No Load Fund/ETF Tracker updated through 10/25/2007

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

A good rebound based on selective good earnings and anticipation of another interest rate cut next week had the major indexes gaining solidly.

Our Trend Tracking Index (TTI) for domestic funds/ETFs has moved to +6.73% above its long-term trend line (red) as the chart below shows:

The international index followed the market higher and remains +4.28% above its own trend line, keeping us on the buy side.

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

ETF/No Load Fund Investing: More Leverage For Your Dollars

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How much more leverage do you need? Apparently more than you have now. At least ProFunds seems to think so according to a MarketWatch article called “Over the Borderline.”

A few days ago, ProFund introduced 2 new funds, UBPIX and UFPIX. The first one, UBPIX, is an UltraLatin America fund designed to earn twice the upside of the New York Latin America 35 ARD Index. If you’ve held regular funds/ETfs with Latin American exposure, you know how fast these can move to the upside or downside. Adding 200% leverage, will add some volatility that should make any gambler jump with joy.

While this will work for some, I don’t think it will be a good idea for the faint of heart. It’s a new twist to supercharge returns in that area but, eventually, when these markets come back to reality, your portfolio will go down faster than free beer. Even using a trailing sell stop might not help since the leveraged move to then downside can be so fast and furious that your 10% stop might turn into a 20% one, or worse.

If this is too much action for you, then you might look at ProFunds’ other new offering, UFPIX, which is designed to reflect twice the downside movement of the Latin America 35 ARD Index. In other words it’s just the opposite. However, since markets tend to go down faster than they go up, this one maybe the tamer of the two.

In my advisor practice, I prefer not using any leverage, which is why I currently have no exposure to either of the above funds.

ETF Master List – Mid-Week Update As Of 10/23/2007

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Two days of rebounding action pushed the major indexes higher and instilled some confidence that maybe some support can be found at these levels. Of course, it’s still anybody’s guess if this is just a dead cat bounce.

Below please find the link to the most recent ETF Master list, which has been updated with yesterday’s closing prices. This will enable you to work with more recent data. You can download the file at:

Our Trend Tracking Indexes (TTIs) recovered from last week’s drubbing and still remain in bullish territory with the domestic and international TTI having moved above their long term trend lines by +6.13% and +3.17% respectively.

From The No Load Fund/ETF Archives: Sounding Like a Broken Record

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In view of last week’s market decline, reader Govind pointed to an article reviewing some of the historical market corrections.

Ranging from the precious metals crash in 1980, the emerging markets debt crisis in 1998 to the dot-com bust and currently the subprime mortgage and housing debacle, the underlying theme seems to be the same: Crashes and bear markets are part of history and will be with us in the future. This is not a prediction on my part; it’s pretty much a built-in economic mechanism which rears its ugly head every so often. As the article correctly stated “Rotating bubbles are the nature of capitalism.”

In other words, you need to come to grips with the fact that these events occur randomly and those who aim to predict are more likely to be wrong than right as I posted about on Saturday.

Since these bubbles, or the deflation of them, can’t be anticipated, having an alternative plan to deal with them is paramount. The only way I have found over the past 25 years is use a combination of trend tracking and trailing stop losses to protect your capital during times of uncertainty. While this approach is not designed to avoid any 3% hiccup in the market, it will keep you away from the devastating blows that have pushed portfolios to 50% and 60% losses.

If you heard me say this before, you are right; it’s the most crucial part of an investment strategy and far more important than being exposed to the latest and greatest fund or ETF.

The events of last week have shown again that we are playing global game and that there are no safe havens. In view of that fact, you can do the next best thing: Give your portfolio a little room to move within a certain range; if that range is violated on the downside, get out!

ETF Investing: Surviving Last Week’s Sell Off

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Whenever markets pull back, I like to view those areas that not only survived but actually posted some gains. A good way is to look at the ETF Master list since it contains some 500 ETFs including all types of orientations.

Besides the obvious winners, short funds, there have been others that bucked last week’s run to the downside:

Here are the top 10 winners along with last week’s performance as well as their M-Index rating:

USO (+4.91%, 20)
DBO (+4.01%, 10)
GSG (+3.56%, 14)
DBC (+2.81%, 11)
DBA (+2.78%, 7)
DBE (+2.70%, 7)
BLV (+2.66%, 2)
FXY (+2.63%, 1)
TLH (+2.54%, 2)
DCR (+2.39%, -4)

In case you are interested, the worst performer was UTH (-14.69%, -8). While we currently have no investments in any of these ETFs, this may change if the momentum numbers continue to show improvements to the upside.

Smart ETF/No Load Fund Investing: The Scandal Of Predictions

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Occasionally, I am being asked by various readers about my opinion on what I think where the market is headed or how a certain no load fund or ETF might perform in the future.

As I try to emphasize repeatedly in my writings, I follow trends, and I am not in the business of predicting future events. Personally, I think making any kind of prediction is for losers only because it simply can’t be done with any reliability.

Nassim Taleb’s book “The Black Swan,” about which I wrote a few weeks ago, had an excerpt that best describes the “expert” problem we are all facing, especially in the financial services industry. He refers to the work of psychologist Philip Tetlock as follows:

“Tetlock studied the business of political and economical “experts.” He asked various specialists to judge the likelihood of a number of political, economic and military events occurring within a specified time frame (about five years ahead). The outcomes represented a total number of around twenty-seven thousand predictions, involving close to three hundred specialists. Economists represented about a quarter of his sample.

The study revealed that experts’ error rates were clearly many time what they had estimated. His study exposed an error problem: there was no difference in results whether one had a PhD or an undergraduate degree.

Well published professors had no advantage over journalists. The only regularity Tetlock found was the negative effect of reputation on prediction: those who had a big reputation were worse predictors than those who had none.”

So, next time you are tuned into in one of those testosterone-charged talking head shows on the financial news channel, try reading this article again and realize that most financial news is geared towards entertainment with absolutely no investment value.