HERE’S Some Pudding For You Hougan

October 14, 2007

I've been running through our updated data, which is always fun, and thought I'd try an exercise. Here's what we should all be buying right now.

Going through the data (updated last week), I came out with the following top-performing ETFs for September after reading your pudding blog. Let's take a look at the last month's returns.

 

Name

Ticker

1 Mo

3 Mo

YTD

2006

2005

iShares FTSE/Xinhua China

FXI

21.38

41.96

63.36

83.19

14.15

iShares Brazil

EWZ

20.17

20.70

57.91

44.27

52.46

Market Vectors Gold Miners

GDX

20.15

19.02

13.06

   

PowerShares Halter USX

PGJ

20.07

29.42

60.57

53.10

-3.29

SPDR S&P China

GXC

19.84

40.70

     

Market Vectors Steel Sector ETF

SLX

19.26

20.95

72.31

   

iPath MSCI India Index

INP

19.20

20.04

39.64

   

Claymore/BNY BRIC ETF

EEB

18.97

25.60

52.81

   

Ultra Basic Materials ProShares

UYM

17.54

8.91

     

SPDR S&P BRIC 40

BIK

16.86

25.97

     

Ultra Oil & Gas ProShares

DIG

15.88

15.53

     

iShares Hong Kong

EWH

15.19

23.71

31.26

29.69

7.84

iShares Australia

EWA

14.88

11.26

34.28

31.42

16.66

First Trust ISE Chindia

FNI

14.75

20.41

     

iShares MSCI ex-Japan

EPP

14.46

12.99

32.85

32.07

14.03

iShares Silver Trust

SLV

14.19

8.72

5.42

   

PowerShares DB Silver Fund

DBS

13.76

10.98

     

WisdomTree Pac ex-Jp Tot Div

DND

13.67

12.92

33.86

   

BLDRS Emerg Mkts 50 ADR

ADRE

13.58

17.21

37.73

37.70

40.81


Data as of 9/30/2007

So does that tell us that we ought to be piling money into China, EM and commodities? I'm not so sure about that. It's been a long, happy run in those asset classes, and if you look at historical returns, they show that these asset classes, and particularly EM is a roller coaster ride. And the last time I checked, roller coasters DO go up, but then they also go down, very hard and fast. See the homebuilders ETFs for a recent idea of what I'm talking about.

That said, I've been wrong before. Maybe this time, EM will just keep going up in some new paradigm until the emerging economies grow past the U.S. economy, and then they'll ride on some sort of Greenspanian perpetual plateau (oops, sorry, bad example).

So what I'm really saying here is that past results are no guarantee of future performance. Do I LIKE China long term? Heck yeah. Does it make me a little nervous right now? Indeed.

On the other side, if you take a look at the new issue of ETFR (October, available to paid subscribers at www.indexuniverse.com/ETFR), you'll see an article I wrote showing that (through July at least) the "fundamental index" ETFs have pretty much underperformed the market since inception (which for many of these only gives us YTD data). The point was that some of the proponents of alternative weighting have said that only in extremely rare circumstances do these indexes underperform, and then only by a little. So I guess we're in extremely rare circumstances, because they're mostly underperforming by a little or more.

But does that means that you throw all these out the window? Well, I wouldn't say so. Give us five years, 10 years, 20 years, and we can talk again. It all comes down to style, and to some degree size. If small and value keep up the good work that they've put in over the last 50 or so years, then these kinds of strategies (available broadly diversified and at a relatively low cost within their purview by the way), could make you be happy.

The numbers—the pudding­ if you will—will be right there for all to see.

Oh yes, thanks Matt for that Red Sox taunt of the Indians after game 1. I'm assuming game 2 you didn't find so enjoyable. I was wide awake for that 11th inning. These are my two favorite teams, but the Red Sox have to be a distant second right now. Can you say "home field advantage?" Oh, not really—I see. And if you guys throw Wakefield out there, we will CRUSH him. And Beckett on three days rest? Quite the conundrum. We've got four solid starters, and I get the feeling our ace will wake up the next time around. But man, your 3-4: SCARY.

 

 

 

 

 

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