The president of the EU said that although nations would be willing to help Greece when necessary, now is not the time. Eventually, something will need to be done about the situation and whatever is decided, Germany will be the country that makes the final decision.

Earlier this week, in my 5 ETFs to Watch, I noted that the German press has been widely critical of bailouts for Greece.

Front-page magazine headlines included words such as “lies” and “deception.” In an editorial, Frankfurter Allgemeine Zeitung made the most succinct argument to date when it asked whether Germans should work two more years, to age 69, to pay for a bailout, while the Greeks are in the streets protesting an increase in their retirement age from 61 to 63.

This recent outpouring of opinion is not new. German economists warned that this day would come if the less competitive southern European economies were added to the currency union.

Edmund Stoiber, formerly the President of Bavaria, said in the late 1990s that Bavaria would sooner have a famine than that Germany would bailout other countries. And although there is no way for a euro country to exit the currency union under current law, Germany’s finance minister wrote this week that such an option be added as part of a proposal for a European Monetary Fund.

The sentiment in Germany is extremely important because Chancellor Angela Merkel is facing a close regional election in May, and she could lose control of the upper house of parliament if her party loses the election. Unfortunately, Greece must roll over about $30 billion in debt in April and May, and that could force matters to a head.

Aside from public opinion, there is a legal question. Ambrose Evans-Pritchard reports that a bailout violates German constitutional law and that legal challenges are already being prepared in the event the government violates the law.

Bailout hopes also received some bad news yesterday, when the EU warned five countries, including Germany, France and the Netherlands, three of the strongest economies on the continent, that they are relying too much on optimistic GDP forecasts to close their budget gaps. Weaker finances in these countries reduce the chance of a bailout for Greece.

After a nice rally below the $1.35 level, the U.S. dollar has consolidated its gains and the euro has strengthened to $1.37. Since Feb. 23, CurrencyShares Euro(FXE) is up about 1.9%. iShares MSCI EMU Index(EZU) gained about 9%, while the worst performing Europe country ETF during the decline, iShares Spain(EWP), is up 11%.

On the other side of the trade, PowerShares DB U.S. Dollar Index Bullish Fund(UUP) fell about 1.8% and ProShares UltraShort Euro(EUO) slid 4%.

Year to date through Feb. 16, FXE is down 3.8%, EZU is down 3.3% and EWP is down 8.4%. UUP still has a gain of 1.3% and EUO is up 6.9%.

What does it all mean? In the next few weeks, continued strength for the euro is possible. In the absence of news, the currency trend is likely to continue, and that trend is for the euro to creep higher against the U.S. dollar.

In the longer term, this could build into a larger rally in the euro if the economy cooperates and the Europeans find a solution acceptable to Germany.

Looming in the background is German opposition to bailouts, including constitutional legal barriers. Germany will be willing to accept a lot more pain for the euro before it starts to soften its position and investors who have factored political intervention into their calculations should adjust their euro targets downward.

Disclaimer

Year to date, the ETF is up 14.8%, while the S&P 500 has risen only 4.5%.

The world economy is coming out of recession, and the U.S. is finding that there is strong demand for its exports. Increased bilateral trade will be good for shippers because it means they can charge for cargo when their ships leave the U.S. and not just for U.S.-bound imports.

Many exporters are struggling with delays because there are too few ships in American ports, and this will give the shipping industry an opportunity to reduce its idle capacity. During the recession, companies put ships on standby, reducing capacity, in the same way that airlines reduce flights when passenger demand is lower.

The result was that in 2009, about 500 ships, or 11% of the total shipping industry’s capacity, was idle. If these companies can step up to meet the new demand for export shipping from the U.S., it will mean greater profits and better earnings for the components of SEA.

The trend of increasing exports from the U.S. will also enjoy support from the government, as the Obama administration has voiced support for a reduction in America’s trade deficit.

It is not only the export picture from the U.S. that is improving. Importers to America have also reported that there has been difficulty in securing cargo space for shipments, meaning that a shipping recovery is proceeding due to increasing consumption that will only get stronger as unemployment decreases in the U.S.

The fund provides exposure to shippers from multiple countries. SEA allocates 18.0% of its net assets to Greek companies. Shippers from the U.S. account for 13.0% of the fund, while firms registered in Bermuda and the Bahamas account for 9.9% and 8.5%, respectively.

A significant amount of weighting is placed on Asia, and Japan, China, Hong Kong, and Singapore account for 35.3% of SEA.

In terms of the allocation among the fund’s 31 companies, the shipper that receives the most net assets accounts for 4.9% of SEA while the shipper that receives the least net assets accounts for 2.0%, making this ETF well-balanced. Some of the companies in the top 10 holdings of SEA include, Teekay Tankers(TNK), Ship Finance International(SFL), Seaspan(SSW)(SSW) and General Maritime(GMR).

In return for providing investors with balanced and international exposure, the ETF has an expense ratio of 0.65%. The fund has adequate liquidity and trades at an average daily volume of more than 200,000 shares.

Overall, SEA is an investment in the overall global recovery, and in particular, the recovery of countries that account for a large portion of world trade, such as the U.S. Shippers are at a critical point right now where there is clearly a demand for their services, but there is concern that putting idle ships back in action will be harmful if recovery stalls or reverses.

For investors betting that economic growth will continue to improve around the world, SEA represents the best way to cash in on the success of shippers.

Last month I wrote that Market Vectors Steel(SLX) and Market Vectors Coal(KOL) were a better play on economic recovery than SEA, and since then, KOL and SLX beat SEA by about 5% and 10%, respectively. However, the shipping bottlenecks facing importers and exporters are likely to be more supportive of SEA moving forward, and the fund should be more competitive with these other two ETFs.

Disclaimer

Arcane parliamentary tactics are in play as the congressional leadership looks for a way to deliver a health care bill to President Obama’s desk, and even the kitchen sink will be available if it can seal the deal. House Speaker Nancy Pelosi and Rep. Louise Slaughter, (D., N.Y.) have a plan in case that doesn’t work, however.

Under House rules, the members can vote on a bill with changes for the Senate bill, while not voting on the Senate bill itself. The House would “deem” the Senate bill to be passed under a “self-executing rule.” This approach would allow a vote on changes to the bill, but not be a vote on the bill itself, providing political cover for the politicians.

It’s unclear how many votes this tactic could pick up, since it’s questionable if it would even work. The intense focus on the health care debate suggests that politicians who argue that they didn’t vote for the bill, only its changes, will ring hollow come November. There may be a few marginal votes already close to a yes, however, that could tip over for a fig leaf of political cover.

Either way, this strategic option highlights the lengths politicians are willing to go to pass health care reform. President Obama already delayed his trip to Australia and Indonesia by three days in order to spend more time finding votes. A vote may still be delayed beyond the Easter recess as well. House Majority Whip James Clyburn said he will get the 216 votes he needs, but not until after April 4.

On the other side of the aisle, the no votes are hardened and willing to take steps to ensure the bill is defeated. One of the stubborn voting blocks in the House is the pro-life Democrats who do not like the abortion language in the Senate bill. Pro-life Senate Republicans have said they will vote with pro-choice Democratic Senators on abortion in order to make the bill unpalatable for these House Democrats.

As a political junkie, this may be highly entertaining, but for investors, this is maddening. The outcome of this vote will, in all likelihood, boil down to a handful of votes. Unlike most bills, this vote will have major repercussions, not just on health care but on the president and congressional leadership’s agendas. A win will put new life into other bills, such as financial reform, while failure would probably end any chance of controversial legislation being brought before the November election.

The best strategy for investors in this situation is to wait for the outcome. As time goes by, the vote count may become clearer and an opportunity may present itself. iShares Dow Jones U.S. Healthcare Providers(IHF), which is chock full of insurance and health management companies such as WellPoint(WLP), Aetna(AET) and Humana(HUM), stands to lose the most from passage of the bill. It also stands to benefit the most if the bill fails, because a large weight would be lifted off the firms. Meanwhile, the drug companies are ready to spend millions on pro-reform advertising. The firms making up iShares Dow Jones U.S. Pharmaceuticals(IHE) should benefit from passage, but failure of the bill wouldn’t necessarily result in a large downside, which is why I own this fund in the ETF Action model portfolio.

After the election of Scott Brown in January for the Massachusetts Senate seat, I said iShares Dow Jones U.S. Medical Devices(IHI)  should see upside due to the weakened status of health reform. It was the right call, as IHI has gone on to outperform IHE, IHF, and the broader iShares Dow Jones U.S. Healthcare(IYH) by about 5% since January 20. I expect it could gain again if the bill fails.

Finally, the best performing health care sector over the short term has been biotechnology, which has been achieving its gains with mergers and successful drug trials. First Trust NYSE Biotechnology(FBT)  has led the pack with a nearly 30% rally, and its possible that the sector will lead health care, whichever way the reform vote is decided.

With a final vote perhaps only weeks away, investors should be cautious about opening new positions, while existing positions can be held. It doesn’t make sense to do anything here, because it’s about as close to a tossup as it gets. Health care reform will come down to the decisions of a few people, and that’s not a situation that favors investors looking to place short-term bets. The president himself may not know the outcome until hours or minutes before a final vote.

Once the result is certain, investors will have plenty of time to position their portfolio for the intermediate and long-term.

Once the result is certain, investors will have plenty of time to position their portfolio for the intermediate and long-term.

Disclaimer

Egypt’s government previously announced that it would increase efforts to attract foreign direct investment as part of a plan to revive the robust economic expansion the country enjoyed before the global financial crisis.

In 2008, the Egyptian economy grew 7.2% — a third straight year of 7%-plus growth. However, as the global slowdown took its toll, Egypt’s growth fell to 4.9% in 2009. Considering that many countries had negative GDP growth in 2009, Egypt’s performance during the global recession wasn’t bad, but the nation is still eager to reaccelerate its economy.

The government reportedly is targeting a 5% pace of growth in 2010 and a 6% rate in 2011. Officials think that this can be achieved through foreign direct investment, which was the policy direction the country followed in the prerecession years.

EGPT, which is the only way for ETF investors to bet solely on Egyptian markets, began trading on Feb. 18. It typically trades about 5,000 shares per day, but on sessions like Monday’s, when the fund lost 6.5%, as many as 25,000 shares can change hands.

Such average volume represents less than ideal liquidity, so I would recommend that investors take only small positions in EGPT.

The fund provides exposure to 29 Egyptian companies and has a net expense ratio of 0.94%.

The ETF devotes 64% of its net assets to its top 10 holdings. With a 9.1% allocation, Commercial International Bank is the largest holding. This is fitting since the most heavily weighted sector in the fund is financials, which accounts for 42.2%.

The second most prominent sector in EGPT is telecommunications services, which accounts for 17.3%. Next largest in terms of sector weighting are industrials and materials, which account for 15.9%, and 14.2%, respectively.

EGPT has underperformed the major U.S. indices since its inception and is down by about 7% since it was launched. The ETF has also underperformed WisdomTree Middle East Dividend Fund(GULF), a regional ETF with an 18.6% allocation in Egypt.

Another regional ETF for the Middle East, SPDR S&P Emerging Middle East & Africa ETF(GAF), allocates 5.1% of its holdings to Egypt, and this fund also has outperformed EGPT.

The final ETF that focuses on the Middle Eastern region, Market Vectors Gulf States Index(MES), does not allocate any portion of its holdings to Egyptian companies and has outperformed EGPT and GULF.

It would appear from this quick comparison that Egypt has been a laggard among the Middle Eastern countries.

This can be explained by political uncertainty, as Egyptian markets have dipped recently on concerns about the 81-year-old President Mubarak’s health. He had gallbladder surgery on March 6, and his post-surgery recovery is going well in Germany. If his condition continues to improve, the fund could make up for lost ground.

As is sometimes the case with lagging funds, this one may turn into an outperformer when the element of uncertainty that has been weighing it down is removed. That would make it an interesting short-term play for risk-tolerant investors.

The fund should also improve in the long run, if the government can deliver on its growth promises.

Disclaimer

Shares have slipped and several ETFs are affected, including First Trust Dow Jones Internet Index(FDN), which has 8.8% of assets in Google, the fund’s No. 1 holding.

Today’s headlines may be negative, but the trend away from physical production and transportation towards digital content and delivery continues, as does the shift towards knowledge-based industries that can quickly adapt in a rapidly changing world.

The latest victim is the post office. The relatively inefficient company is unable to adapt to the changes in the economy and carries an enormous burden of legacy pension costs. The strategy here, as with other government services, is to reduce service and increase fees and taxes, in order to make good on generous pension promises. First to go may be Saturday delivery.

On the other side is an army of businesses ready to grab market share. First in line, obviously, are direct competitors such as FedEx(FDX) and UPS(UPS). Right behind them, however, is a phalanx of content delivery firms.

At 6.1% of FDN, Amazon.com(AMZN) is blazing the path towards the electronic delivery of books, via its Kindle service. Apple(AAPL) will join the competition on April 3, when it launches the iPad and begins selling books in its iBook store. Post office competitors may pick up some business, but they are just as likely to lose some business as content increasingly goes digital.

Another example is Netflix(NFLX). The company, which makes up 2.7% of FDN, is unlikely to rely on U.S. Postal Service competitors if Saturday delivery is terminated. Instead, the firm and its customers are likely to accelerate the shift toward streaming movies and video games.

Besides content, there are the millions of letters, bills and advertisements sent through the mail. Each increase in the cost of mail, be it service or cost related, will entice more customers to go paperless. For instance, IAC/InterActiveCorp(IACI), which accounts for 2.4% of FDN, owns a firm called Evite, which allows users to send online invitations.

While many firms in FDN can find ways to cut costs via the Internet, or help other companies become more efficient, the fund is also packed with the infrastructure and service firms that build and maintain the Internet. Juniper Networks(JNPR), for instance, has recently tested a 100-gigabit router with Verizon(VZ). That bandwidth will be necessary as more and more consumers stream movies and television to their computers and TVs.

Investors have a choice besides FDN in the Internet space: it’s PowerShares Nasdaq Internet Portfolio(PNQI). However, the fund trades only 10,000 shares per day and has just $15 million in assets.

PNQI has a large position in Baidu(BIDU) that has grown to its largest single position, 9.2% of assets, after the firm rallied more than 50% in the wake of Google’s Jan. 12 announcement that it may leave China.

FDN has no exposure to BIDU, and the difference in this holding has meant FDN underperformed PNQI by about 1.5% since Google’s announcement. That small advantage isn’t worth the drawbacks of low volume.

Saturday delivery isn’t crucial to the mail business. The post office will still process mail on the day and losses will be small. This one service change isn’t the end of the story, though. The problems at the organization go deeper and will take longer to solve. Saturday delivery will likely be the first casualty in a multi-year reorganization.

And what happens with the U.S. Postal Service is a microcosm of the larger economy, which is also reorganizing itself in the wake of the worst financial crisis since the Great Depression. Besides cost cutting, the firms in FDN are well-positioned financially due to much lower average debt levels. Whatever the day to day headlines deliver, these long-term fundamentals are working in the sector’s favor.

Disclaimer

Finding the most efficient way to play the yellow metal, however, can prove to be a time consuming and overwhelming task.

Thanks to mutual funds and ETFs investors are now provided with a vast number of options, all of which can satisfy even the most ravenous craving for precious metals.

Looking for an ETF play on gold miners? Today, investors can choose whether they want to play established operations like those in the Market Vectors Gold Miners ETF(GDX) or smaller, more volatile companies found in the Market Vectors Junior Gold Miners ETF(GDXJ).

The number of mutual funds that expose investors to gold miners is much greater.

Given the staggering number of options on the table, it is easy for investors to become overwhelmed. Therefore, to relieve some of this confusion, I will provide my personal picks for the best gold miner mutual funds and ETFs. This list contains three gold miner funds that I feel are the strongest, cheapest, and most liquid options available in the gold arena.

Fidelity Select Gold Fund(FSAGX)

Of the gold mutual fund options currently available, few offer as low a fee as the Fidelity Select Gold Fund, whose 0.86% expense ratio has likely aided in the fund’s ability to accumulate over $3 billion in assets since its inception 25 years ago.

The five top equity positions of FSAGX are akin to a who’s who of the gold mining industry. The top holdings include Goldcorp(GG), Barrick Gold(ABX), AngloGold Ashanti(AU), Newmont Mining(NEM) and Newcrest Mining. Together, these positions account for 41% of the fund’s portfolio.

FSAGX, however, offers more than just exposure to gold miners. Over 7% of its portfolio is allocated to physical gold bullion, giving investors some exposure to the commodity itself.

In the past three months through March 12, FSAGX has fallen 3%

Tocqueville Gold Fund(TGLDX)

Launched in 1998, TGLDX is another mutual fund option for investors looking for gold mining exposure. Over the past three-month period through March 12, TGLDX has outperformed FSAGX, with a 1.8% gain.

TGLDX’s strength stems from its fund manager, John Hathaway, who has managed the fund since its inception. Under his stewardship, the portfolio has returned 22.8% annualized over the past 10 years compared to FSAGX’s 18.3% annualized run over the same period.

Currently, the fund’s top equity positions include Ivanhoe Mines(IVN), Randgold Resources(GOLD), Iamgold(IAG), Osisko Exploration, and Eldorado Gold(EGO).

Like FSAGX, TGLDX provides investors with access to physical bullion, though on a larger scale, with physical gold coins its largest position at nearly 10% of its total portfolio.

Investors should be aware this fund carries a significantly higher expense ratio that its Fidelity competitor, with a charge of 1.50%.

Market Vectors Gold Miners ETF(GDX)

While TGLDX and FSAGX are fine choices for accessing the gold market, investors seeking the transparency, liquidity and low costs that come with owning ETFs should look no further than GDX.

Van Eck, the company behind GDX, has blazed a trail within the ETF ring by offering a number of industry firsts. Among other things, GDX is the first ETF that is exclusively focused on the gold mining industry. Using this instrument, investors can gain access to a broad selection of the largest gold miners.

GDX’s top holdings include Barrick Gold, Goldcorp, Newmont Mining, AngloGold Ashanti and Kinross(KGC). Together, these five positions account for half of the fund’s total portfolio.

Unlike the two mutual fund offerings, GDX does not hold any physical gold in its underlying portfolio. This has caused the fund to underperform over the past three months agains its more diversified competitors, as it dipped 5%.

This lag can be mitigated, however, by combining exposure to GDX with the better performing GDXJ (down 0.5% in the past three months) and one of the trio of physical gold ETFs (all down about 2%).

A combination of GDX, GDXJ and the SPDR Gold Trust(GLD), iShares COMEX Gold Trust Shares(IAU) or ETFS Physical Swiss Gold Shares(SGOL), could deliver a return equal to or better than FSAGX.

Any mix of those ETFs could not beat the return of Hathaway’s TGLDX in the past three months or the past year, however. Investors who are unwilling to do their homework in this sector may do better with a manager who has a solid track record going back more than a decade.

Disclaimer

Euro Shares(FXE)
The euro has been consolidating after a swift decline from mid-January until mid-February. The FXE has bounced slightly from its lows, and the price is back to early February levels.

Politicians were able to put the brakes on the decline by saying they would offer aid for Greece if it trimmed its deficit. Since then, Greece has pushed through a series of spending cuts and tax increases designed to close its budget shortfall.

However, it’s unclear whether the Germans will go along with a bailout. Last week Der Spiegel ran a cover story on “The Euro Lie.” It mirrors other articles that have attacked Greece for “deception,” editorials that have criticized the early Greek retirement age and politicians that have fired barbs at the country.

There’s a May regional election that could cost Chancellor Angela Merkel’s party control of the upper house in parliament and she doesn’t want to hand an issue to her opponents. It’s likely, then, that the outcome of EU finance ministers meeting will be to delay a final decision on Greece. Since it may be weeks until the next step in the process, the euro is likely to follow the course it sets this week.

iShares: FTSE Xinhua(FXI)
China’s consumer inflation reached 2.7% in February, while producer prices increased 5.4%. Chinese monetary tightening led to a global sell-off earlier this year, with FXI and resource producers bearing the brunt of the decline.

An increase in the reserve ratio or other policy changes will likely induce more selling. Weaker global financial markets may be bad news for Greece and the Europeans as well, if selling spreads there, but if the Greek rescue package includes bonds, it could reduce the interest cost for the continent.

iShares Dow Transport(IYT)
Investors will be looking to FedEx’s(FDX) third-quarter earnings report on Thursday. FedEx lowered guidance for this quarter when it last reported in December, but it raised guidance for 2010. The company accounts for 11.4% of IYT, but the impact will be much broader with major indexes at or near new highs and investors looking for some clear economic data. If FedEx maintains or raises its guidance, it would be welcome news to the bulls who already expect an earnings beat.

iShares: Dow Jones U.S. Health Care Providers Index Fund(IHF)
The companies with the most to lose in health care reform will be paying close attention to the March 18 deadline for action on the bill in Congress. With pro-life Senate Republicans willing to vote pro-choice in order to make the bill unpalatable to pro-life House Democrats, the chances of passage seem slim to none, but health care has been on the ropes before only to make a comeback–and President Obama has an extra three days to work with after delaying his Asia trip until March 21.

SPDR Gold(GLD)
There are a lot of factors that will have an impact on currency valuations and inflation expectations this week. In addition to everything mentioned already, the Federal Reserve meets Tuesday. It is expected to hold policy and rates steady, but any change in wording or outlook will have an impact. A surprise is more likely to be negative though, so investors should be cautious ahead of the meeting.

Disclaimer

In the following three blogs from the past week Don commented on the trends that are working so far this year, the balanced approach of the SPDR S&P Retail ETF and his ETF Oscar winner.

Three Trends That Are Working for ETFs

Posted 03/10/2010 1:15 p.m. EST

A helpful approach is to look at what’s been working in 2010, and fundamentally assess whether these trends will continue. Here are three themes that stand out.
Biotech Bullishness

Bidding has helped to buoy biotech as companies with cash look to buy earnings. OSI Pharmaceuticals(OSIP) and Millipore(MIL) have been sector standouts, helping to push biotech ETFs higher.

In a sector characterized by homeruns and strikeouts, ETFs offer a way to gain exposure while mitigating single-security risk. While Human Genome Sciences(HGSI) now trades over $30, a more than 5,000% increase from the same time last year, a late-stage failure for Medivation’s (MDVN) Alzheimer’s drug set that stock back 65% in a single session last week.

How to play: First Trust NYSE Arca Biotech Index(FBT) uses an equal-weight methodology to give investors exposure to 20 firms that represent a cross section of the sector. Unlike iShares Nasdaq Biotechnology(IBB), which concentrates assets in industry giants and top holdings, FBT offers a more balanced viewpoint.

It also doesn’t hurt that FBT’s portfolio contains both OSI Pharmaceuticals and Millipore.
Regional Banks Roar

As the Volcker rule proposal signals a change of tone in Washington, ETFs focused on regional banks, such as iShares Dow Jones U.S. Regional Banks(IAT) and the regional-bank-heavy SPDR KBW Bank(KBE), have outperformed big-bank funds.

While the Volcker proposal will likely continue to meet resistance, its introduction marks a shift from the big-bank bailouts that put giants such as Goldman Sachs(GS) and JPMorgan Chase(JPM) in the spotlight.

How to play: As the government sets it sights on financial reform, KBE and IAT could continue to outperform. Both ETFs are strong, liquid picks for regional banking exposure.

Indefatigable Japan

Despite the ongoing problems at top-holding Toyota(TM), it seems like nothing can derail the iShares MSCI Japan Index(EWJ).

A stronger yen is lifting the returns of the equity ETFs, and EWJ is up 4.41% year-to-date. Investors are anticipating an increase in exports to China, Japan’s second-largest export market after the U.S., which would boost profits for Japan’s manufacturers.

Political changes have also fueled hope for this previously stagnant economy. In August 2009, the Democratic Party of Japan won a landslide victory over the entrenched Liberal Democratic Party. Reform could help to fuel growth in the months ahead.

How to play: EWJ is a direct way to bet on Japanese firms, but ETF investors need to remember that this fund is highly influenced by currency changes. Since EWJ does not hedge its currency exposure, shares of this fund represent an unhedged investment in overseas securities.

When the dollar is appreciating against the yen, this fund gets a boost, but currency cuts both ways. Investors using EWJ to bet on Japan will want to have a full understanding of the currency situation.

The Best Big-Picture Retail ETF
Posted 03/10/2010 8:54 a.m. EST

Earnings reports from specialty retailers keep pushing the SPDR S&P Retail(XRT) higher, and sector sentiment should continue to improve with holdings such as J. Crew(JCG) reporting better-than-expected earnings.

The company released its earnings after the bell yesterday, beating analysts’ expectations. Lean inventories helped this retailer report a quarterly profit of 61 cents a share, way ahead of Wall Street’s consensus at 46 cents per share and a sharp contrast to last year’s loss of 22 cents a share.

Another XRT holding, American Eagle Outfitters(AEO), reported adjusted fourth-quarter earnings of 33 cents per share, just meeting consensus, but the big news was that the company will close its Martin + Osa concept stores, which will slim down inventory, and refocusing on its core business.

While writing about specific holdings is certainly instructive in understanding the movement of an ETF, especially those that are top-heavy, when focusing on funds, you must view the holdings as a group. Determine the scope. See what kind of picture they paint. Does the strategy make sense?

Successful ETFs (balanced, liquid funds that closely track their underlying values) don’t hinge on the performance of an individual component; they capture the movement of a sector.

In the case of XRT, its weighting methodology keeps any one stock from influencing the performance of the fund. To put this into perspective, consider this fact: Top RTH holding Target(TGT) makes up just 1.64% of the fund’s total portfolio.

J. Crew makes up 1.51% and American Eagle 1.49% of XRT. To say that either one of these stocks will be responsible for the success or failure of XRT would be ridiculous.

I picked XRT for just that reason: Its well-balanced portfolio will give investors exposure to a sector that has been outperforming, while minimizing exposure to the inevitable few bad apples.

XRT’s modified market-cap design allows for this fund to take the temperature of the retail sector, not just let you know how Wal-Mart’s(WMT)  doing on any given day.

I’ve been bullish on the retailers in this fund because many of them offer cost-conscious alternatives to pricier brands. I believe that’s the world in which we live. Case in point: As the market floundered in its darkest days, President Obama’s daughters showed up to the inauguration in J. Crew, not an uber-expensive custom designer.

Many of the companies in XRT’s portfolio have been effective at cutting costs and raising dividends. I believe that innovative new marketing methods will continue to lift the retail sector as the market improves.

Viewing the world through an ETF lens means having to look at the big picture, not calling red or black. XRT is my pick for retail because its well-balanced structure helps to maximize exposure while minimizing risk. In a marketplace where so much is uncertain, you can’t ask for anything more.

The ETF Oscar Goes to …
Posted 03/08/2010 08:01 a.m. EST

Like an award-winning movie, the successful release of an exchange-traded fund is a combination of innovative strategy, good timing and dumb luck.

Watching the Oscars Sunday night after having read Mark Harris’ excellent story about Oscar strategy in New York magazine last month, I was reminded once again of the exciting and often surprising process of watching a newly-released ETF succeed or fail in the open marketplace.

Whether an ETF is an indie-breakout or a big budget premiere, sometimes things go right, sometimes things go wrong, but you never really know until the rubber hits the road. The real measure of a product’s success is its reception: No matter what an ETF is about, it’s only a hit if people show up.

It may be only early March, but a raft of new ETF products already have been released in 2010 with varying success. Looking back at the beginning of 2010, however, there is already one product that stands out when judged by factors like timeliness, strategy and. most importantly, reception.

Thus far, the ETF Oscar for best new product of 2010 goes to: ETF Securities’ ETFS Physical Platinum Shares(PPLT).

Launched on Jan. 8, PPLT already has amassed more than $430 million in assets, helping to make ETF Securities’ fledgling U.S. ETF operation the 15th-largest ETF issuer when measured by total assets.

This global ETF brand was the first to introduce physically-backed gold ETFs in Australia and London in 2003.

Physically-backed, bullion-based products like PPLT and SPDR Gold Shares(GLD) have transformed the way that U.S. investors access precious metals, transforming a small segment of the market into an asset class.

PPLT offers investors fractional exposure to a physical stockpile of platinum. The performance of the fund is determined by the demand for and price of physical platinum.

PPLT’s launch couldn’t have been more perfectly timed — a result of good luck and market conditions. ETF Securities filed for PPLT and the accompanying ETFS Physical Palladium Shares(PALL)  back in early 2009, first introducing the idea of a physically-backed platinum product to U.S. investors.

Already familiar with products like GLD and iShares Silver(SLV), ETF investors were ready to embrace a new way to access an extraordinarily expensive asset. Having already introduced two successful physically backed products into the U.S marketplace to compete with already-entrenched competitors, ETF Securities was ready to make its name as a first-mover in the platinum space.

As a new participant in the U.S. ETF marketplace, ETF Securities had to rely on strategy — rather than notoriety — when introducing PALL and PPLT. They stepped into a gap in the ETF industry and presented a new investment vehicle to an equity-wary investor pool.

In his article about the process of Oscar campaigning, Harris notes “there is no war room, per se, but there are early front-runners that fade, grassroots insurgencies, even primaries. Ultimately, most of the nominees emerge from a combination of good planning, good movies, and good luck.”

PPLT has been able to capitalize on a booming segment of the ETF industry, an exciting new strategy, and a moment in market history.

While other ETFs will ultimately enter the exchange-traded space in 2010 and compete for the attention of investors, PPLT has already made its mark and this product won’t be easily forgotten in the months ahead.

Disclaimer

Winners

SPDR KBW Bank ETF (KBE) +3.8%

iShares Dow Jones U.S. Regional Banks Index Fund(IAT) +3.2%

SPDR KBW Regional Bank(KRE) +2.1%

The U.K. financial goliath Barclays stirred up the regional banking sector on Wednesday when a report indicated that the firm was looking to acquire U.S. retail banking assets.

KBE saw an additional rise when Vikram Pandit of Citigroup(C) provided investors with an optimistic outlook for the troubled company. Citigroup accounts for 8% of the fund’s index.

First Trust NYSE Arca Biotechnology Index Fund(FBT) +4.5%

SPDR S&P Biotechnology(XBI) +2.3%

PowerShares Dynamic Biotechnology and Genome Portfolio(PBE) +2%

For the second week in a row, the biotech industry was a big winner in the ETF arena. As with last time, the FBT managed to handily beat its SPDR and iShares competitors to lead this health care subsector higher.

Helping to power FBT over XBI this week was InterMune’s(ITMN) 60% jump on Wednesday. In the past month alone, ITMN has managed to gain more than 120%. This week, the company saw a rise from the optimism that the FDA would approve its experimental drug used to treat idiopathic pulmonary fibrosis, a disease that causes scarring of the lung.

After the advance, InterMune is now FBT’s top holding, accounting for more than 10% of the fund’s total portfolio.

Market Vectors Indonesia(IDX) +3%

Standard & Poor’s raised Indonesia’s foreign currency sovereign credit rating on Friday, and the nation’s central bank raised growth estimates for 2010 and 2011. The country will be visited by President Obama later this month, and then by Chinese Prime Minister Wen Jiabao in April.

Though the fund is up 9.2% this year, it is still has about 1.5% to go before it surpasses its Jan. 19 high of $68.82.
Losers

United States Natural Gas Fund(UNG) -4.6%

iPath Dow Jones-UBS Natural Gas Subindex Total Return ETN(GAZ) -4.4%

United States 12 Month Natural(UNL) -3.7%

UNG continues to set new records. The only problem for long investors is that those records are record lows. UNG broke $8 a share this week to close at $7.97. It was the first time the security traded below $8 intraday as well.

This week’s slide came as inventory numbers met expectations. The decline in prices continues to be a healthy sign of natural gas supply, and investors will have to wait for a pickup in demand before UNG can put in a bottom.

iPath Dow Jones-UBS Grains Subindex Total Return ETN(JJG) -2.4%

PowerShares DB Agriculture Fund(DBA) -1.6%

Soybean, wheat and corn futures stumbled this week in light of strong forecast yields from top-producing nations including the U.S. and South America. As supplies continue to outweigh demand, expect commodity-backed agriculture funds like DBA to continue their underperformance.

iPath Dow Jones-UBS Nickel ETN(JJN) -3.8%

Despite the continuation of a nearly seven-month mine strike in Subury, Ontario, nickel prices still faltered this week, and JJN led the losers.

Though this week’s performance was dismal, global nickel prices may soon see a rebound. According to a report from UBS, global demand for the metal appears to be stabilizing, and producers in the developed world are beginning to ramp up production.

With the outlook for both demand and supply improving, the days of nickel’s downfall may soon be numbered.

Disclaimer

Recent indicators for both labor and manufacturing are painting improving pictures, even if the positive spin requires extrapolation. As I mentioned last week, the latest manufacturing surveys have either improved or remain in expansionary territory. Employment, on the other hand, has been improving more gingerly. However, investors looked beyond February’s results to deduce a positive March and the expectation that sustainable net-job creation is nearly upon us.

The reason for this is that the Bureau of Labor Statistics (BLS) reported a better-than-expected loss of 36,000 nonfarm jobs last week. This is in spite of the fact that the U.S. incurred the largest weather-related impact ever recorded for the month of February. Due to many parts of the country seeing record snowfall, the BLS estimated that 1.03 million people were unable to work last month; this is more than three times the average for a typical February. By reducing the payroll counts in a similar fashion, it is possible that February could have instead recorded a solidly positive jobs-growth number. In addition, the Manpower survey, which was released on Tuesday, showed increasing stability among the 18,000 firms that it surveyed. Fewer firms planned to cut their payrolls and more planned to add to their ranks. The majority of companies, however, expected no change in their hiring plans.

Today, retail sales numbers surprised to the upside by climbing 0.3 percent. This was the largest jump since November, and the results build upon a strong January to paint a better consumer picture as 2010 progresses. Weakness was expected due to the severity of the snowstorms last month, but the gains outside of auto sales were widespread.

One of the chief elements of uncertainty that led to the global correction earlier this quarter was the sovereign debt concerns facing Greece and other smaller European nations. Some of the dust has settled on this issue, paving the way for equity and credit markets to stabilize. The successful issuance of Greek bonds last week provided some assurance that the short-term risk of default is limited, and the affect on euro zone bond yields has also been minimal, indicating the risk of contagion remains theoretical or remote at this point. Although European equities have suffered so far in 2010, this has more to do with lagging economic performance than sovereign debt concerns. However, a report out on Friday showed that industrial production spiked by 1.7 percent in January, which may ease concerns that the recovery is stalling there.