3 New ETFs Worth Waiting For

Even the worst economy since the Great Depression and a president who chastises white-collar financial workers for not “making anything” hasn’t stopped the intense pace of innovation in the ETF space, where no fewer than 250 funds await regulatory approval. These aren’t the usual bevy of large-cap lookalikes full of Exxon Mobil (XOM) and Google (GOOG). Previously unattainable markets, from commodities, currencies and real estate will soon be as easy to trade as General Electric (GE)… if the SEC ever gets around to permitting them to list. Here are a few of the upcoming products I’m anticipating the most.

1. ETFs Palladium Trust (No Ticker Yet)
Palladium, a sister metal to platinum, is used extensively in auto catalysts, which accounts for roughly 55% of the total demand. It’s also used in dentistry, electronics and jewelry, giving it somewhat of a split personality. It’s an industrial metal that’s often closely correlated with gold and silver. The majority of supply comes from Russia and South Africa, where disruptions in production can often lead to sharp spikes in price.

Source: Platinumtoday.com

Longtime readers know I’ve had some success in the past with palladium-related equities such as North American Palladium (PAL) and Stillwater Mining (SWC). Not unlike SPDR Gold Trust (GLD) or iShares Silver Trust (SLV), the ETFs Palladium Trust will aim to simply track the price of palladium, less expenses, making it easier and less cumbersome to trade than futures contracts or actually taking physical delivery. A small and comparatively illiquid market, palladium likely will move quite quickly once signs of an economic recovery begin to appear. For those interested in this unusual opportunity, the prospectus is an informative read.

2. WisdomTree Currency Funds
Upstart fund provider WisdomTree has shown great innovation by launching a suite of stock funds weighted by dividends and earnings rather than market capitalization. Lesser known, but equally groundbreaking are the firm’s currency ETFs, including WisdomTree Dreyfus Chinese Yuan Fund (CYB), which tracks the movements of the Chinese yuan, an exposure that would have been unheard of even a few years back.

Waiting in the wings are a host of proposed currency funds that will permit U.S. investors to allocate into foreign currencies ranging from the Israeli shekel to the Thai baht. We previously highlighted the firm’s South African rand fund , which has regained some ground as investors have once again become less risk averse.

Now no fewer than 16 funds are proposed in the firm’s August 2008 filing with the SEC. Yield-hungry investors will undoubtedly be interested in funds tracking high-yielding currencies such as the Turkish lira or Indonesian rupiah. We’ll assume they’ve shelved plans for a fund following the Icelandic krona.

Given the size and scope of the government’s expansion plans, the potential for a long-term depreciation of the U.S. dollar is becoming even more likely than the black helicopter crowd would normally suggest. If and when they finally list, WisdomTree’s new offering will undoubtedly up the game for investors looking to diversify out of the good ‘ole greenback.

3. MacroMarkets Metro Housing Funds
On May 11, MacroMarkets will IPO two new securities that truly change the game for asset allocation in a stock account. No longer resigned to use REITs as a surrogate for real estate exposure, stock investors will now be able to speculate on residential housing itself.

Major Metro Housing Up (UMM) and Major Metro Housing Down (DMM) track three times the percentage change of single-family homes, as measured by the widely watched Case-Shiller Composite Home Price Index. Essentially, this is a way to bet on (or hedge) the value of residential real estate with one simple transaction. If you are bullish on housing, buy UMM. If you are bearish on housing, or want to hedge the value of your own home, buy DMM. Particulars are spelled out in the fund’s detailed prospectus.

Case-Shiller Composite Home Price Index

Source: MacroShares

The composite index is comprised of New York (27%), San Diego (5.5%), San Francisco (11.8%), Washington, D.C. (7.8%), Boston (7.4%), Chicago (8.9%), Denver (3.7%), Las Vegas (1.5%), Los Angeles (21.2%) and Miami (5.0%), giving investors a broad exposure to residential metro real estate without being too heavily weighted in any one region. These funds represent a major step forward in asset allocation for investors of every size and stripe, allowing you to buy (or sell) a home without so much as calling a broker.

For those who’d prefer to have their politics delivered in cartoons rather than rhetoric, the free-market Ludwig von Mises Institute features an illustrated version of “The Road to Serfdom,” originally published by the Nobel-Prize winning economist in 1944.

“The Illustrated Road to Serfdom”
Via: The Ludwig von Mises Institute