The Street.com reports that ProShares is launching another inverse Exchange Traded Fund:

The ProShares Short 20+ Year Treasury(TBF) is set to track the Barclays Capital U.S. 20+ Year Treasury Bond Index, an underlying index used for successful traditional funds. Investors may be temped to believe that a “single” inverse Treasury fund like TBF would be less risky than other types of leveraged funds. The recent shakedown in the leveraged ETF business has taught investors otherwise. TBF, like other leveraged fund strategies, is a daily tracking ETF that is appropriate for sophisticated investors.
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TBF’s strategy isn’t based on shorting the 20+ year Treasury bond index, as the name of the ETF might suggest, but on owning instruments that provide a return that would be “like” shorting the index. This important difference impacts the risk and fees involved in investing in these non-traditional strategies.

Buyer beware. My recommendation is to never ever jump on any new offering no matter how tempting it may appear. My personal rule is to let any newly issued ETF accumulate pricing over the next 9 months to a year, so that a long-term trend can be easily identified. Additionally, I can at that time also chart the underlying index against the new ETF to identify any weaknesses in respect to their inverse relationship.

And last not least, a year from now, I can clearly see how daily trading volume has developed to make sure that this ETF is in fact in survival mode.

Yesterday, I tried to answer the question whether the dollar is really headed for abyss as so many investors seem to think.

Bill Fleckenstein had some thoughts on the topic in “There’s no will to fight inflation:”

The world’s central banks are loath to take away the punch bowl. Lest you think otherwise, consider the path forged by the Reserve Bank of Australia.

Money printing is just too easy (and seemingly painless) for central planners-cum-bankers to resist.

As the above and other news reports have shown, the entire industrialized world is participating in doing the same thing. That means that everyone is devaluating their currency at about the same rate.

To my way of thinking, if there is no “supreme” currency left against which all others are measured, then the dollar will move pretty much in sync in terms of its relative value with the rest of the world.

Unless sound economic policies are suddenly put in place and ruthlessly enforced in many parts of the world (and not in the U.S.), I simply can’t see the dollar heading towards abyss.

Just food for thought.

Reader Tad had some interesting comments recently. Among other things he said:

One day, soon, I would like to see a blog from you on “what happens when we default on our debt”. Or, with the US dollar close to what could be freefall, “what happens if it does go into freefall” and what would you advise in the way of investments/safe havens… I know they are entwined, but you know where I am going on this one…

This has to be most frequently asked question as many astute readers are aware of the sad state of economic affairs and the potential subsequent consequences. We all like to have some kind of crystal ball to see how this current scenario will play out.

I am not so sure if the dollar destruction will actually come about as many anticipate.

Historically, currencies have been destroyed because of one country’s failure to adopt sound monetary policies. However, the bursting of the current real estate/mortgage/credit bubble has affected all industrialized nations around the world, and all governments have adopted similar policies, all of which could be considered bad for their respective currencies.

This brings up the interesting question as to how much individual currencies will really suffer if everyone is essentially devaluating at the same time; maybe to slightly different degrees.

While I don’t have that answer (I don’t think anybody does), for some more thoughts along the current deflation scenario, you might want to read Mish Shedlock’s blog post on “Creative Destruction.”

As far as future investments are concerned, it is far too early to try to predict/speculate as to what will be the safe haven on the horizon. As always, I let the trends be my guide.

The ETF Master list in the weekly StatSheet gives you some 12 pages of ETF listings (ranked by momentum) covering just about any sector and area you could think of. The column to watch in the future is %M/A (the percentage an ETF is positioned relative to its long-term trend line. A positive number means the price is above its trend line while a negative number means it’s below it).

Over time, as market conditions change, you will see ETFs moving from positive territory into the negative area and vice versa. The crossing to the upside should get your attention to see if such a move accompanied by rising momentum figures may justify an investment in such an ETF.

Right now, with most ETFs showing positive momentum numbers, there is not much that can be learned about the future. Once the markets sell off again and negative momentum prevails, that is the time to watch for those ETFs, which are the first ones to sprint again above their respective long-term trend lines.

Keep in mind that after a sell off, or market crash, those ETFs who recover the quickest, are most likely in tune with the economic circumstance at the time. Those are the ones to focus on and that is about as close as you can come to make an appropriate choice without too much guesswork.

My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

With an apparent floor and a ceiling firmly in place, the major indexes meandered around the unchanged line, but closed slightly higher.

Our Trend Tracking Index (TTI) for domestic funds/ETFs has now crossed its trend line (red) to the upside by +6.42% keeping the current buy signal intact. The effective date was June 3, 2009.



The international index has now broken above its long-term trend line by +14.22%. A Buy signal was triggered effective May 11, 2009. We are holding our positions subject to a trailing stop loss.



[Click on charts to enlarge]

For more details, and the latest market commentary, as well as the updated No load Fund/ETF StatSheet, please see the above link.

The Wall Street Journal featured an interesting piece titled “For some Investors, Night of Living ETF.” Here are some highlights:

Low costs are a selling point for the exchange-traded-fund industry. But more than a quarter of the ETFs on the market are hitting shareholders with high trading costs that escape many investors’ notice.

The ranks of less-liquid ETFs are expanding as money available to seed new ETFs dries up but fund companies continue to roll out new products. Though many funds don’t attract much cash, they are relatively cheap to launch so fund companies will continue to throw products at the wall to see what sticks, ETF analysts said. There are more than 500 ETFs in registration, waiting to be launched.

What concerns me far more than direct costs is low trading volume. Some of the ETFs featured in the ETF Master list of my StatSheet are featured to show all the different types that are available, but that does not make them necessarily a good choice.

Once you have decided on an ETF invest in (via momentum index selection or other criteria), you need to look at volume. For quick reference, I use Yahoo Finance. Let’s say, I want to check out the particulars for QQQQ (in which we currently have positions), I simply go to this link and immediately can see that the average daily trading volume is over 113 million shares, which makes it very suitable even for large block trades.

How much volume should you be looking for in an ETF? To me, the very minimum is about 4 times the amount I am planning to invest. Say, I want to deploy $2 million of clients’ assets, I want to see an average daily volume of at least $8 million. That assures me a fairly smooth fill without too much slippage.

More importantly, looking ahead, the time will come when the trend reverses, and I’ll be heading for the exit door. I want to be able to get out as quickly as I can and with as little of a price concession as possible.

You can only do that by being invested in high volume ETFs. I suggest you use a similar approach by making a quick volume check before entering your order. In a way, investing in a low volume ETF can increase your hidden costs by decreasing your exit price and thereby lowering your accumulated profit or, in some cases, increasing your losses.

The markets bobbed and weaved a bit yesterday but Fed chairman Bernanke’s nomination for a second term cheered traders, who are now looking for more economic stability and growth.

I must be one of the few who is not impressed by Bernanke’s resume, especially due to the fact that he never saw the housing bubble and subsequent recession coming, but is now predicting that better times are ahead. It reminds me of the (former Treasury chief) Paulsen speech early last year announcing on several occasions that the U.S. banking system is sound. Yeah right.

If you are not familiar with Bernanke’s recent history, take a look at this video clip on YouTube send in by an anonymous reader.

I continue to be very hesitant in believing that these alleged economic green shoots will ever grow into Redwoods. My investment outlook remains guarded, and all of my positions have clearly defined exit points in place.