That is the title of an article from someone named Ron Rowland. The article has a spreadsheet of 139 ETFs and ETNs that might be in trouble due to very low dollar volume. Exchange traded products are obviously becoming more and more a part of the portfolio landscape, providers have created over 700 funds so far and I'm not even sure if a third of them are profitable.
It would be reasonable to wonder whether anything from X-shares will be around a year from now but I doubt anything, no matter how obscure, from iShares/iPath is going anywhere. According to the Deathwatch the Barclays Global product with the lowest dollar volume is the iPath Aluminum ETN (JJU) with only $6118 worth of shares traded per day. Anyone thinking they have some particular insight with aluminum can probably buy JJU with confidence about it lasting. That same type of insight about the biofuels ETN from ELEMENTs might not work out as well (in terms of surviving).
I hope all the quirky products can survive, although I know not all of them can. Having 95% of your portfolio in normal broad based products and then allocating 4-5% to quirky things like tin, Norwegian fisheries (so such ETF exists) or anything else they come up with that you know a little something about is perfectly valid; the prices of tantalum and thorium won't go to zero even if they were to go down a lot (I am not aware of any ETPs for tantalum or thorium).
A couple of notes, iShares closed a couple of sub-sector ETFs in 2001 which for the ETF industry was another lifetime ago. Also iPath ETNs are obviously a debt obligation of Barclays Bank and so a failure of the bank would jeopardize the ETNs. The ETNs are part of the BGI division which last I looked was profitable and I believe would be an attractive asset in some sort of fire sale or other restructuring should it ever come to that but you should know the risk in case you decide to step up to a little cocoa.
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19 comments:
I should look to see if ANY of Claymore's ETFs have significant volume.
they're based near me (CHicagoland) and are going through some layoffs.
WSJ had an interesting article about funds failing to acheive goals. The example was double long/short funds failing to double the underlying index on an annual basis. The fine print in the prospectus apparently says the strategy is for a daily basis. The article then went on to show how compounding effects can distort the annual return even though the fund was meeting its stated objective. At the end of the year, a double short fund might actually only be down 25% instead of 200%.
Anyone else see the article and care to comment?
Lesson: Make sure you read the prospectus and don't count on a fund's name to describe their strategy. Buyer beware.
Rereading, I didn't articulate this well, hope you all get the drift.
Your love for odd stuff will never fade. I will add you are likely correct, but I just do not see it for most people due to little understanding or time to deal with it.
http://globaleconomicanalysis.blogspot.com/
On another note I highly recommend Mish's review of 2008 and themes for 2009.
I second Anon 7:23 in that Mish offers excellent insight into the economy as well as market forecasts.
Roger- you may want to consider adding Mish as one of your visited blogs on a daily basis.
In summary Mish is expecting this sucker's rally to end after the stimulus package is announced and we will retrace to 450-700 on the S&P 500. He also says not too short treasuries as an investment strategy or hedge and comments on deflation and other factors. Quite interesting.
Maybe if they spelt aluminium correctly they'd sell more.
A UK heckle? nice.
while we're at it what about all the words ending with ize versus ise
Roger--this is a question re an earlier video post of yours, but if you don't mind my asking, what is the best way to obtain a single share certificate as you did for Yahoo? It seems like a neat idea for novelty purposes, but I would be interested in whether the cost/hassle factor is high. Thanks!
hassle? none
cost? one share, commission, and order out fee of $50 which seems onerous but I did it anyway.
Thanks--the $50 seems like the kicker. I called my brokerage and they had the same charge. Bummer...if there were a cheaper way I can think of a few names I'd like to have for sentimental/collectors purposes. I wonder if different companies even have different certificates, or if many of them use basically the same form, which wouldn't be that interesting.
No one really uses stock certificates anymore. SErvices like that cost money. You could check ebay.
"No one really uses stock certificates anymore. SErvices like that cost money."
You are correct. My investment adviser at Madoff securities clearly indicated there was no need for wasteful paper work anymore last year.
ETF's multiplied like rabbits. I can remember when DIG/DUG had really low volume! And the triples--they came out of the gate with monstrous volume.
I use them judiciously--mostly as a hedge for other positions either on the long/short side.
I recently read Napier's Anatomy of the Bear and did a short summary at my blog (I rarely promote anything that I've written), but Napier's book is excellent (I suggest you buy it and read it). But you might find it of passing interest.
Very interesting post. What usually happens to the shareholders when an ETF is closed? Do they get a payout, are they left in the dust, or does someone dump a pile of aluminum/aluminium in their driveway?
not a big deal when an ETF closes, they cash you out at the NAV
could have adverse tax consequences though.
also check with stock transfer agents they usually offer a direct purchase option and the choice of getting the certificate. I don't know how much they charge for the certs, but it might be less than your broker
http://www.amstock.com/investpower/new_faqs.asp
There's seems to be a death watch in everything these days.
Corporate Death Watch
Insurance Companies Death Watch
Bank Death Watch
Investment Bank Death Watch
Hedge Fund Death Watch
Bailout Death Watch
Madoff Related Death Watch
and now ETF's?
ETF Death Watch; there are too many of them.
I'm still waiting for 10x S&P long and short. Maybe 5x oil, too.
Thanks for the tips on buying obtaining an actual stock certificate like Roger did. What would happen if the stock split, dividends were paid, etc.? Seems like a simple answer but since I've never held a physical certificate before, I guess I don't know the answer!
if you take possession of stock like that you will get dividends sent to you as well as new shares in certificate form should the stock ever split.
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