Friday Randoms

This chart comes courtesy of Michael Kahn in Barron's. The support that became resistance on the chart will either matter or it won't, given my expectations that this is a normal bear I expect it will matter but we'll know soon enough.

I stumbled across this article from theStreet.com about OEFs than own ETFs exclusively--so a fund of funds. I took the article to generally be skeptical which I agree with to a point.

If I were buying an actively managed fund I would want the manager to use whatever tools he thought were best to use. If that included ETFs fine but that's not what these funds are.

The focus is funds of ETFs. There were several mentioned including the Wilmington ETF Allocation Fund (WETIX). The allocation as of January 31, 2008 (according to Yahoo Finance) as follows;

iShares Russell 1000 Growth Index 54.56%
iShares MSCI EAFE Index 25.41%
Vanguard Emerging Markets Stock ETF 14.96%
iShares MSCI EAFE Growth Index 5.01%

The turnover is low at 44%, the description implies it uses an active strategy and it charges 0.70%. Well, what do you think of this?

IndexUniverse reported yesterday that Ameristock is closing it's five treasury bond ETFs (I'm using the word bond even though that term is only partially correct along with notes and bills); 1 year (GKA), 2 year (GKB), 5 year (GKC), 10 year (GKD) and 20 year (GKE).

I wrote an article about these when they listed for TSCM that was skeptical of the second to market nature of these and the potential lack of utility for people that need a specific income stream from their portfolio.

Will McClatchy took me to task on Seeking Alpha in response to my Ameristock article on my belief that knowing exactly what your income stream will be from your bond exposure is preferable to having a variable income stream that cannot be predicted. If I read Will's article correctly (you should read it, my take might be wrong) he believes having the maturity constant is preferable and leads to a truer asset allocation.

I don't think this would be palatable in the real world for someone who takes income from their portfolio as opposed to someone who uses fixed income products to manage equity volatility. In some segments of the bond market, like treasuries, individual issues are generally the better way to go. With things like convertible bonds I prefer a product. Where foreign sovereign is concerned I think it it depends. Forgetting about order size for a moment, buying debt from a developed AAA rated country is not absurdly risky. Emerging market bonds obviously kick it up a notch as does investing in foreign corporates (which I am currently trying to learn more about). Now bring order size back in and foreign debt becomes out of reach for most individuals.

To be clear I am not talking in absolutes as there are as many unique situations as there are investors but you should read Will's article, think about what I have said and make up your own mind.