Dion's Weekly ETF Blog Wrap

NEW YORK ( TheStreet) -- 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.

Here are three of his blog posts from the past week:


Focus on Gaming

Published 7/22/2011 11:18 a.m. EDT

Whatever your view of the gaming industry, there is no question that it has been one of the best sector plays of the past few months. Despite high unemployment and sluggish economic growth in the U.S., big gaming names have posted impressive earnings this year, and the Market Vectors Gaming ETF ( BJK) has hit a series of all-time highs.

I am long BJK, whose top holdings include Las Vegas Sands ( LVS)(12.69%), Wynn Resorts ( WYNN) (9.79%), Genting Bhd (6.23%), Crown (3.72%) and SJM Holdings (3.53%). Right now, this is the only ETF that offers focused gaming exposure.

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Some of the unfamiliar names on this list point to one of the reasons the gaming sector is flourishing. It is truly a global industry. Genting, for instance, is a Malaysian company with a significant presence in Southeast Asia. SJM is one of the six companies with a license to operate in Macau, the former Portuguese enclave in China, which is now the world's biggest gaming destination.

The latest good earnings news from Wynn and record-setting numbers from Las Vegas Sands in the first quarter have given BJK the impetus to move higher, so it's one of my ETFs to watch for next week.

Although BJK is focused exclusively on gaming, there are other funds that provide indirect exposure to the space. Real estate investment trust (REIT) ETFs such as the Vanguard REIT ETF ( VNQ) or the iShares Cohen & Steers Realty Majors Index Fund ( ICF) often have hotel and resort property managers lurking in their holdings.

The Other Black Gold

Published 7/21/2011 11:19 a.m. EDT

Although it's no longer widely used to power locomotives or heat homes, coal is a crucial component of steel production and is used to generate almost half of the electricity consumed annually in the U.S. In China, the world's largest consumer and importer of coal, more than two-thirds of power generation is coal-based.

As the world's developing economies add power-hungry industrial capacity, demand for relatively cheap and abundant coal should continue to rise. I've been long the Market Vectors Coal ETF ( KOL) for some time. This fund has recovered nicely from its 2008 lows, and our momentum model indicates it should continue to perform well in the near term. The PowerShares Global Coal Portfolio ( PKOL) is similar but carries a slightly higher expense ratio.

In a research note this morning, UBS wrote that China is considering reducing the value-added tax it levies on coal imports and that demand in Japan is growing briskly as that nation recovers from the March earthquake, tsunami and nuclear disasters.

While most of the coal mined annually is used for electricity production, there's another side to the coal story: its use in the manufacture of steel and other alloys. Heating low-sulfur bituminous coal at high temperatures in the absence of oxygen produces metallurgical coke, or "metcoke."

As it happens, the initial public offering of a company called SunCoke Energy ( SXC), which supplies metcoke to the steel manufacturing sector, took place this morning on the New York Stock Exchange. SunCoke's stock opened at $17 a share and quickly jumped 7%.

Demand for metcoke in India and China, which produces 50% of the world's steel, has been rising steadily, although SunCoke CEO Frederick "Fritz" Henderson, the former CEO of GM ( GM), acknowledged in an interview on CNBC this morning that the rate of demand in China is slowing. Nevertheless, Henderson said he believes that Chinese steel production and demand for his company's products would continue to expand there, just not at 9% to 10% per year.

At the time of publication, Dion Money Management was long KOL.

Look Abroad to Hedge the 'New Normal'

Published 7/20/2011 2:00 p.m. EDT

Is the developed world about to enter a period of sluggish economic growth coupled with inflation? This toxic combination, known as stagflation, is frequently used to describe the economic conditions that prevailed in the U.S. during the 1970s and early 1980s.

In March 2009, as the financial markets were still reeling, bond guru Bill Gross, the co-founder of PIMCO, coined the term the "New Normal" to characterize what he thought would be a similar period of slow growth and high inflation in the developed world. According to Gross, the New Normal will include diminishing returns on U.S. equity and a declining standard of living for most Americans.

While Gross's vision is undeniably gloomy, there is a silver lining. The crucial difference between the stagflation of the past and Gross's New Normal is that formerly underdeveloped nations such as China, India and Brazil have been booming for years. Even as the rate of economic expansion slows in those countries, nations such as Vietnam, Cambodia and the so-called frontier countries of the Middle East and North Africa, are taking up the growth mantle.

Most important, investors can easily and inexpensively incorporate international exposure into their portfolios using exchange-traded funds and other exchange-traded products.

I'm generally bullish on Southeast Asia, and I hold the iShares MSCI Malaysia Index Fund ( EWM) and the iShares MSCI Indonesia Investable Market Index Fund ( EIDO) in client portfolios.

Closer to home, I also like Mexico and I use the iShares Mexico Investable Market Index Fund ( EWW) for exposure there.

The common thread running through all three positions is the rapidly growing emerging-market consumer-demand story, which I believe will be one of the most important investment themes for at least the next decade.

Fund sponsors are constantly rolling out new products to meet emerging-markets investors' needs. There's even a firm, Emerging Global Advisors, that focuses exclusively on the emerging markets space. The Emerging Global Shares Dow Jones Emerging Markets Consumer Titans ETF ( ECON) is a well-diversified fund with heavy weightings in Mexico (21%), Brazil (16.8%), South Africa (14.5%) and India (10.5%). This fund is a good buy-and-hold option for investors looking to boost their emerging-markets exposure.

At the time of publication, Dion Money Management was long EWM, EIDO and EWW.

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