into the EU, including Czech Republic, Hungary, Poland, Russia, and Turkey.
SPDR S&P Emerging Asia Pacific ETF (GMF) Index includes companies domiciled in China, India, Indonesia, Malaysia, Pakistan, the Philippines, Taiwan, and Thailand.
SPDR S&P China ETF (GXC) Underlying index includes over 150 companies domiciled in China

Find out what ETFs belong in your portfolio by joining the Chartwell ETF Advisor

Sterling Slide Against Euro and Dollar Hits ETF

By Carl Delfeld of the Chartwell ETF Advisor

The United Kingdom market and the exchange-traded iShares fund that tracks it (EWU) has benefited from one of the highest interest rates and strongest currencies in the group of G 10 countries. But banking and real estate problems are being translated into a weaker currency and fueling speculation that the next move of the Bank of England will be to cut interest rates to stimulate the economy and help real estate markets.

The pound on Monday fell to a 14-month low against the euro and dropped below $2 against the dollar for the first time in a month. A weaker pound has a negative effect on returns for American investors in the UK exchange-traded fund which is unhedged.

Sterling fell to a low of £0.6962 against the euro, its weakest level since July 2006, before pulling back to stand down 0.5 per cent at £0.6951 by late trade in New York. The pound dropped 0.6 per cent to $1.9945 against the dollar, having hit a low of $1.9916 in the session. Sterling also fell 0.6 per cent to Y230 against the yen and 0.6 per cent to SFr2.3760 against the Swiss franc.

The UK ETF (EWU) is heavily slanted to the financial services sector but is trading at historically attractive valuations. Is current weakness in the ETF and sterling a problem or an opportunity? Find out by joining the Chartwell ETF Advisor.

Global Markets and ETFs Start Week on Apprehensive Note

By Carl Delfeld of the Chartwell ETF Advisor

Global markets and the exchange-traded funds that track them got started on an apprehensive note with most markets down tempered by optimism about tomorrow’s FOMC meeting, which is expected to produce a cut in the official funds rate target of at least 25 bp to 5.00%. China, as usual these days, started strongly though concerns over Taiwan are rising.

Barchart reports that European stocks are trading lower this morning with the DJ Stoxx 50 index currently down -1.24%. Northern Rock Plc, the UK mortgage bank that received a bailout by the Bank of England last week, fell 30% today and depositors lined up to withdraw money (BBC reported depositor withdrawals of at least 2 billion pounds). In addition, Microsoft received news it lost its appeal of an EU antitrust decision.

The US Justice department started an antitrust investigation of flash-memory producers, causing a 2% sell-off in flash-memory-producer Samsung Electronics. Toshiba, another major flash memory producer, did not trade today due to the Japanese holiday. Asian stocks today closed mostly lower with Hong Kong down -1.20%, Australia down -0.56%, and Singapore down -1.70%. However, China's CSI 300 index today closed +1.88%, and South Korea closed slightly higher by +0.08%.

In early trading on U.S. exchanges, the Hong Kong (EWH) and Singapore (EWS) ETFs were down while Canada (EWC) and Mexico (EWW) were up.

Learn more about international markets and ETFs by visiting the Chartwell ETF Advisor

Rate Hike Highlights Swiss ETF's Strengths

By Carl Delfeld of the Chartwell ETF Advisor

Switzerland's Central Bank, a vigilant inflation hawk, raised interest rates again last week for the eighth consecutive quarter in contrast to the European Central Bank and Bank of England which kept rates steady.

The rate hike highlights the Swiss conservative fiscal stance which makes the Switzerland exchange-traded fund (EWL) a welcome addition to any global ETF portfolio.

If you think of Switzerland as “Old Europe” with high taxes and big government which stifles economic growth, think again. While only 137 miles by 216 miles in size with a population of 7.2 million, Switzerland packs a punch and is a financial and multinational powerhouse.

It has a strong currency backed by ample gold reserves, fiscal discipline, trade surplus and very little foreign debt. Outward looking, Switzerland has 40% of its GDP attributed to exports. Switzerland represents the third largest financial center in the world after New York and London. It is also home to world-beating pharmaceutical, engineering and food companies. For starters, Switzerland is home to four of the largest five firms in Europe in terms of market capitalization: UBS, Nestle, Novartis, and Roche. It also has the highest per capita income in the world.

Switzerland also enjoys a stable government, a vibrant democracy and a reputation as an asset haven in times of stress. The Swiss have had a functioning democracy for 500 years and actually has a fairly weak central government with a legislature that meets for only two weeks four times a year. What better way to play the trend that large global blue chip global companies are back in favor than with Swiss quality, value and growth through the iShares Switzerland ETF (EWL).

Learn more about picking ETFs by joining the Chartwell ETF Advisor

China ETF Shakes Off Inflation Jump and Rate Hike

By Carl Delfeld of the Chartwell ETF Advisor

China exchange-traded funds like the MSCI iShares China (FXI) and the S&P SPDR China (GXC) have churned through market volatility to hit new highs. Even in the face of 6.5% inflation numbers for August, the highest in a decade and double the target of monetary authorities, failed to derail both ETFs which ended Friday up 1.5% for the day. The chief inflation culprit is food prices which surged more than 18% year on year with a shortage of many staples such as pork.

China raised its benchmark 1-year lending rate by 27 bp to a 9-year high of 7.29% from 7.02%. That was the fifth interest rate hike this year and followed the previous rate hike by just a month. China's second quarter GDP was up +11.9%. China has no choice but to raise interest rates in order to cool the economy and inflation to try to keep the economy on from overheating. The rate hike shows once again that China's economy is in its own world and somewhat insulated from financial problems such as the subprime mortgage and banking system crisis.

The IMF has predicted that China's economy this year will contribute more to the world's economic growth that the US and emerging markets as a whole will contribute more than 50% of world GDP growth this year.

Learn about ETF strategies to tap into Chinese growth at the Chartwell ETF Advisor

Portfolio Risk Management Using ETF Options

By Carl Delfeld of the Chartwell ETF Advisor

Many exchange-traded fund (ETF) investors don't realize that many ETFs have options that can be used as an excellent risk management tool. Options are the right to buy (called a call) or to sell (called a put) a stock at a certain price before a certain date. These rights have value and are themselves bought and sold on stock exchanges at evolving prices that reflect the fortunes of the underlying stock or ETF and the time left in the contract.

Here are some of the ways these options can be used. Want to lock in profits from a recent run-up in an ETF without selling the position and triggering taxes? Want to buy insurance against a drop in an emerging market like China? These and other defensive strategies can be obtained with the nearly 70 ETF options currently available. Although many large stocks offer options, trying to engage in many at once becomes a nightmare of expense, tracking and paperwork. ETFs make defensive options easy.

Here is just one example of how we have used options. After the Chinese market had a huge run up this year, we recommended that investors purchase a put option on the China ETF (FXI) giving them the right to sell it at a price close to its then current price for out to 18 months. This gave us the security to then hold FXI even though it seemed overvalued and vulnerable. If a market is all beaten up but you don't know if the worst is over - you could buy a call option and see what happens.

Find out about more global ETF strategies at the Chartwell ETF Advisor

Why Not a Finland ETF?

By Carl Delfeld of the Chartwell ETF Advisor

For all their flaws, country-specific exchange-traded funds have captured the imagination of global investors. Why not one for Finland?

Mr. Vesa Vihriälä, the Secretary General of the Economic Council of Finland notes in a letter to the Financial Times that gross domestic product grow by 5 per cent in 2006, growth averaged 3.3 per cent in 2000-2006, which is well above the European Union and OECD averages of 2.0 and 2.5 per cent, respectively. Finland's GDP per capita, adjusted for purchasing power parity, ranked 10th in 2006 according to Groningen University, surpassing that of Germany, the UK, France, Sweden and Austria. Finland's unemployment rate has already fallen to 6.5 per cent and is set to decline further given the projected GDP growth.

No doubt Finland faces many challenges such as an aging population, less than stellar in commercializing innovations, limited success in attracting foreign talents and direct investment, weak productivity in the services sector, and inflexible labor markets.

Finland's most visible company, Nokia, also highlights the hybrid nature of most country ETFs. It would dominate a market cap weighted Finland ETF but is hardly tied to the Finnish economy but rather is very much a play on global growth and development. China is its biggest market, followed by India and then the United States. From its plants in India, Nokia ships products to more than 50 countries!

Find out more about Chartwell's World Country ETF Rotation Portfolio

International Private Equity ETF Ready for Launch

By Carl Delfeld of the Chartwell ETF Advisor

While private equity is currently a bit out of favor, ETF investors should welcome the launch on September 27th of the PowerShares International Listed Private Equity (PFP) exchange-traded fund. This ETF will provide exposure primarily to European markets with the United Kingdom accounting for 23% of exposure followed by France at 18%, Australia at 16% and Japan at 13%.

This ETF is not a direct private equity play but rather offers diversified exposure to internationally listed companies whose primary purpose is to invest in as Powershares puts it "private, innovative and promising businesses".

The PowerShares International Listed Private Equity (ILPE) ETF tracks the Red Rocks International Listed Private Equity (ILPE) Index and includes more than 30 internationally listed companies with direct investments in more than 1,000 private global businesses. The ILPE Index is rebalanced and reconstituted quarterly and fund holdings are disclosed every day, giving investors a much higher level of transparency than is often available in traditional private equity funds.

Companies in the ETF basket are just about evenly split between mid cap and large cap categories. The top four companies in the index represent 35% of total expsoure. Backtesting shows the index outperforming the EAFE index by a handsome margin and the expense ration is 0.75%.

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Bring Back Koizumi

By Carl Delfeld of the Chartwell ETF Advisor

Japan's ruling Liberal Democratic Party (LDP) needs to bring back former Prime Minister Junichiro Koizumi to keep its grip on power, reinvigorate the Japanese economy, and strengthen its alliance with America. The LDP will hold elections next week to find a replacement leader for Mr. Shinzo Abe who stunned his party by resigning as prime minister.

Investors in Japan through exchange-traded funds such as the MSCI iShares Japan ETF (EWJ) should be watching carefully since the next LDP leader will come under sharp scrutiny and pressure to hold a general election that could topple a ruling party that has been the leading power for the past half-century. An election is not constitutionally necessary until September 2009.

Japan, facing slow economic growth and a lack of consumer confidence needs to put an economic reform agenda front and center. This was Mr. Abe’s prime mistake as he shifted to international affairs and nebulous goals such as a “Beautiful Japan”. On the foreign affairs front, the top priority needs to be deepening ties with America including moving towards a free trade zone and accelerating missile defense. It is also vital that Japan continues its operations to refuel allied ships in the Indian Ocean, parliamentary approval for which runs out on November 1. Mr. Ichiro Ozawa, leader of the opposition Democratic Party of Japan, whose party overwhelmed the LDP in July's upper house elections, said his party would continue to oppose an extension of the anti-terrorism bill.

Above all, the Japanese electorate and global investors are looking for a leader of Japan who is creative, confident and a bold reformer.

Koizumi is that leader.

Former Prime Minister Koizumi stunned the political establishment by calling a snap election last September with postal privatization front and center. He then had the audacity to recruit high profile candidates to replace the “obstructionists”.

Why is the post office system so important? It is a blend of economics, politics and symbolism. With $3 trillion of assets, the 134-year-old postal system is a huge economic force and by privatizing it Koizumi hopes to unleash this liquidity, cut the bloated bureaucracy and lead the way to broader market reform. Prime Minister Koizumi was not coy about this stating: “privatization of the post office is the first step toward the reconstruction of Japan’s politics and economy.”

This long overdue confrontation also highlights two realities long known by Japan watchers but ignored by the mass media. The first is that Japan is to a great degree a socialistic country – in fact one of the few socialistic countries that have worked. Mr. Koizumi realizes that it is not working any more and is bent on opening it up and driving market reform. The second truth is that the key to economic reform is political reform and this means reducing the LDP’s reliance on rural areas and making it more relevant to younger urban voters.

What does this all mean for global investors in Japan? Japan’s economy is showing signs that its fragile recovery after a long period of deflation and weak growth is at risk. While real estate prices rose in Tokyo last year for the first time in 14 years, corporate spending is slowing and a stronger yen is hurting exports. The most important missing link is vigorous consumer spending which is at best lackluster.

Japan is a rich country holding on to 40% of the world’s $12 trillion in savings but lacks the confidence to act like it. Let’s bring Mr. Koizumi back to unlock Japan’s potential for higher economic growth and prosperity.

For more information about investing in markets like Japan, go to the Chartwell Advisor

Powershares Rolling Out New International ETFs

The Powershares family of exchange-traded funds announcedc that on September 27, 2007, it will roll out four new international ETFs using its RAFI methodology. The ETFs include:

(PXH) PowerShares FTSE RAFI Emerging Markets
(PDN) PowerShares FTSE RAFI Developed Markets ex-U.S. Small-Mid
(PDQ) PowerShares FTSE RAFI Asia Pacific ex-Japan Small-Mid
(PWD) PowerShares FTSE RAFI Europe Small-Mid

These PowerShares ETFs arebased on FTSE RAFI International Indexes. These indexes represent an investable, liquid universe of over 2,000 global equities spanning more than 40 countries, and each index is designed to track the performance of the fundamentally largest equities in its target region. Companies are selected based on the following four fundamental measures of size: sales, income, book value and dividends.

The patent pending Research Affiliates proprietary research model seeks to provide investment friendly indexes that offer a more accurate measure of the global marketplace than that of a traditional market-cap weighted ETFs such as the iShares family of ETFs.

Powershares maintains that market cap weighted ETFs inherently forces an investor to overweight overvalued companies and underweight undervalued companies, creating a significant growth bias and investment approach that are contrary to sound principles. The PowerShares FTSE RAFI International Portfolios are rebalanced and reconstituted annually.

By Carl Delfeld of the Chartwell ETF Advisor

Earthquake Rocks Hot Indonesian Market and ETF

A powerful earthquake centered near the Indonesian island of Sumatra rocked the Indonesian Fund (IF) which has been one of the best country ETF performers. The earthquake set off a tsunami alert for the Indian Ocean. At least seven people were killed and more than 100 injured.

The National Weather Service’s Pacific Tsunami Warning Center said sea level readings showed that the earthquake, which had a magnitude of 8.2, did indeed generate a tsunami that caused destruction along the coast.

In December 2004, a series of giant waves pummled Banda Aceh, Indonesia, killing 130,000 people. Scientists who have studied the area have warned that Padang, Indonesia, was particularly at risk for powerful earthquakes and tsunamis as the geological rupture that caused the 2004 destruction travels south.

But despite Indonesia's devastating loss from the 2004 tsunami, its economy recovered at an impressive rate, and its closed-end fund (CEF) reflects this. Indonesia's economy grew 5.5% last year and is expected to grow 6.2% this year and 6.5% next year. In addition, corporate earnings are projected to grow 23% this year and more than 20% next year, which would be the best performance in Asia.

Indonesia has taken the brave step of opening its financial services sector to majority investment by international investors; let’s also open up other areas such as infrastructure and power. The most important reform to make Indonesia more attractive to international capital is to set up a transparent and clear approval process to cut out red tape and corruption. Then reinvigorate a previously announced plan to privatize some of Indonesia’s 145 largest state-owned companies to increase their profitability and raise more government revenue.

It may be too thinly capitalized for an ETF right now but as a country with the fourth largest population in the world, the largest Muslim population and an archipelago spanning more turf than America, Indonesia deserves to be on your global watch list.

By Carl Delfeld of the Chartwell ETF Advisor

US and UK Treasury Chiefs Comment on Market Turbulence

The crisis of confidence in credit markets and market volatility is likely to last longer than any of the financial shocks of the past two decades, Hank Paulson, US Treasury secretary, warned yesterday in a speech in Washington.

He said the uncertainty in credit markets would last longer than the turmoil that followed the Asian crisis and the Russian default of the 1990s or the Latin American debt crisis of the 1980s. Mr. Paulson was an investment banker during both bouts of turbulence and speaks from experience.

The Financial Times quoted Secretary Paulson regarding why current problems will take longer to work out.

"The reason it is going to take longer today [than in previous crises] is that we are more globalised," he said. US mortgages had been "sliced and diced" and were turning up at Landesbanken - state-run regional banks - in Germany.

"Secondly, it is the level of complexity," he said, adding that he had met daily with bankers trying to value asset-backed commercial paper and other products.

Meanwhile, Barchart reports that Bank of England Governor Mervyn King continues to take a hard line in dealing with the global banking crisis and indirectly is confronting the Fed and the European Central Bank for their active support in providing liquidity to the banking system.

Mr. King said in written testimony to the UK Parliament's Treasury Committee that the BOE will not expand its collateral rules or make longer-dated loans to banks. He said , "The provision of such liquidity support undermines the efficient pricing of risk by providing ex-post insurance for risky behavior. That encourages excessive risk-taking, and sows the seeds of a future financial crisis."

Mr. King's statement may make it more difficult for the Fed to consider a 50 bp rate cut and appear to cave in to bankers who are suffering from tight financing conditions.

By Carl Delfeld of the Chartwell ETF Advisor

Health Benefit Costs Set to Rise 6.7% Next Year

Besides the goal of outsized capital gains, the underlying rationale for the HealthShares family of ETFs is to spur research and development of products that cure rather than just treat diseases thereby stemming rapidly rising healthcare costs.

The amount of money employers and workers in the US spend on health benefits will rise 6.7 per cent next year after three consecutive years of flat 6% growth, according to preliminary results of a survey by Mercer Health & Benefits, the human resources consulting group. The figure includes the cost of medical plans and premiums, but does not take in out-of-pocket expenses paid by employees so the numbers understate by quite a margin the real impact of escalating health care costs.

An article in the Financial Times noted that two out of three Americans depend on employer-backed insurance programs for their healthcare, and rising health spending is one of the most significant issues in the forthcoming presidential election, with spending on healthcare expected to reach $4 trillion in 2015, or 20 per cent of GDP.

During the last three years expense growth have been flat at about 6 per cent each year which had raised hopes in the healthcare community that the benefit cost trend would begin to drop towards average wage and consumer price index trends. In fact, the figure remains roughly two times the rate of inflation and shows no signs of slowing down.

By Carl Delfeld of the Chartwell ETF Advisor

More Bad Economic News for Japan ETF

Japan's market and exchange-traded funds that track it such as (EWJ) have suffered through continued weak economic growth were dealt a further setback as GDP revisions slipped into red figures.

Japan’s economy shrank more sharply than expected in the second quarter, with revised gross domestic product data released on Monday showing an annualised contraction of 1.2 per cent according to the Financial Times. Economists were expecting a downward revision following evidence last week that capital spending, a big driver of growth, had slowed sharply.

The only bright spot was core machinery orders, a highly volatile figure regarded as a leading gauge of capital spending, rose 17.0 per cent in July from June, government data showed. That was far above economists’ median forecast for a 5.3 per cent increase.

JPMorgan has recently revised down its estimate for annual growth in the year to end-March 2007 from above 2 per cent to 1.6 per cent. It now expects the central bank to refrain from a rate rise until next year.

Political news is also a bit discouraging as Japan's Prime Minister, fresh from the APEC meeting in Australia, spoke on Monday to parliament in an attempt to re-position his agenda and stage a comeback from the hit to the influence and prestige of the ruling Liberal Democratic Party which lost control in Upper House elections in July.

Mr. Abe said it was vital Japan continued its operations to refuel allied ships in the Indian Ocean, parliamentary approval for which runs out on November 1. Addressing a threat from the opposition Democratic Party of Japan to oppose extension of the so-called special anti-terror law, he said: “I hope to deepen constructive discussions with the opposition parties.”

This is an extremely important issue for Japan-U.S. relations.

By Carl Delfeld of the Chartwell ETF Advisor

iShares Muni ETF Hits Market

iShares has launched the first Muni exchange-traded fund, the iShares S&P National Municipal Bond Fund. This ETF (MUB) has important tax advantages of municipal bonds with the tax efficiencies of ETFs. Along with transparency and ease of use, this ETF offers cost efficiency, monthly income distribution, intraday trading liquidity.

Municipal bonds are issued by state and local governments to pay for specific projects like the construction of highways or the expansion of schools. Often referred to as the 'tax-exempt' bond market, the interest from municipal bonds is generally exempt from federal income taxation. This tax advantage is the major motivation for investing in municipal bonds. However, investors must be aware that not all municipal bonds enjoy the same tax-exemption benefits.

The fund is expected to pay regular monthly dividends to investors. In addition to being federally tax exempt, the income may also be eligible for exemption from state and local taxes.

By Carl Delfeld of the Chartwell ETF Advisor

ProShares ETFs Hits $7 Billion Mark

ProShares exchange-traded funds provide built-in short or magnified exposure to a variety of well-known indexes, ranging from broad small-, mid-, and large-cap and style indexes to 11 sectors.

ProFunds Group today announced that its ProShares family of exchange traded funds (ETFs) passed the $7 billion mark—in just over a year after its launch. ProShares offers the first and only ETFs designed to provide short or magnified exposure to well-known market indexes.

Gaining short exposure to the markets with ProShares ETFs is convenient whereas traditional short selling requires investors to open a margin account, and you can lose more than you invest. In addition, Short ProShares can be used in some retirement accounts where short selling is prohibited.

There are two types of ProShares ETFs with 52 choices now available to investors:

Short & UltraShort ProShares – Hedge against downturns, or seek profit when markets decline, with the only ETFs designed to go up when indexes go down. For example, the Short S&P500 (SH) seeks daily investment results, before fees and expenses, that correspond to the inverse (opposite) of the daily performance of the S&P 500® Index.

Ultra ProShares – Get more exposure for your investment dollars with the only ETFs designed to double the daily performance of popular market indexes (before fees and expenses). For example, the Ultra QQQ (QLD)seeks daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of the NASDAQ-100® Index.

Used prudently, ProShares ETFs can be a welcome addition to your global ETF portfolio and the short ETFs can act like a shock absorber to cushion your portfolio in down and volatile markets.

By Carl Delfeld of the Chartwell ETF Advisor

ETFs Sunny Side Up

Keep in mind that despite the steady drumbeat of negative stories on TV business channels, the record of the American and global economy in weathering challenges is actually quite extraordinary. Take a look at the “sunny side” before going to cash and hibernating for the winter.

Here is the big picture which you can find in the American Funds mountain chart. The S&P 500's total return has exceeded the return on "risk-free" Treasury long-term bonds in all but four of the ten-year periods -- the ones ending in 1974, 1977, 1978, and 2002. Despite wars, inflation, recessions, gasoline shortages and housing crashes in various parts of the nation, the S&P 500, with dividends reinvested, has yielded an average ten-year return of 243% vs. 86% for the highest-grade bonds. Since 1959, there has only been one year, 1980, when consumer spending fell.

Here are some more reasons to be optimistic that the U.S. and global markets will again be resilient.

First, consumer spending will likely stay strong because the top 20% of income earners account for a higher percentage of total consumer spending than the lower 60%.

Second, share buybacks from a broad range of firms may help soften the blow of weaker share prices. Some of the companies with sizable pending buyback programs are P&G, Home Depot, Nestle, Wal-Mart, ConocoPhillips, UBS, Bank of America Johnson & Johnson, JP Morgan and Walt Disney.

Third, corporate earnings seem to be rather firm. According to data from Thomson Financial, earnings per share for S&P 500 companies in aggregate are expected to rise 8.1% in 2007 and 11.5% in 2008. For the MSCI World index companies, the number is 13.2% for 2007 and MSCI Asia is even stronger at just over 18%.

Fourth, corporate balance sheets in aggregate have improved. The net debt of S&P 500 companies has fallen 11% since 2001.

Fifth, there is now a wide expectation that the Federal Reserve will cut interest rates next month and central banks around the world have demonstrated their willingness to take actions to inject liquidity and calm markets.

Sixth, valuations in the U.S. and around the world do not seem overdone to me. The S&P 500 is trading at 16 times earnings and international markets, with the exception of Indonesia and India, appear undervalued. Ireland, Germany and the UK are trading at 11 times, the Netherlands at 10 times, Sweden and Singapore at 12 times and Mexico is trading at 13 times earnings.

Lastly, many global companies are increasing the proportion of their total sales to emerging market countries and economic growth in these fast-growing markets seems to be alive and kicking. The major themes driving this growth which has averaged well over 7% in annual terms over the past five years seem clear.

Economic market reforms, openness to foreign capital, better balance sheets and fiscal discipline leading to higher credit ratings and bulging FX reserves, urbanization leading to higher productivity, and the ability to catch up more rapidly due to breakthroughs in technology and communications have all helped emerging market countries catch up fast. The world is truly filling in leading to tens of millions moving from poverty to the middle class.

Indeed it appears that sophisticated global ETF investors are not backing away from international and emerging markets like Hong Kong (EWH), up 17.5%, and Thailand (TF), up 38%, but fueling their stellar returns.

While the S&P 500 Index is up 3.9% this year, Chartwell ETF Advisor picks have done much better. Brazil (EWZ) is up 32.1%, South Korea (EWY) is up 28.6%, Germany, up 18.8%, and Singapore (EWS) is up 18.3%. Click here to join today.

Bottom line: Keep healthy cash positions for flexibility and use dips in markets to accumulate shares in high quality U.S. and global ETFs that have strong currencies and that have demonstrated fiscal discipline and a commitment to market reforms.

By Carl Delfeld of the Chartwell ETF Advisor