ETF XRAY

WisdomTree's EMD Takes on iShares EFA

By Carl Delfeld of the Chartwell ETF Advisor

The iShares MSCI EAFE exchange-traded fund (EFA) is the leading ETF for investors looking for international exposure and the second largest ETF in terms of assets under management. WisdomTree hopes to change this with its new ETF: WisdomTree Dividend Index of Europe, Far East Asia and Australasia Index (DWM).The WisdomTree family of ETFs distinguishes itself by a common sense approach that can be summed up by "buy low, and sell high."

WisdomTree uses a rules-based methodology to select and weight companies in its ETFs by a measure of fundamental value — instead of stock price and therefore market value alone. After researching all of the fundamental indicators of value, WisdomTree believes the most-effective metrics are cash dividends, or core earnings.

The WisdomTree Dividend Index of Europe, Far East Asia and Australasia (WisdomTree DEFA) is a fundamentally weighted Index that measures the performance of dividend-paying companies in the industrialized world, excluding Canada and the United States, that pay regular cash dividends and that meet other liquidity and capitalization requirements. It is comprised of companies incorporated in 16 developed European countries, Japan, Australia, New Zealand, Hong Kong and Singapore. Companies are weighted in the Index based on annual cash dividends paid.

EFA and DWM track the same countries but while EFA's basket of companies selection and weighting is based on market value, DWM is based on cash dividends. Therefore, the distribution of companies and countries is different in a few important ways.

First of all, in terms of countries, France and Australia jump ahead of Japan and Germany in the DWM ETF due to their higher dividends.

1) United Kingdom 22.83%
2) France 12.92%
3) Australia 8.89%
4) Japan 8.43%
5) Germany 8.00%

Chartwell ETF will be publishing an article in January 2008 which will explore more differences between these two ETFs so that you can make a wise and informed choice.

Big 2007 Winner Was Emerging Market ETFs

By Carl Delfeld of the Chartwell ETF Advisor

What can we learn from where investors put their money in markets around the world and the exchange-traded funds that track them during 2007?

The last week of the year saw some cash flow out of Money Market, Europe Equity and US Bond Funds and ETFs and into Energy Sector, US, Global and Global Emerging Markets Equity Funds acording to fund flow data from EPFR Global. Equity markets around the world rebounded from the previous week’s sharp drops and energy prices resumed their climb.

While the latest flows tracked by EPFR Global into US Equity Funds and ETFs pushed them into positive territory for the year, it did nothing to change the story for 2007: a massive rotation out of funds geared to developed markets into those geared to – or, in the case of Global Equity Funds, with some exposure to – emerging markets. Net flows into the GEM and Latin America Equity Funds and ETFs tracked weekly by EPFR Global were 361% and 305% of their 2006 totals while combined flows for Japan and Europe Equity Funds and ETFs were $63.7 billion lower than the previous year’s total.

At the country level Russia Country Funds such as (RSX) extended their winning run to 16 straight weeks and Brazil Country Funds and ETFs (EWZ) closed the books on a year that saw them post inflows that were nearly six times their 2006 total. But investors continued booking the profits generated by China’s frothy equity markets, with China Country Funds such as (FXI) and (GXC) are again seeing outflows despite their 75% collective portfolio gain for the year.

To use this useful data in building your ETF global portfolios, go to Chartwell ETF.

The Politics of Asian ETF Investing

By Carl Delfeld of the Chartwell ETF Advisor

Unlike most global investment advisors and strategists using exchange-traded funds, I pay a lot of attention to politics, both here in America and in overseas markets. The politics of a country tells me a lot about the probability of long-term economic growth and stability – vital ingredients for successful investing. It also reveals a country’s culture, business climate and durability in the wake of shocks like the real estate downturn. Countries with free and open political systems can take sledgehammer blows and come back fighting. The politics of countries and the ETFs that track them are important.

The relatively civil conduct of our campaigns and the fair, smooth transfer of executive power is a major reason why our markets are so attractive to global investors. Sure politics everywhere is a contact sport but we look pretty good compared to the fisticuffs this week in South Korea, the messy situation in Pakistan, and the ham-handed turnover of power in Russia (RSX) from Mr. Putin to Mr. Putin.

The current presidential campaign really has my blood pumping. The race between Senator Clinton and Senator Obama is tightening with John Edwards jockeying for an opening. The Republican race is even more fluid and open with the sudden rise of former Governor Huckabee posing a threat to former Governor Romney, former New York Mayor Rudy Giuliani losing steam in national polls and re-directing his efforts to big states like California and Florida. All this movement is creating an opening for the old lion Senator John McCain, whose campaign was left for dead only a few months ago, is staging a comeback in Iowa and New Hampshire.

Political risk is likely to play an increasingly dominant role in Asian markets in the coming year. Elections are due to take place in Taiwan with important ramifications for China while the result of the US presidential elections will have significant implications for relations with Asia, and in particular China. Korea (EWY) faces parliamentary elections in April, the results of which will be crucial to shoring up support for President-elect Lee Myung-bak.

Pakistan, with the death of Benazir Bhutto is the clearest example of why regional risk aversion is rising, but the last weeks of 2007 have produced others. In Thailand (TF), the People’s Power party, allies of deposed prime minister Thaksin Shinawatra, emerged as the largest party after Christmas Eve elections, but fell short of a majority. The shape of any new government, as well as the future of Mr Thaksin himself, remains unclear. Japan’s premier, meanwhile, not even three months into the job, is suffering from the same lack of confidence and popularity that led to the fall of Mr. Abe. Sure makes you pine for the strong agenda of former PM Koizumi when Japan's market (EWJ) was booming.

If you want to stay on top of important political trends and events in the world, go to Chartwell ETF today.

3M's Emerging Market Sales Help the S&P Global Industrials ETF (EXI)

By Carl Delfeld of the Chartwell ETF Advisor

3M with over 50,000 products on global markets is a constituent of the S&P Global Industrials (EXI) exchange-traded fund and the Chartwell Global 30 portfolio.

Sales grew 10% in the first nine months of 2007, while gross margins increased slightly, from 22% in 2006 to 23% so far this year according to Morningstar report. The company has also improved its pipeline of new products.

3M's broad product line also lessens the likelihood that a slowing U.S. economy will stall sales growth and some of the company’s fast-growing businesses are in defensive segments of the economy, such as health care, security, transportation and education.

Rapid growth in emerging nations is clearly helping spur 3M's top line growth. Sales to developing countries, particularly those in Eastern Europe, the Middle East and Africa, have grown 19% per year since 2002. More than 60% of 3M's $24 billion in revenue over the past 12 months has come from overseas operations.

Learn more about the 10 global sector ETFs that make up the S&P 1200 at Chartwell ETF.

Merry Christmas from Chartwell ETF

International Small Cap ETFs All Favor Japan/UK

By Carl Delfeld of the Chartwell ETF Advisor

Exchange-traded fund investors now have more international small cap ETF options but all of them share one major drawback, an overemphasis on Japan and the UK. I would love to see a small cap oriented ETF that included emerging markets and challenged the indexes in a more dramatic way.

Tom Lydon of ETF Trends summarizes your small cap international ETF choices this way.

iShares MSCI EAFE Small-Cap (SCZ) launched last week and has an expense ratio 0.40%. Industrials make up 23.5% of the ETF, followed by financials at 20.7% and consumer discretionary at 16.1%. Top countries represented are Japan at 24.8%, the U.K. at 19.8% and Australia at 8.9%.

iShares FTSE Developed ex-U.S. Small-Cap (IFSM) began trading last month with an expense ratio 0.50%. Top sectors represented in this ETF include industrials at 28.5%, financials at 22.4% and consumer services at 12.9%. The U.K. makes up 24.1% of the ETF, followed by Japan at 15.9% and France with 6.1%.

PowerShares FTSE RAFI Developed ex-U.S. Small-Mid (PDN) hit the market in September with an expense ratio of 0.75%. Consumer discretionary makes up 18.3% of this ETF, while consumer staples is 9.4% and energy is 3.8%. Japan is the top country represented with 34.4%, the U.K. is 11.9% and Hong Kong makes up 7.0%. PDN also includes mid-cap companies.

SPDR S&P International Small-Cap (GWX) launched earlier this year in April and has an expense ratio of 0.60%. GWX consists of industrials at 25.8%, consumer discretionary at 19.4% and financials at 16.9%. Japan is again the top weighted country at 24.0%, followed by the U.K. at 12.0% and Canada at 10.9%.

WisdomTree International Small-Cap Dividend Fund (DLS) was the first to launch in June 2006. It has an expense ratio of 0.58%. The top sectors are industrials at 25.3%, consumer non-cyclical at 18.1% and financials at 17.8%. Japan's weight in DLS is 22.6%, Australia follows with 18.5% and then the U.K. at 18.3%.

You can see that it is difficult to avoid this Japan/UK dominance. The SPDR ETF has the least exposure to Japan and the UK at 36% and the Wisdom Tree option breaks the mold with Australia as its number two country weighting just slightly above the UK.

Learn which is the best international small cap ETF for your portfolio by joining the Chartwell ETF Advisor today.

What are the Benefits of ADRs?

By Carl Delfeld of the Chartwell ETF Advisor

What are the benefits of ADRs and exchange-traded funds that contain a basket of ADRs?

ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas. The leading sponsors/issuers of ADRs are JPMorgan and the Bank of New York.
The advantages of ADRs to investors are primarily convenience and cost. For individuals, ADRs are an easy and cost-effective way to buy shares in a foreign company. They save money by reducing administration costs and avoiding foreign taxes on each transaction.

When you buy and sell ADRs you are trading in the U.S. market. Your trade will clear and settle in U.S. dollars. The depositary bank will convert any dividends or other cash payments into U.S. dollars before sending them to you. The depositary bank may arrange to vote your shares for you as you instruct.
However, keep in mind that ADRs do not eliminate the currency and economic risks that go along with investing in another country.

For example, dividend payments in euros would be converted to U.S. dollars, net of conversion expenses and foreign taxes and in accordance with the deposit agreement. This has been a welcome feature for the last few years, as the U.S. dollar has declined relative to most major currencies but it could go the other way as well.

Powershares Launches Two New Technical ETFs

By Carl Delfeld of the Chartwell ETF Advisor

Powershares continues to introduce new and innovative exchange-traded funds with two that follow the Dorsey Wright point and figure charting and selection and weight based on relative strength. The ETFs hit most likely begin trading on markets on December 28th.

The PowerShares DWA Developed Markets Technical Leaders Portfolio (PIZ) is based on the Dorsey Wright Developed Markets Technical Leaders™ Index. This Index includes approximately 100 companies domiciled in developed countries.

The PowerShares DWA Emerging Markets Technical Leaders Portfolio (PIE) is based on the Dorsey Wright Emerging Markets Technical Leaders™ Index. This Index includes approximately 100 companies domiciled in emerging market countries.

Relative strength measures a stock's performance in relation to its peers'. Relative strength analysis has been in existence through various forms for nearly 100 years, but DWA believes it has refined this investment strategy, creating a robust tool for stock selection and portfolio construction.

DWA tracks multiple technical market indicators through a state-of-the-art Point & Figure charting methodology that identifies "technical leaders" within the marketplace. DWA selects approximately 100 of these technical leaders to include in each of its Technical Leaders™ Indexes. The PowerShares portfolios seek to replicate these indexes, giving investors easy access to the DWA investment strategy.

I think that the emerging market ETF is quite intriguing and may add it to some of Chartwell ETF's model portfolios to complement market cap weighted emerging market ETFs like the iShares (EEM).

South Korea's New President and ETF

By Carl Delfeld of the Chartwell ETF Advisor

While concern mounts about South Korea's real estate sector, investors in its iShares exchange-traded fund (EWY) should welcome the country's newly elected president, Lee Myung-bak.

He advocates closer links to Washington and a tougher approach to Pyongyang. He is pledging a more welcoming environment for foreign investors by cutting red tape, clamping down on labour unions and accelerating bank privatisation. Promoting economic growth is his top priority.

The Financial Times reports that Mr. Lee won over 50% of the vote in a field of 10 candidates, and this underlines the extent to which Koreans are looking for a shift in policy orientation after a decade of left-wing rule. During the campaign he pledged to create a “747” economy: 7 per cent annual growth; more than doubling annual per capita income to $40,000; and making Korea the world’s seventh-largest economy, up from 11th or 12th now.

Homebuilder ETFs May Be Close to Bottom

By Carl Delfeld of the Chartwell ETF Advisor

Could it be the right time to build a position in an exchange-traded fund that tracks homebuilder stocks like the SPDR S&P Homebuilders (XHB) which is down 43% year-to-date? Or is it still too soon?

Today’s November housing starts report is expected to fall -4.3% to 1.176 million units, reversing October’s small +3.0% upward rebound to 1.229 million acording to information from Barchart. The expected report would put the housing starts series below September’s level of 1.193 mln units to post a new 15-year low. The US housing starts series has now fallen by a total of -48% from the peak of 2.292 mln units seen in Jan 2006 to the 15-year low of 1.193 mln units seen in September 2007.

You might think that the current 48% plunge in housing starts may be unprecedented but it is not. In fact, US housing starts have seen even larger dives during the years of 1973-74, 1979-81, and 1987-89.

Nevertheless, the current housing market slump remains of historic proportions and there is no sign as yet of a bottom. Yesterday’s NAHB housing market index remained unchanged at a record low of 19 for the third straight month, which suggests that US homebuilder confidence is bumping along the bottom at present. US homebuilders remain in bad shape, with the supply of new homes still on the market at 8.5 months, which is just below the 16-year high of 9.3 posted in September. US homebuilders remain under pressure to slash expenses and inventories just to stay alive until the next cycle.

The S&P 500 US Homebuilders stock index is only slightly above the 6-year low of 283.87 posted several weeks ago. The index has plunged by 79% from its record high of 1333.82 posted in August 2005. The index has returned to the levels seen in 2002 during the early stages of the 2002-05 housing boom and is down 60% this year on a year-to-date basis.

There is no P/E on the homebuilder index at present because earnings for the sector are negative.

Find out when the time is right to take the plunge by joining the Chartwell ETF Advisor.
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Jim Rogers Move to "China": Sell or Buy Signal?

By Carl Delfeld of the Chartwell ETF Advisor

On CNBC last Friday afternoon, Jim Rogers confirmed that he has scheduled a closing on his townhouse in New York City and is uprooting his family, and moving to Singapore in order to participate first-hand in the great Chinese economic boom. He's also raising his child as bi-lingual in Chinese.

Rogers minced no words expressing his distaste for American equities and the American competitive position in the global economy going forward. He said the U.S. dollar will not be the world's reserve currency for long and is apparently gaga over China's economic boom and stock market.

China is without a doubt an exciting growth story but could this high profile move signal something else?
In a recent message to Chartwell ETF members , I outlined eight China risks that could derail its juggernaut economy and perhaps its stock market as well. Here they are:

Valuation Risk

Banking/Credit Risk

Resource Price Risk

Taiwan Risk

Trading Partner Risk

Inflation Risk

Beijing Olympic Risk

Political Risk

For a description of each risk and what it could mean for your portfolio, join the Chartwell ETF Advisor.

And for a polar opposite to Mr. Roger's pessimism, see my "America Sunny Side Up" article as well. One more interesting observation. I noticed that Mr. Rogers chose to move to Singapore and not mainland China. I wonder why?

WisdomTree ETFs Revamps Website

By Carl Delfeld of the Chartwell ETF Advisor

The WisdomTree family of exchange-traded funds announced an upgrade of its ETF website today. Investor and advisor-friendly websites are an important way of attracting attention and gaining market share by a particular sponsor of ETFs. Competition is getting very intense.

Here is an overview of the website changes and how they can help both investors and financial advisors.

New primary navigation bar featuring quick access to advisor analytics and research

New Search By Ticker option, to make searches faster

Detailed ETF information including performance and dividend yields

An organized library with materials you can share with clients

An events page with details for invitation only events with Professor Jeremy Siegel and others.

To learn about the differences between the different families of ETFs and which ones should be in your ETF portfolio, go to Chartwell's ETF Library.

South Korean Election and ETF

By Carl Delfeld of the Chartwell ETF Advisor

It is a foregone conclusion that Mr. Lee Myung-bak, the former Mayor of Seoul and construction magnate is going to win South Korea’s presidential election on December 19th. The question is what does this mean for the Korean economy and the iShares MSCI South Korea exchange-traded fund? (EWY)

Given his pro-business, tax cutting agenda, the election of Mr. Lee is likely to be perceived as a plus for the Korean stock market which has been one of the best performers this year.

But the country is unsettled and apprehensive about economic prospects. Squeezed between, Japan, China and Russia, it lacks the confidence and security to fully embrace a market economy. Labor and real estate values have risen to uncomfortable levels. It’s growth rate has slipped a bit and while a 4.5% average annual growth rate is nothing to sneeze at, faster growing countries like Brazil and India have pushed the country back from the 11th- largest economy in the world to the 13th slot. In short, it needs some mojo.

Together, Samsung, POSCO, KEPCO (Korea Electric Power) and SK Telecom account for almost 50% of South Korean stock market’s market capitalization and roughly the same proportion in the basket of South Korean companies that are contained in the MSCI iShares South Korean ETF (EWY).

Over the past 52 weeks, EWY has moved from $45 to $75 but has pulled back to $65.

For a full analysis of South Korea and its stock market, go to the Chartwell ETF Advisor.

Irish Banks and ETF Hit Hard

By Carl Delfeld of the Chartwell ETF Advisor

According to the FT, Irish banks were particularly hard hit by profit-taking after last week’s bounce. They were dealt a further blow when Merrion, the Dublin-based brokers, said slowing domestic growth was behind its downgrades from “buy” to “hold” of Bank of Ireland and Anglo Irish Bank .

The New Ireland Fund (IRL), which trades at a slight discount to its NAV, has been a disappointing performer and has about a 35% exposure to Ireland's banking and construction sectors. Offsetting this perception is that Ireland is probably the cheapest market in the world trading at just eight time earnings.

The Irish Times also reported a rise in the consumer price index, from 4.8 per cent in October, brings the inflation rate back to July levels, with overall prices having risen by 0.6 per cent between October and November.

Will the luck of the Irish return or will it track Notre Dame football? Go to the Chartwell ETF Advisor to find out.

IBM Shifts Focus to Emerging Markets

By Carl Delfeld of the Chartwell ETF Advisor

IBM, a bit behind the curve, announced that it is ramping up focus on emerging markets that investors are already investing actively in through exchange-traded funds. This is a significant change in thinking for a firm that has always focused on traditional markets.

IBM is set to spend $1.6bn over the next three years as its hunt for growth takes it to smaller markets in the emerging world that have not previously been a focus of its efforts, according to an internal memo from its chief executive and described by Richard Waters of the FT.

The attempt to tap a wider range of developing countries comes as IBM’s earlier investment in three big markets which already have ETFs - Brazil (EWZ), India (IIF) and China (GXC) – has started to pay off.

Though still only a small part of its total revenues, business in these countries accounted for a quarter of IBM’s growth last year and plays an important part in the longer-term financial goals that Sam Palmisano has set.

In an e-mail to senior management, the IBM executive wrote of “a significant shift in our approach to the global marketplace” as the company sought to organise itself to deal with opportunities outside its normal scope. “Too often in the past, because we’ve built our plans by starting with our traditional markets, we haven’t focused sharply enough on the opportunities being generated elsewhere,” Mr Palmisano wrote.

Steel ETF Shows its Mettle

By Carl Delfeld of the Chartwell ETF Advisor

Investors need nerves of stell picking exchange-traded funds in this turbulent market and having Van Eck Market Vectors Steel (SLX) wouldn't hurt either. SLX is the top performing ETF this year and is up a stunning 84.5%.

Tom Lydon of ETF Trends points out that the steel sector has a vested interest in the interest rate cuts and anything that stimulates industrial activity and building. Demand for industrial metals is tightly tied into infrastructure development and manufacturing and the better the economy, the more stuff gets built. And don't forget that emerging market countries like Brazil, China and India are building a lot more infrastructure than we are. Just visit Shanghai and look at its landscape filled with huge cranes and buildings under construction. Investors in SLX are counting on a steady increase in steel demand in the coming years.

The mining group Rio Tinto (RTP) is one of the largest holdings in SLX at 12.7%. The company has been in BHP Billiton's (BHP) sights for a takeover, but it looks like it will have to sweeten its bid and put more cash on the table to get Rio Tinto to the negotiating table. The merger makes sense and collectively, the companies will have more bargaining power with big buyers from China which will do what it can to nix the deal.

Is it too late to put some steel in your ETF portfolio? Join the Chartwell Advisor and learn more about ETFs and global investing.

Chinese Inflation Could Rattle Market & ETFs

By Carl Delfeld of the Chartwell ETF Advisor

Inflation, especially food inflation, has been a reoccurring problem in Chinese history with price controls tried unsuccessfully over the centuries time and time again. If the government tries this tack again, it will likely hit China ETFs like the iShares FTSE/Xinhua China 25 (FXI) and the SPDR S&P China (GXC).

Chinese inflation reached an 11-year high of 6.9% in November, a level that will harden Beijing’s resolve to tighten monetary policy and probably further delay energy price reform. Richard McGregor in Beijing for the Financial Times cites that the annual inflation rate, which hit 6.5% cent in October, is driven primarily by food prices, which rose by 18.2% cent from a year earlier, mainly because of a shortage of pigs and rising global feed costs.

China’s trade surplus, a prime cause of excess liquidity in the economy, reached $26.3bn in November, only slightly lower than the record $27.1bn, according to figures released on Tuesday.

These numbers are disconcerting especially since China has lifted interest rates five times and reserve ratios 10 times this year, with little impact on the pace of economic growth or inflation.

For the article "China Risk 101", go to the Chartwell ETF Advisor.

Trade Deficit Increase Hurts Dollar

By Carl Delfeld of the Chartwell ETF Advisor

The falling dollar has helped spur exports and the performance of some companies and exchange-traded funds. While this appears to have stabilized the persistent trade deficit, it is tough going because of structural problems

Today’s October trade deficit numbers are expected by Barchart to expand by $1.1 billion to -$57.4 bln from -$56.5 bln in September. The U.S. trade deficit in the past year has steadily improved due to strong U.S. exports tied to the weak dollar and strong overseas economic growth and demand. The U.S. trade deficit can continue to show some modest improvement since export demand should remain firm.

However, the U.S. trade deficit is likely to remain relatively wide over the foreseeable future due to intractable problems such as high oil import volumes and prices (which boost the dollar value of US oil imports), the poor U.S. savings rate which forces an influx of capital from overseas and the competitive trade advantages of nations such as China (weak currency, low labor costs). China’s trade surplus, a prime cause of excess liquidity in the economy, reached $26.3bn in November, only slightly lower than the record $27.1bn, according to figures released on Tuesday.

S&P projects that U.S. exports will increase just over 7% during 2007 and are likely to rise 9.5% in 2008 and 8.4% in 2009. The key to trade deficit coming down appreciably will be rise in Chinese currency and lower energy prices. Any of these happening will help value of U.S. dollar.

Learn more about ways to diversify your portfolio away from the U.S. dollar by joining the Chartwell Advisor.

Investor Flows Favor Emerging & Money Markets

By Carl Delfeld of the Chartwell ETF Advisor

Risk appetite returned, at least among some sources of capital, during the first week of December as EPFR Global-tracked emerging markets equity exchange-traded funds had their best week of the year in dollar terms, Financial Sector ETFs and Funds absorbed another $1 billion and High Yield Bond Funds posted inflows for the first time in six weeks. But plenty of investors remain cautious: Money Market Funds, a proxy for cash, took in another $21.3 billion.

Equity funds and ETFs geared to developed markets continue to suffer with US, Japan and Europe Equity Funds all posting outflows during the week. The combined net outflows from these three fund groups since the first week of August now stand at $45.9 billion. During that same period emerging markets ETFs and funds taken in a net $26.9 billion.

“Some of that is still attributable to the fact developed markets have more direct exposure to the US sub-prime debt crisis, and some to the fact another US rate cut – if it happens -- is going it hit Japanese and European export competitiveness” observes EPFR Global Senior Analyst Cameron Brandt. “But much of it boils down to basic performance. The average Asia ex-Japan Equity Fund’s year-to-date portfolio gain is nearly eight times larger than the 7.3% returned by their US Equity Fund counterparts and 11 times greater than the average gain posted by Global Bond Funds.”

Chartwell ETF uses input from EPFR Global provides fund flows and asset allocation data to financial institutions around the world.

ETF Asset Growth Pauses, State Street Bucks Trend

By Carl Delfeld of the Chartwell Global ETF Advisor

Exchange-traded fund assets fell back a bit in the midst of market turbulence during November but the number of U.S. listed ETFs surged over 600 and globally broke through the 1,000 barrier.

At the end of November, 612 ETFs in the US were managed by 19 ETF managers, with assets totaling approximately $576BN according to information provided by State Street Global Advisors. U.S. industry assets decreased approximately $8BN from $584BN in October 2007. Twenty-six new ETFs were launched during the month of November.

Barclays Global Investors (BGI) had the largest assets under management with $326BN across 149 ETFs, followed by State Street with $132BN across 64 ETFs. In a distant third place was Vanguard which has been aggressively reducing fees to gain market share. Collectively, these three ETF families accounted for approximately 87% of the US-listed ETF market.

State Street ETFs bucked market trends by adding more than $5BN in net inflows in November, led by SPDR® S&P® 500 with $4.1BN in net inflows. State Street ETF assets climbed $2.9BN for the month and more than $30BN YTD. The SPDR International Treasury Bond ETF (BWX), which is a holding in some of Chartwell ETF's model portfolios, has gained over $130MM in assets since its launch in early October.

Overall, International ETF assets fell $8.3BN, or 4.9% to $163.4BN while fixed income ETFs gained $2.6BN in assets, climbing to $32.9BN.

Learn more about ETFs and how tou can use them to build a global portfolio by joining the Chartwell ETF Advisor.

Brazil Joins Sovereign Wealth Club

By Carl Delfeld of the Chartwell ETF Advisor

Brazil and its exchange-traded fund (EWZ) have come a long way. From a run on its currency and dwindling foreign exchange reserves to an appreciating currency and the formation of a soveriegn wealth fund. However, like everything political in Brazil, even this good news does not come without controversy.

Jonathan Wheatley in São Paulo reports for the FT that the original plan had the SWF drawing on Brazil’s foreign reserves, which have risen quickly this year to about $180bn. That plan sparked a behind-the-scenes row between the finance ministry and the central bank and the government’s commitment to Brazil’s floating exchange rate regime.

“The big victory for the central bank,” a central bank official said, “is that the fund will have nothing to do with Brazil’s foreign reserves and nothing to do with the central bank.” But in an interview with the FT in Brasília last week, Brazil's Finance Minister Mr. Mantega said the fund would indeed affect the accumulation of reserves and would share the central bank’s source of funding at the national treasury.

Under current rules intervention in currency markets is the sole prerogative of Brazil’s central bank. It is unlikely that Brazil's current $180 billion of foreign exchange reserves would be used wisely to increase demand for dollar assets.

Learn more about Brazil and its ETF by joining the Chartwell ETF Advisor.

Japan's Restaurants Beat Market and ETFs Hands Down

By Carl Delfeld of the Chartwell ETF Advisor

While Japan's market and the ETFs that track it such as the iShares MSCI Japan (EWJ) and the iShares S&P/Topix 150 (ITF) have disappointed investors, you can't say the same about its restaurants.

The coveted Michelin "star" is viewed by many as a symbol of international culinary excellence, and an honor for which restaurateurs and chefs literally die for. The launch of the Michelin Guide Tokyo was a blockbuster for Michelin and Asia and a shocker for the rest of the world, as it was the first time Michelin devoted a team of its own food critics to select excellent restaurants outside Europe and North America. What also sets it apart is that Tokyo is the only guide so far in which every one of its 150 restaurants were awarded at least one star. A restaurant that receives one or more stars is considered not only among the best in its country but also in the world.

Tokyo has long been known as one of the best places in the world to dine. With a total of 191 Michelin stars, Tokyo has become the world leader in gourmet dining with more stars than any other city in the world. By comparison, Paris, known for offering the best cuisine in the world, has 98 stars overall; London has 50 and is followed closely by New York City with 49; and San Francisco has a 34 stars.

Tokyo also stands out because of the variety of cuisines it offers in its restaurants is unmatched by any other major city—40% of Tokyo's 150 starred restaurants are non-Japanese restaurants. Of these, 75% are French, 14% are Italian and the remainder includes a handful of Chinese and Spanish restaurants. The French must be grinding their teeth but perhaps will just jump on the next flight to Tokyo.

Will Japan's markets earn more stars in 2008? Join the Chartwell Advisor and find out.

OECD Economic Growth Projections May Impact ETFs

By Carl Delfeld of the Chartwell ETF Advisor

The OECD cut back its 2008 forecast for developing member countries and this could impact the performance of exchange-traded funds like Germany (EWG) and Sweden (EWD). At the same time it increased forecast for emerging countires like India (INP) and China (FXI).

In its twice-yearly Economic Outlook, the OECD forecast growth in the 30-nation area of an annual 2.1 per cent in the fourth quarter of 2008, down from its May projection of 2.7 per cent.

This would be the weakest performance since 2003, when the world economy was emerging from the fallout caused by the bursting of the technology bubble in 2000.

Jorgen Elmeskov, acting head of the economics department, said although the organisation had cut its growth forecasts "virtually everywhere in the OECD", the outlook was "actually not that bad in view of the recent shocks".

OECD cut its fourth quarter GDP growth projection from 2.7% to 2.1% for its 30 country members but raised number for China to 10.7% and India to 8.4%.

How important is economic growth in choosing country ETFs? Go to Chartwell ETF and find out.

ETFs Worldwide Will Exceed 1,000 by Year End

By Carl Delfeld of the Chartwell ETF Advisor

The number of exchange-traded funds listed on exchanges around the world will exceed 1,000 by the end of the year. The number of ETFs listed on the London Stock Exchange recently climbed over 100.

In terms of assets, ETFs are also experiencing solid growth. According to the Investment Company Institute (ICI), the combined assets of U.S. exchange-traded funds (ETFs) grew $37.08 billion to $588.18 billion in October.

This is a 6.7 percent increase compared to September and 48.8 percent jump compared to October 2006, when industry wide ETF assets were $395.3 billion. During October, the value of all ETF shares issued exceeded that of shares redeemed by $17.54 billion. So far this year, ETFs have experienced a net issuance of $97.40 billion.

Get some help choosing which ETFs are best for your portfolio by joining the Chartwell ETF Advisor.

Economist's Business Books of the Year

By Carl Delfeld of the Chartwell ETF Advisor

Below are some of the Economist's picks for business and investment books of the year. They may help you in planning any changes in your global exchange-traded fund strategy. Chartwell will also be releasing a white paper on global sector ETF investing later this month.

The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It
By Paul Collier. Oxford University Press; 224 pages; $28 and £16.99
Crammed with statistical nuggets and common sense, this book, by an economics professor at Oxford University, should be compulsory reading for anyone embroiled in the thankless business of trying to pull people out of the pit of poverty.

The Age of Turbulence: Adventures in a New World
By Alan Greenspan. Penguin Press; 531 pages; $35 and £25
A memoir-cum-essay by the famously opaque former chairman of the Federal Reserve that provides few surprises, but is an unexpectedly enjoyable read.

Wikinomics: How Mass Collaboration Changes Everything
By Don Tapscott and Anthony D. Williams. Portfolio; 320 pages; $25.95. Atlantic Books; £16.99
A believers' guide to how the emergence of community on the internet is fundamentally changing business.

The Last Tycoons: The Secret History of Lazard Frères & Co—A Tale of Unrestrained Ambition, Billion-Dollar Fortunes, Byzantine Power Struggles, and Hidden Scandal
By William D. Cohan. Doubleday; 742 pages; $29.95
How an investment bank concentrated on providing corporate advice to the rich and powerful—a business model that relied not on its balance sheet but on the brains and wiles of the men toiling away in its famously ratty offices. William Cohan used to work at Lazard's himself.

The Black Swan: The Impact of the Highly Improbable
By Nassim Nicholas Taleb. Random House; 400 pages; $26.95. Allen Lane; £20
A Wall Street trader turned philosopher on the power of the unexpected.

Bank of England Rate Cut Lifts ETFs

By Carl Delfeld of the Chartwell ETF Advisor

After Canada cut its benchmark rate earlier this week, attention now turns to England and the European Central Bank. And what would be the effect on markets and the exchange-traded funds that track them?

The Bank of England today cut interest rates from 5.75% to 5.5% on Thursday as its monetary policy committee judged that worsening conditions in financial markets and a tightening supply of credit had increased the risks to growth and inflation.

“Although output in the United Kingdom has expanded at a brisk pace for the past two years, there are now signs that growth has begun to slow,” the Bank said in a statement released alongside the decision. The rate cut will probably help support and strengthen the value of the US dollar.

In terms of the UK ETF (EWU), it will cut both ways by increasing prospects for economic growth but weakening the pound short term. The move also increases the likelihood that the ECB will also trim its benchmark rate.

Click here for the full statement by the Bank of England. Find out if the UK ETF (EWU) is recommended by the Chartwell ETF Advisor.

iShares Launches Eight New International ETFs

By Carl Delfeld of the Chartwell ETF Advisor

In case you missed it, the iShares family of exchange-traded funds recently introduced eight new international ETFs. Here is the list of new ETFs followed by the exchange they trade on and their annual expense ratio.

iShares FTSE Developed Small Cap ex-North America (IFSM) NASDAQ 50 bps
iShares FTSE EPRA/NAREIT Global Real Estate ex-U.S. (IFGL) NASDAQ 48 bps
iShares FTSE EPRA/NAREIT Asia (IFAS) NASDAQ 48 bps
iShares FTSE EPRA/NAREIT Europe (IFEU) NASDAQ 48 bps
iShares FTSE EPRA/NAREIT North America (IFNA) NASDAQ 48 bps
iShares S&P Asia 50 (AIA) NYSE Arca 50 bps
iShares MSCI BRIC (BKF) NYSE Arca 75 bps
iShares MSCI Chile (ECH) NYSE Arca 74 bps

The addition of the Chile ETF (ECH) is welcome since this is the most pro-market oriented country in the region although it has come down sharply over the past few months. It is up 2.9% today in mid-day trading.

To see how you can build an ETF global portfolio that is the envy of friends, go to Chartwell ETF.

Chartwell Launches Global Sector ETF Rotation Portfolio

Chartwell Partners, a global investment advisory firm specializing in exchange-traded funds, is launching a Global Sector Rotation portfolio for high net worth individuals and insitutions.

With an increasingly globalized economy, categorizing companies by their headquarters is becoming less useful. What business sector they are primarily engaged in is a more useful way to group companies and compare valuations and stock prices.

The following ten global sector ETFs together make up the S&P Global 1200 index containing 1,200 large and liquid companies from 29 countries with a total market value of over $28 trillion. The market cap based sector weightings range from 4.8% for the iShares S&P Global Utilities (JXI) to 23.2% for the iShares Global Financials (IXG).

iShares S&P Global Consumer Discretionary (RXI)
iShares S&P Global Consumer Staples (KXI)
iShares S&P Global Health Care (IXJ)
iShares S&P Global Energy (IXC)
iShares S&P Global Industrials (EXI)
iShares S&P Global Technology (IXN)
iShares S&P Global Telecommunications (IXP)
iShares S&P Global Utilities (JXI)
iShares S&P Global Materials (MXI)
iShares S&P Global Financials (IXG)

Chartwell global sector allocations challege these traditional market cap based weightings using a macro momentum led, valuation check model. For more information contact Carl Delfeld at 719.264.1503 or go to ChartwellETF.com.

Follow Buffett with SPDR Lehman High Yield ETF (JNK)

By Carl Delfeld of the Chartwell ETF Advisor

You can use a new ETF to follow Warren Buffet who recently invested $2.1 billion in debt issued by Texas utility TXU. Buffet did say that he sees the investment as a play more on utility sector.

The SPDR® Lehman High Yield Bond ETF [JNK] introduced by State Street offers a precision investment vehicle that gives you a diversified, transparent and liquid means to gain exposure to the high yield fixed income segment. These higher risk investments can provide greater potential income in comparison to the more conservative fixed income investments such as treasury bonds and investment grade debt.

The ETF currently has 105 holdings with communications as the largest sector weighting at 24%. The average yield is 8.87%, no one holding excedes 3.5% and the average quality is B1/B2.

Wider spreads for high yield bonds and State Street's worldwide leadership in indexing and ETFs provide an attractive risk/return dynamic in this asset class. State Street is the second largest sponsor of ETFs in terms of assets and has introduced a series of innovative ETFs this year to gain on leader iShares. You should only cautiously invest in this sector and Chartwell ETF can help you blend the right ETFs consistent with your goals, time horizon and risk profile.

Chartwell ETF's Global 30 Tesco Attacks US Market

By Carl Delfeld of the Chartwell ETF Advisor

TESCO, a holding in Chartwell ETF's Chartwell Global 30 portfolio showed strong sales growth in the third quarter. Like-for-like sales, excluding fuel, at the UK supermarket chain rose more than 4 per cent year-on-year in the third quarter, nearly double the rate in the previous quarter. Total sales, including fuel, rose 7.6 per cent according to report in the Financial Times.

Sales from Tesco’s International businesses rose 25.7 per cent, with its stores in Asia leading the way, and good increases from central Europe. It expects to open 7m sq ft of selling space in its international division in the current financial year. Tesco has also already begun its invasion of America by establishing a beachhead on the west coast. Its goal is to build a substantial US convenience chain that could hit 1,000 stores with the next five years. It will open stores from San Diego to San Francisco, aiming for 50 stores by the end of its financial year in February 2008, and a further 200 by the end of 2009.

However, Tesco has put together a blueprint for a far bigger chain. A second distribution centre in Stockton, northern California, will give it distribution capacity for a further 500 stores. The brand is designed to be as fresh as Whole Foods, with value like a Wal-Mart, the convenience of a Walgreens and product range of a Trader Joe’s,” said Tesco USA CEO Tim Mason. “That leaves us with a specific edge in the market.”

Find out more about the Chartwell Global 30 index and portfolio.

Emerging Market ETFs and the Decoupling Issue

By Carl Delfeld of the Chartwell ETF Advisor

There has been a lot of talk about how emerging markets and the exchange-traded funds that track them have decoupled from more developed markets. Not really. But the main point is that all these country ETFs move at different paces and over time a blend of them offer investors the potential of good returns with lower volatility.

Despite some weak returns during the past month, emerging equity markets and ETFs are still up so far this year. China’s Shenzhen market, for example, has risen 167 per cent in dollar terms in 2007. But all are off their highs for the year. Shenzhen B shares have lost a tenth of their value since October 16, while Brazil and Korea have fallen 6 per cent and 9 per cent respectively since October 31. Spreads on emerging market sovereign external debt have widened to 254 basis points over US Treasuries from less than 200bp in September, according to JP Morgan.

But according to the Financial Times, there is evidence that economic linkages between emerging and developed market ETFs have increased. Developed countries’ share of world trade has fallen from a peak of almost 80 per cent in 1972 to 55 per cent in 2006, according to the IMF. And China has replaced the US or Japan as the most important trading partner for Hong Kong, Taiwan, Korea, and Vietnam. But because export growth has grown faster than these countries gross domestic product, for many countries exports to the US now account for a greater share of GDP now than in 1995.

But look at just the last thirty days. Malaysia (EWM), Switzerland (EWL), Spain (EWP) and Germany (EWG) were all up marginally while Canada (EWC) lost 11.2%, China (FXI) lost 10.5% and South Korea (EWY) lost 7.2%. Having a variety of different country ETFs in your portfolio and Chartwell's ETF Country Rotation strategy still adds value.

China's Thanksgiving Snub to America

By Carl Delfeld of the Chartwell ETF Advisor and the Center for American Diplomacy

Despite the fact that hundreds of American military families had flown to Hong Kong for holiday reunions, the Chinese government effectively barred a US carrier group from visiting Hong Kong, forcing 8,000 American sailors and airmen and their families to miss the planned holiday.

The Financial Times reported that China had rejected the fleet’s initial request for a port call. The Ministry of Foreign Affairs gave no reason for the refusal. On Thursday it apparently attempted to reverse its decision but it was too little too late due to logistics and a storm brewing in the area.

“We spent [Wednesday] floating in limbo trying to figure out if [China] was going to let all of the ships into their territorial waters or not. Finally, in the afternoon we were told it was a no-go,” one US sailor, who gave his name only as Jim, wrote on a military bulletin board.

The Kitty Hawk, the Navy’s oldest warship, has been visiting Hong Kong since the Vietnam war, and its Thanksgiving stopover in the territory was intended as a farewell call since the carrier will be retired next year.

The Financial Times reported that Admiral Timothy Keating, head of US Pacific Command, and Admiral Gary Roughead, chief of naval operations, on Tuesday said China also had recently refused a request from two minesweeping ships – the USS Guardian and USS Patriot – to enter Hong Kong harbour to avoid a storm.

"It is not, in our view, ­conduct that is indicative of a country who understands its obligations as a responsible nation.” Admiral Keating said he was more concerned about the decision to deny the minesweepers, which he said had been sailing in international waters, access to the port during a storm.

“For the Chinese to have denied those two ships in particular, small though they may be, that is a different kettle of fish for us, and is in ways more disturbing, more perplexing than the denial for the Kitty Hawk’s port visit request,” he said. Separately, Admiral Roughead said the Chinese had not obeyed the first tenet of the sea, which was that you first provided assistance to vessels in potential trouble before sorting out other issues.

Wealth Funds Impact on ETF Markets

By Carl Delfeld of the Chartwell ETF Advisor

Citigroup's raising of $7.5bn in new capital at a coupon of 11 per cent from the Abu Dhabi Investment Authority to augment its overstretched balance sheet is helping its stock and exchange-traded funds such as the iShares S&P Global Financials ETF (IXG).

Investment funds from the Middle East and Asia have invested an estimated $37bn in shares of western financial companies this year in a sign the funds are taking a more optimistic view than other investors of the growth prospects for banks, exchanges and asset managers.

According to the Financial Times, analysts at Morgan Stanley, the investment in financials by sovereign wealth funds far outstrips the amount they have committed to other sectors. Bankers say there is a big appetite among wealth funds for further investment in financial assets hit by the credit market turmoil.

Meanwhile Singapore's Temasek chairman recently stated that the group would no longer a seek a controlling stake in “iconic” foreign companies and instead opt for minority stakes in future investments with the participation of local partners. The new policy reflects the recent controversy over Temasek’s investments in Thailand and Indonesia which may be caught up in a global backlash against sovereign wealth funds, particularly from such emerging countries as China, the Middle East and Russia.

Find out what ETFs will benefit most from these investment flows by joining the Chartwell ETF Advisor