In a previous post I mentioned the obvious disconnect that occurred earlier this year between domestic REITs and those that invest in the global arena.

The WSJ just featured an article called “Foreign Real Estate Funds Boom,” which analyses several REITs covering a variety of countries. Most of them are well known, however, foreign funds are not the cheapest when it comes to annual operating expenses.

However, my contention has always been that cost is relative to performance. If you had owned EGLRX for example with an over 40% return over the past year, the expense ratio would not have mattered. Nevertheless, many investors prefer a low cost solution along with great performance.

As has been the case, ETFs have come to the rescue over the past 5 years. The new kid on the block for international REITs is a Wisdom Tree International Fund (DRW), which focuses on Australia and some Asian countries. It’s only been around a short while, but for that period it has closely tracked the above mentioned EGLRX.

I will add DRW to the StatSheet (sector section and master List) starting with this week’s issue. While there is not enough data available to clearly identify its long-term trend, having it included already gives us the opportunity to monitor it and see how the momentum figures develop over the next few months.

If you believe that the performance of foreign REITs is to continue, you can invest in this new ETF now, but it is essential that you use my recommended sell stop discipline, just in case the market turns against you.

I have currently no investments in these funds.

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

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

The bulls had it their way as the Dow and S&P; 500 closed in record territory.

Our Trend Tracking Index (TTI) for domestic funds/ETFs is now positioned +5.23% above its long-term trend line (red) as the chart below shows:

The international index has now moved to +8.90% above its own trend line, as you can see below:

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

Last Tuesday, the market could not find its bearings and the result was a sharp sell off. Seems like it was one of those days were all news were interpreted as bad news. Even Fed chairman Bernanke’s words on inflation couldn’t calm the Wall Street crowd.

One of the big news items of the day was Standard & Poor’s announcement that they might be downgrading some 2.1% of the $565 billion of subprime bonds because of the housing slump being worse than anticipated.

No surprise to me, but Michael Shedlock explains the ins and outs of this debacle with a great sense of humor in his article titled “Stress Test.” This is in reference to S & P’s report that it will implement a ‘stress test’ of subprime mortgages.

Hmm, I wonder if that is just another useless phrase that would fit well into the theme of my recent Sunday post “Why business people speak like idiots,” or if they actually have a valid plan. My guess is, it’s the former but I’m sure, as time goes on, we’ll hear more about it.

From time to time, you may come across some investing terminology and see terms like “R-Squared” used in an article. The formula is represented in the picture on the left and, if you’re a math wiz, you devour things like this for breakfast.

For the rest of us mortal human beings, here’s the definition by Vanguard:

“R-squared measures how much a fund’s past returns can be explained by the returns from its benchmark index.

The higher the R-squared, the more the fund’s return can be explained by the performance of the index, and so the performance of the market or market segment. The lower the R-squared, the more the return can be explained by the fund manager’s decisions.”

When would this be important to you? Most of the time, it does not matter, but when you invest in some of the newer more esoteric ETFs, which are all supposed to track an index, and the ETF performance differs from the underlying index performance, you now know why: Based on the above explanation, R-squared is less than 1.

It does happen occasionally, as I posted about in “ETF News: Straying From The Index.”

Okay, I had to shorten the title due to space limitations. I am referring to Larry Swedroe’s book “The Only Guide To A Winning Investment strategy You’ll Ever Need.”

It contains some interesting (but rehashed) information I have written about before. Larry is a proponent of index investing and seems to think that buying and holding indexes is far superior to active investing.

I have to be honest with you; there is not much in this book I can agree with. Actually, it makes my hair stand up and I could write endless posts on my disagreements. However, I will only focus on a couple of items, which I found worthwhile sharing with you.

Page 34 features a table showing the devastating effects of the last bear market and Larry’s point is that even royalty funds like Janus suffered severely.

To me, the interesting thing about reading forecasts is that nobody seems to agree on the direction of the market. Despite the fact that everyone has the same information available, opinions vary and many times are opposite of each other. That’s a dead giveaway of the value of a forecast, which is zero.

Nevertheless, I read some of them strictly for entertainment.

While I actually may agree with some of the views expressed, they never ever form the basis of my investment decisions. MarketWatch had a recent blurb called “Still a lot of chances to buy upward mobility,” which featured an interview with Donald Hodges, co-manager of the Hodges fund.

His opinion was that “that the stock market will remain stronger than many observers seem to think, and that there are days with severe reactions, but that’s more typical of a strong market than of a real bad one. The bad markets we have been through are the ones that roll over and just get you every day.”

I can agree with that.

The article ends with an opinion from Eugene Sit, chairman of Sit Investment Associates, who says that “he expects stocks to suffer a short-term downturn — in the neighborhood of 5% — before a year-end rally allows the market to finish the year about 3% higher than it was at the halfway point.”

I can agree with that too.

Here you have two somewhat different opinions similar to what you might read daily in any of the media. Unfortunately, many investors use these as a basis for making their investment decisions, and that’s the problem. It’s just an opinion, which you can agree with or not, but that’s it.

This is the exact reason why I never state a view as to where I think the market is headed, although I get many requests from readers who seem to think I have some mysterious power to look into the future.

I track trends and deal with facts; not what might be happening or what I want to happen, but strictly what the numbers tell me “is happening.” If you can get away from overindulging and participating in the (for the most part useless) daily news barrage, you might find yourself looking at facts rather that predictions, which are a far better basis for making more appropriate investment decisions.