Don Dion posts his current insights on the stock, bond, commodity and currency markets in his RealMoney blog , anticipating which ETFs will be in play next. Among his blogs this week are the following, in which he wrote about the selloff in India, why commodities have further to fall and the outlook for a brokerage ETF.Click here for information on RealMoney, where you can read daily blogs, including Don Dion's, and reader comments in real time.
India's leaders didn't deliver the reforms promised during the election. While this is the best time to pass market reforms, it is also the most difficult. Only the strongest and/or wisest of governments will push in the opposite direction of popular sentiment (Hungary's minority socialist government, for instance, passed tax cuts and shifted taxes from production to consumption). Grading on a scale, this isn't the worst budget proposal and does not mean reforms will never arrive. Long term, therefore, the drop in Indian stocks is overdone. Short term, however, the larger-than-expected deficit is another piece of negative news that mows down the "green shoots" story. Investors interested in India's future may have the opportunity to enter at lower prices in the coming weeks. There are three pure-play Indian exchange-traded products: WisdomTree India Earnings ( EPI), PowerShares India ( PIN) and iPath India ETN ( INP).
However, there's strong evidence that Chinese demand wasn't permanent, but rather a combination of low prices and massive loan growth. Chinese companies found themselves flush with cash as the banking sector became a tool for stimulus and they faced a world with severely depressed commodity prices. It is probable that the recent demand was not a resumption of previous growth levels, but future demand packed into a few short months. Companies betting on Chinese demand, such as Alcoa, may be in for a third-quarter surprise. Traders wanting to profit from further commodity declines can use the inverse ETNs offered by PowerShares. PowerShares DB Crude Oil Double Short ( DTO) has good volume. PowerShares DB Base Metals Double Short ( BOM) has very little volume and can only be used for very small positions at this time. Energy and metals are most correlated with China's economy, but those who think agriculture or gold also have further to drop can check out PowerShares DB Gold Double Short ( DZZ), which trades on high volume, and PowerShares DB Agriculture Double Short ( AGA), with very low volume. PowerShares offers single-short ETNs as well, but these are less popular and hence have even lower volume.