NEW YORK (
) -- Don Dion posts his current insights on the stock, bond, commodity and currency markets in his
blog, anticipating which ETFs will be in play next. Among his blogs this week were the following, in which he wrote about the attack of dollar bulls on an ETF, the impact of Buffett's big railroad acquisition on the transport sector and how
JP Morgan Alerian MLP Index ETN
is set to outperform the
S&P 500 Index
Attack of the Dollar Bulls
Posted 11/05/2009 3:33 p.m. EDT
Dollar bulls just broke
PowerShares DB U.S. Dollar Bullish
. They have purchased all the available shares and creation is halted until the
approves the creation of another 100 million shares, which would more than triple the existing share total. This is due to a multi-month trend that accelerated into October.
PowerShares DB U.S. Dollar Bearish Fund
would be the top choice of ETF investors. With $379 million in assets at the end of October, having added $39 million in a month that was marked by heavy inflows into emerging markets and fixed-income ETFs best positioned for
, one might conclude that ETF investors are bearish on the U.S. dollar.
The headlines would reinforce that thinking, but the data may tell a different story. UUP saw $232 million of inflows last month and assets climbed to $726 million, up from $504 million at the end of September, $354 million at the end of August, and $184 million at the end of July. UDN, meanwhile, has held steady with $300 million plus in assets for the past four months.
As of today, however, PowerShares' Web site reports that UUP has $944 million in assets, a jump of $218 million in less than a week, nearly the total for all of October.
Last year, during October 2008, UUP was much larger than UDN in terms of assets. UUP had $608 million compared to $65 million in UDN, at a time when the U.S. dollar was in the midst of a major rally.
Also at this time last year, UDN had year-to-date net outflows of $4 million, compared to net inflows of $185 million this year. UUP meanwhile, had inflows of $415 million year-to-date through Oct. 31 last year, and $439 million in inflows this year.
There remains a huge difference in trading volume as well, with UDN trading $305 million worth of shares last month, compared to $1,672 million for UUP. Both were up sharply from September, when volume was $193 million for UDN and $957 million in UUP.
Clearly, investors are more interested in the bullish dollar fund this year, even though it hasn't even begun to rally; in fact, it hit its low for the year last month. This ramped-up interest may be due to higher visibility for the ETF as a way to bet on the U.S. dollar.
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Buffett Escapes the Transports -- for Now
Posted 11/03/2009 11:20 AM EDT
Monday's close of 3,599.84 for the Dow Jones Transportation Index was the lowest closing value since Aug. 17 of this year. The 3600 level has formed a support line since August, which has been tested four times, including yesterday.
Things were looking less than rosy for the index, which had been diverging from the
Dow Jones Industrial Average
. Contra the transports, the industrials had been the strongest of the major indices. The developing question was whether the Dow would turn down or the transports move up.
Thanks to Warren Buffett, we have an answer.
Buffett's $34 billion purchase of
Burlington Northern Santa Fe
sent the transports up 4.5% at the open and the
iShares Dow Jones U.S. Transportation Index
up 4.7%. BNI is the largest holding in IYT, at 11.38% as of yesterday's close.
Shares of BNI gained more than 28%, and with the deal valued at $100 per share, shares only have about 3% more to go. BNI's advance accounts for nearly 3% of IYT's gain, and the halo effect lifted other railroads such as
by 5.5% and 6.5% in early trading. Those two firms account for 8.12% and 4.92%, respectively, of IYT's assets.
, which makes up 10.72% of the index, was up 1.4% early, and
, 8.37% of the index, had a small gain of 0.3%.
I would not buy shares of IYT here until there's a follow-through. While today's move could hold and the technical picture has improved, there needs to be broad support for transportation stocks. A Buffett-fueled rise in the rail sector is not enough.
AMJ Set to Outperform
Posted 11/02/2009 4:39 p.m. EDT
August 28 article on the
JP Morgan Alerian MLP Index ETN
, the shares have climbed 7.3%, compared with an 8.2% advance in
First Trust ISE-Revere Natural Gas
, a 10.6% drop in
U.S. Natural Gas
and a 1.4% gain in the S&P 500 Index.
While FCG offers greater gains as a result of leverage on the price of natural gas, it comes with volatility, and the past week has nearly brought FCG's return in line with that of AMJ. UNG could be a great fund to own if natural gas prices were to recover, but the supply glut remains an issue.
I expect AMJ to continue to outperform the S&P 500 Index whether the market goes up or down. Gains have been harder to come by in the broader market and the less volatile AMJ's outperformance in an up market suggests that investors are finding reasons to own master limited partnerships. The relatively high yield offered is undoubtedly drawing in some income investors.
AMJ does carry the credit risk of JP Morgan, however, an added variable to consider. During a sharp sell-off or a period of heightened fear, AMJ has the potential to trade at a discount to NAV.
-- Written by Don Dion in Williamstown, Mass.
A special note from Don: To put it simply, I want to help you profit from ETFs. You don't have to be an expert trader -- there are potential profits for investors at every level. And I think there's no better way to jump into the world of ETFs than my brand new service, TheStreet ETF Action by Don Dion. Membership is limited, so click here to get in on the action!
At the time of publication, Dion was long JPMorgan Alerian MLP Index ETN.
Don Dion is president and founder of
, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.
Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.