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. This week, among his blogs featured below, he wrote about developments in Singapore and China, ongoing problems in the natural gas futures market, and using currencies in your portfolio.

Click here for information on RealMoney, where you can read daily blogs, including Don Dion's, and reader comments in real time.

I was pleased to learn this week that I have been listed as one of the "25 People Who Revolutionized the ETF Industry" by the analysts of ETF Database. According to their Web page, Dion is credited as "one of the most widely-read analysts in the ETF industry." The analysts also note that "through his numerous publications, Don has raised the visibility of ETFs as an investment option and informed countless investors of their advantages and drawbacks." To view the results, please click here and visit the ETF Database Web site.

Asian Jitters

Posted 7/13/2009 9:52 a.m. EDT

Economists estimate that Singapore's economy grew at 13.4% in the second quarter, following a 14.6% drop in the first three months. Official data will be released this evening in the U.S., but iShares Singapore ( EWS) will come under pressure today after the Straits Times Index fell 1.79%. Japan and Hong Kong's major indices dropped 2.55% and 2.56%, respectively.

Depending on your outlook for the first big day of earnings season tomorrow -- when Goldman Sachs ( GS), Intel ( INTC) and Johnson & Johnson ( JNJ) report -- EWS could present a short-term trading opportunity. Weakness today could turn to strength on a strong GDP report and follow-through into good earnings reports tomorrow. However, European shares are already trading higher.

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Sticking with Asia, the South China Morning Post reports that Beijing may shift economic policy in the second half of the year. After a $600 billion infrastructure-focused stimulus package was introduced in the first half, economists inside and outside government expect the leadership to introduce measures designed to boost domestic consumption and move away from the export-led growth model of the past decade. Expect investors to react positively to any change in this direction.

My favorite China ETF remains Claymore/Alpha Shares China Small Cap ( HAO); the next best fund is PowerShares Golden Dragon ( PGJ), followed by the largest and most liquid iShares FTSE/Xinhua 25 China Index ( FXI). It may take some time for the change to unfold, though, because the unrest in Xinjiang province may delay the high-level economic meetings scheduled for this month.

Nat-Gas ETF Lags Behind Futures

Posted 7/16/2009 5:43 p.m. EDT

United States Natural Gas ( UNG) has delivered a two-day show for investors who are curious about how the huge assets of UNG affect the futures market. UNG is in the midst of rolling its contracts, selling August natural gas and purchasing September natural gas.

Yesterday, UNG underperformed PowerShares DB Oil ( DBO) by more than 5%. Today, DBO has a 1% gain vs. a 7% gain in UNG, while the two nearest-month natural gas futures contracts have jumped 11%. This on a day when inventory increases were in line with expectations and there's no sign of a pickup in demand. (We wrote recently about UNG.)

Mosaic ( MOS), which accounts for 6.99% of Market Vectors Agribusiness ( MOO), is rumored to be the target of Brazil's Vale ( VALE), which is 10.27% of Market Vectors Steel ( SLX). The news helped lift MOO 2.86% and kept SLX's gain to 1.92%.

Google ( GOOG) beat analysts' estimates for profits and sales, but the stock is down 2.5% in after-hours. IBM ( IBM) also beat earnings and lifted its 2009 full-year estimate by more than 5%; its shares are up 2% after hours.

These developments are all positive for the market, and the after-hours drop in Google, if it doesn't reverse tonight, is likely to reverse in the morning following the coming stream of positive news coverage this evening and tomorrow morning. As long as Citigroup ( C), Bank of America ( BAC) and General Electric ( GE) don't derail the market, it could finish the week at a new near-term high.

The S&P 500 index peaked at 956 intraday on June 11; a 1.7% gain tomorrow would match that high. If that's the case, the leading momentum ETFs -- technology (specifically networking), emerging markets, financials and commodities/materials will lead the way.

Currency ETFs Are a Nice Hedge

Posted 7/17/2009 10:03 a.m. EDT

Market Vectors Indonesia ( IDX) should remain under pressure after two bombings in Jakarta rocked the country. The Indonesian rupiah fell 1% and the stock market declined 0.6%, a combined 1.6% loss for investors marking their trade in dollars.

It highlights the currency risk inherent in international investing, which can lead to much higher- or lower-than-expected returns. For instance, in the past six months, CurrencyShares Japanese Yen ( FXY) is down 4%, compared to a 14% gain for the Nikkei. iShares Japan ( EWJ) is up only 5%, however, as the currency drag weighed on returns. Investors who were "right" about Japan may nonetheless have seen their gains suffer because they failed to take currency moves into account.

As with commodities, the best way to trade currencies is to head straight to the forex and futures markets, but currency ETFs offer a way for conservative investors to put cash to work or hedge their investments. During last fall's market decline, PowerShares U.S. Dollar Bullish Fund ( UUP) and the FXY were two excellent plays. Both funds delivered returns of more than 10% between the end of July and the end of October, while the S&P 500 index suffered a 24% decline. Instead of going straight to cash, investors can use currency ETFs to deliver extra returns on top of sitting out a market decline.

It's also a great way to hedge for investors nervous about the markets. For the past two years, the dollar and yen weakened when risk appetites increased and strengthened when fear increased. Or investors can increase their risk and pile onto a trade, increasing their exposure. Buying emerging-market ETFs along with PowerShares DB U.S. Dollar Bearish Fund ( UDN) would give a portfolio heightened exposure to a weak dollar. However, as the IDX example shows today, investors already have direct currency exposure if they own an international ETF holding local stocks.

I have used both UUP and UDN in model and client portfolios. Currently, UDN is in some portfolios due to the near-term outlook. Risk appetites have been increasing since March, and the U.S. dollar weakened from $1.25 to more than $1.40 vs. the euro, which makes up more than 50% of the Dollar Index tracked by UUP and UDN. Since reaching that level in June, however, the euro/dollar has stayed within a very tight range, and our position could change at any time due to market conditions.
At the time of publication, Dion was long PGJ and UDN.

Don Dion is the 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.

Dion is also president and founder of Dion Money Management, 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.

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