When reviewing the top 10 rated exchange-traded funds and notes this month, an obvious theme emerges. As the U.S. dollar erodes in value, nine of the 10 funds directly benefit.
The U.S. Dollar Index compares our "greenbacks" to a basket of six major world currencies, and shows that we have lost 11.45% in the last year. Even after fractionally positive months of April and May, the year-to-date loss is 4.98%. The May 31 reports of shrinking industrial production and nonfarm payrolls coincided with CPI inflation running at 4.2% in the United States.
All of the top 10 funds received A+ ratings for the period ending May 31.
Six of the top 10 funds track various currencies against the U.S. dollar with the
iPath EUR/USD Exch Rate ETN
taking top honors. The second place
CurrencyShares Euro Trust
did just as well betting on the same currency.
The Eurozone economy may have declining retail sales and consumer confidence but currency traders have still preferred the euro as a store of wealth to the U.S. dollar over the last year.
Another big difference between America and Europe is in the balance of trade. While Europe is a net exporter, America imports more goods than it exports. For companies to return their sales revenue to their home country they sell dollars, further pushing down its value.
Sweden did not join in on the Euro currency. Their Krona has fared well against the U.S. dollar over the last year massaging the
CurrencyShares Swedish Krona Trust
to a double-digit gain.
Three of the funds listed below appreciated from hard asset holdings measured in U.S. dollars.
As the U.S. dollar loses value, it takes more dollars to buy commodities such as precious metals and, more specifically, gold. This has been great news for investors in
PowerShares DB Gold Fund
PowerShares DB Commodity Index
PowerShares DB Precious Metals Fund
Market Vectors Environmental Services ETF
also scored an A+ rating with large holdings of
Allied Waste Industries
For an explanation of our ratings,
Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.