ETF Expert

Countries like Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates have relied heavily on their respective financial companies. It follows that the adverse effect of Dubai World’s credit concerns on Middle East investing was not all that surprising.

Keep in mind that… in mid-2008… the ”Gulf” region experienced a 75%+ drop in the spot price of oil from $145+ per barrel. And while “crude” may have gone back up from $35-$40 to $75-$80 in 2009, a large percentage of this is attributable to the dollar falling to the same lows seen in July 2008.

Yet oil is nowhere near where it was in July 2008. And neither are the Middle East ETFs like Market Vectors Gulf States (MES) and WisdomTree Middle East Dividend (GULF). Worse yet, Middle East ETFs have been some of the least impressive off the March lows, performing far worse than Vanguard Total U.S. Market (VTI).

Ironically, the $60 billion in debt woes for Dubai World wasn’t a catalyst for months of selling activity on MES and GULF. In fact, both of these ETFs were in troubling near-term downtrends since October. (Consider the Market Vectors Gulf States chart below.)

Yet if you think the ongoing credit uncertainty in Dubai is reason alone to “short” ETFs with substantial United Arab Emirates exposure, I’d resist the urge. For one thing, neither the Middle East ETFs like Market Vectors Gulf States (MES) or WisdomTree Middle East Dividend (GULF) have sufficient liquidity to get a “trader’s” execution price for a buy or a sell. Secondly, there’s a strong chance that much of these frontier investment woes have been “priced in;” this year’s severe undeperformance may become next year’s unforeseen over-performance.

If you’d like to learn more about ETF investing… then tune into “In the Money With Gary Gordon.” You can listen to the show “LIVE”, via podcast or on your iPod.

 Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company and/or its clients may hold positions in the ETFs, mutual funds and/or index funds mentioned above. The company does not receive compensation from any of the fund providers covered in this feature. Moreover, the commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.

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