ETF Expert

ETF Expert: Does A Balanced Budget Translate Into Strong Country ETF Returns?

At least on the surface, the economics of government involvement translates into stimulus spending. There's not a whole lot of cuttin' going on.

In fact, I visited the back page of the most recent edition of The Economist to learn that there isn't a single country that can boast a budget surplus as a percentage of GDP. Whether the situation has come about from a decline in "revenue" or an increase in spending or both, the entire world is experiencing an imbalance.

Granted, as a percentage of total economic output, few countries are in as bad as shape as the United States and Britain. I would have to defer to an astute economist to tell me when, if ever, has the budget imbalance as a % of GDP surpassed -13.2%?

I did, however, identify 3 countries with budget imbalances as a percentage of total economic output that were lower than -3.0%. And I wondered if it is or is not reflected as a sign of hope/health for those countries... a la ETF performance.

Budget Balance % of GDP 2009
				%		YTD (ETFs)
Brazil				-2.0		43.2%
Canada				-2.1		16.7%
Indonesia				-3.0		93.4%
					Note: 93.4% since 1/20

I doubt that a balanced budget alone can account for the success of 2 emerging dynamos like iShares Brazil (EWZ) and Market Vectors Indonesia (IDX). And perhaps it is Canada's recovering currency combined with its vast resources that explains terrific YTD results for iShares MSCI Canada (EWC).

And to be completely fair, we ought not concentrate on calendar year returns. The real question is, how have some of these investments performed versus the U.S. S&P 500 since the bear market's inception in October, 2007? You tell me!

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. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.

ETF Expert: Emerging Market ETFs from 4 Different Regions

U.S stocks have hit fresh 10-week lows. In fact, the S&P 500 has pulled back -6.8% from its recent closing high on June 11.

With the correction of the U.S markets becoming increasingly clear by the day, many "green shoot" believers are more concerned about the well-being of emerging markets. After all, the consensus seems to be that... while "emergers" were the last into the muck... they're going to be the first out.

Emerging Market Correction
					% Decline From Recent High
SPDR S&P Emerging Europe (GUR)						-20.0%
SPDR S&P Emerging Latin America (GML)						-11.6%
SPDR S&P Emerging Asia Pacific (GMF)						-9.2%
SPDR S&P Emerging Middle East/Africa (GAF)						-5.6%
SPDR S&P Emerging Markets (GMM)						-8.5%

One of the first things that is noticeable is the reduced risk associated with investing across all emerging markets. Not only is SPDR S&P Emerging Markets (GMM) performing better than 3 of the 4 identified regions, but Vanguard Emerging Markets (VWO) is also down less at -8.8%. More often than not, diversifying across an entire segment like emerging stocks leads to better risk-reward outcomes than choosing individual countries, or even regions.

Next, the unruly 20% slide for SPDR S&P Emerging Europe (GUR) is a direct result of a 50% energy weighting. In fact, GUR has a 20% weighting in Gazprom, Russia's gigantic oil enterprise. In effect, most of the downside activity here is a direct result of crude oil's move from the high $70s per barrel to the low $60s per barrel.

In complete contrast, SPDR S&P Emerging Middle East/Africa (GAF) has negligible exposure to energy at about 5%. The fund is primarily tilted 60% towards materials, financials and telecom of South Africa, with the Middle East exposure directly corresponding to Israel's Teva Pharmaceuticals. (Note: I once called this fund the South Africa/Israel Fund because the actual name is deceptive.)

In essence, the take-away here is two-fold. First, the -8.5%/-8.8% drop for emerging markets as a whole is not extreme. Adjusted for beta risk, with the S&P down -6.8%, the emerging market drop may even be on the light side.

Second, trying to ascertain which emerging region will out-duel another is likely an exercise in futility... especially over more significant lengths of time like 5 and 10 years. Granted, my heart, mind and educational experience all scream, "Emerging Asia" with an investment like SPDR S&P Emerging Asia Pacific (GMF). Yet I can't deny the greater likelihood over an entire decade that a more diversified Vanguard Emerging Markets (VWO) should come out ahead.

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. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.

ETF Expert: 3rd Time's Anything But A Charm For SPY/EFA Losses

Two weeks ago, I expressed an idea that we had entered a summertime slumber. (Review 6/17/09's "Anatomy of A B--- Market Rally In U.S. ETFs, In Foreign ETFs.")

The premise was simple. A cyclical uptrend required more than the absence of bad news to move substantially higher. Yet a continuation of bear market hopelessness wouldn't occur with trillions of investor dollars looking to dribble into bargain opportunities. Hence, we'd probably trade sideways.

At the time, I noted that we had moved 8 weeks up and 6 weeks sideways. Now it is 8 weeks up and 8 weeks sideways. In fact, all of the explosive recovery gains for stock assets came in March-April, while the market has tread water throughout May-June.

Yet there's a disturbing trend for the naysayers. Specifically, major benchmark ETFs for developed markets have closed lower each week for 3 consecutive weeks. Here are the numbers:

3rd Consecutive "Unlucky" Week For Major ETF Benchmarks (Through 7/2/09)
				6/15-6/19	6/22/-6/26	6/29-7/2	3-Week Cum Loss
S&P 500 SPDR Trust (SPY)				-2.6%	-0.2%	-2.2%	-5.0%
iShares MSCI EAFE Index (EFA)				-3.1%	0.0%	-1.6%	-4.6%
iShares MSCI Emerging Markets (EEM)				-5.9%	2.6%	-1.2%	-4.6%

Perhaps what is most disturbing about the trend is that the so-called lower risk investments -- developed market stocks -- have dropped more over the last 3 weeks than emerging market counterparts. Why invest more in the "perceived" safety of the U.S, Europe or Japan, when China, Latin America and Southeast Asia aren't falling deeper. (We all know which is going up faster!)

There are ways to mitigate the dangers of investing in emerging markets. One can use stop-losses. One can also employ diversification with low-correlating assets. (Re-read "The 5 Best Diversifiers For Reducing Emerging Market Risk!")

Frankly, if you're going to look to U.S. stocks for a portion of your portfolio, you may wish to go after a reliable income component. And you may even wish to exclude financial stocks from your dividend pursuit.

Energy MLPs are a solid first step... Magellan Midstream (MMP), Kinder Morgan (KMR). A fund investor might consider the Alerian MLP Index ETN (AMJ).

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. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.

ETF Expert: iShares Chile (ECH) Outperforms Credit Suisse Chile Fund (CH)

I began covering Chile in May of 2007, even in the absence of a corresponding exchange-traded fund. The Latin American country was/is a dominant player in the export of copper. What's more, it's GDP growth was as strong as any in the region. And its budget was essentially in check.

Yet the only alternative up to that point, the closed-end Chile Fund (CH), had been significantly underperforming iShares Latin America (ILF). And the underperformance wasn't small potatoes.

Between the 3 years 4/1/2004 through 3/31/2007, The Chile Fund (CH) had provided an exceptional aggregate return of 120%. Yet the simple choice of a passive, regional index in the iShares Latin America (ILF) offered 195%. (7,500 basis points is hardly something to sneeze at!)

Indeed, it's hard to justify an actively managed country fund with expenses as high as 2%+, when there's a passive index for the entire region that's outperforming with only 0.5% expense. (Note: The portfolio manager for CH was pretty angry with me for pointing out performance issues and expenses that an investor has to pay; in truth, I had heaped a great deal of praise on "HIS" closed-end fund.)

In spite of iShares Latin America's (ILF) better numbers, I still looked forward to a Chile ETF. And near the start of the bear market in November of 2007, I finally got my wish. Of course, by then, the world was working its way into a vortex.

Here in 2009, however, with expectations that the global industrial cycle is in the process of being "reflated," copper king Chile is back on a lot of people's maps. So I thought I'd take a look at performance issues once more; that is, how would The Chile Fund (CH) compare over the last year against its newer rival, iShares MSCI Chile (ECH).

I suppose the active portfolio manager of CH would, once again, tell me that I am missing a big picture. But you tell me?

iShares MSCI Chile (ECH) was less volatile than CH during the systemic financial breakdown in October 2008.  iShares MSCI Chile (ECH) lost less than CH during the March retrenchment period. What's more, the passive index approach of using the MSCI Chile Index via ECH led to a 1-year loss of approx -4.6%; in contrast, the Chile Fund (CH) lost approx -12%.

Granted, the charts aren't flawless. And, arbitrary calendar periods are... arbitrary calendar periods. But I still can't see why I'd pursue the closed-end country fund when a passive country index exists as an alternative.

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. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.

ETF Expert: One Person's Crisis May Be An Emerging ETF Investor's Opportunity

Having spent years in Southeast Asia, I learned a thing or three about Mandarin Chinese. For instance, the word for crisis is "wei ji." Although some native speakers deny it, "wei ji" actually comes from combining the word for danger (wei xian) and the word for opportunity (ji huay).

Debate may rage on about the equation... Crisis = Danger + Opportunity. Yet there's little argument that a person's, group's or country's crisis may be another person's, group's or country's risk-worthy chance for advancement.

So the U.S. crisis up until now has included a debt bubble, residential housing collapse, systemic financial breakdown and eventual economic recession. The U.S. will still have to contend with higher-than-normal credit defaults for less worthy issuers, commercial property foreclosures and risks to the U.S. dollar.

All of those home-grown, crisis-level concerns do indeed pose dangers to any type of investment. We did see the world markets, and emerging markets, in particular, fall deeper and further into a black hole in 2008. Why? Other regions weren't ready to quote unquote "decouple" from U.S. business activity or our consumer-based society.

Yet, what about going forward? It does seem that even a modicum of stability in the world's largest economies (i.e., U.S. and Japan) spell dangerously desirable opportunities in emerging market ETFs. Emerging and frontier market success has been well documented here at ETF Expert.

Granted, I anticipated the summertime slumber in "Anatomy of a B--- Market Rally." Specifically, emerging markets really haven't made a whole lot of progress since early May. In fact, an argument could be made for the old adage, "Sell in May and go away."

In spite of an 8-week surge that has been followed up by a 7-week slumber, there's every reason to view emerging market ETFs with greater affection than ever before. Pullbacks in equity markets provide risk-taking opportunities, and those opportunities are most evident in the growing middle classes of China and Brazil.

Consider China's commodity binge spending as evidence for housing demand. You can profit from Claymore China Real Estate (TAO).

Think about changes taking place in Latin America's largest economy, Brazil. You can tap Brazilian consumers' increasing purchasing power with a fund that is 40% weighted towards food products, household durables and specialty retail. Get a gander at the Market Vectors Brazil Small Cap Fund (BRF).

Investing in the purchasing power of foreign consumers is not a "sure thing." It's a risky, or... "dangerous" proposition. Still, the rewards are there, particularly if the Brazilian real and the Chinese yuan appreciate against the U.S. dollar.

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. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.

ETF Expert: The New Peru ETF Is Far Too Materialistic (EPU)

I had high hopes for this one... honest. I really want to believe that I can gain access to a rapidly expanding Latin American economy that has a superb bond rating.

Yet the iShares MSCI All Peru Capped Index Fund (EPU) has a 65% weighting in basic materials. There's little reason to expect that it'll perform much differently than WisdomTree International Materials (DBN) or SPDR S&P International Materials (IRV).

 

Few people have been as openly bullish about basic industry investing during the reflation of the global industrial cycle. (See May 27th's, "Let's Build Stuff!")

Yet that doesn't mean that one's entire portfolio should be comprised of investments that are so strongly correlated to a single theme. I've expressed this concern in numerous columns, including, "Be Wary of Materialism in Your Emerging Market ETF Assets."

As if to show a dramatic difference in the potential performance of Peru (EPU), the iShares folks provided 3-year, back-dated performance of the All Peru Capped Index at 23.5% annualized. The comparisons were made with other titans of emerging market investing such as the 3-year annualized results of the MSCI Brazil Index at just 1.9 and the MSCI Emerging Market at -8.2%.

Clearly, these are dramatic performance discrepancies. In fact, it would seem that the collective strength of the 25 stocks in the Peru Index... albeit, very materialistic... have pulled off something rather unique. Spectacular 3-year returns!

Credit the power of a 20% weighting in gold metal miner, Compania de Minas Buenaventura (BVN). The 100%+ 3-year return is contributing heavily to the 3-year 23.5% annualized AllPeru Capped Index.

Still, one look at the chart, and we can see the risks of a 1/5 weighting in a single stock. In a matter of months, it shed 75% in value.

Bottom line? Over time, the iShares MSCI All Peru Capped Index Fund (EPU) is likely to correlate very highly with other resource-rich countries like South Africa (EZA); EPU is likely to correlate highly with International Materials (DBN) and Global Materials (MXI). Don't make the mistake of believing that you are well-diversified if you've got all of these investments in your portfolio.

Moreover, be sure to use stop-losses with emerging market country funds. There's a lot of ups, downs, bumps and bruises on the way to your pot of gold. Entry and exit points... yes, timing... may be crucial.

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. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.

ETF Expert: Does "Technical Leadership" Matter In Your Emerging Market ETF?

I've asked the question before; that is, do strategic ETFs add value to portfolios?

Near the bear market's inception in November 2007, I noted that a wide variety of "strategy ETFs" were outperforming the benchmark S&P 500. At least "strategy ETFs" had the edge at that moment in time.

In April of this year, 2009, I talked about why the Powershares G10 Currency Harvest Fund (DBV). I explained that it would likely capitalize on shorting the yen and the dollar while reinvesting in the currencies of Australia, Norway and New Zealand.

Dividend rotation, sector rotation, technical leadership, carry trade investing, market neutral. These are just a handful of strategic methods that can lead to successful investing outcomes. Yet with all of the focus shifting to emerging markets, it makes sense to evaluate whether the PowerShares DWA Emerging Markets Technical Leaders Fund (PIE) has been helpful or harmful since its introduction 18 months ago.

The Emerging Markets Technical Leaders Fund (PIE) tracks an index comprised of approx 100 companies in emerging growth countries. The list includes companies in countries from BRIC nations, MENA nations, most of Southeast Asia, Latin America and Eastern Europe.

The most recent information on PIE shows that 28% of the fund is dedicated to Chinese companies. Meanwhile, another 44% goes to Southeast Asia. By itself, this is not a bad thing... and it likely reflects "technical strength" in the region so far this year.

That said, PIE has been unable to justify its annual percentage of 0.90 so far. I say this for several reasons. First,a strategic fund provides "alpha" to the extent its giving you something other than general market performance. "Why else would you use it?" So when PIE is showing a 98% correlation with general emerging market performance in iShares Emerging Markets (EEM), it's hard to believe your getting something that is truly different with PIE.

Second,if the performance on non-strategic EEM is far superior to that of PIE, why would I embrace the strategic PIE? Granted, it's only been 18 months. Yet the strategic element should provide a "pop" to performance to embrace the idea that the "strategy" is sound. The evidence thus far is underwhelming.

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" or via podcast or on your iPod at this link.

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.

ETF Expert: Be Wary Of "Materialism" In Your Emerging Market ETF Assets

One of the best investment decisions that I've made in 2009 has been overweighting materials ETFs. At the same time, I've cautioned investors time and again to be cognizant of their overall exposure.

In "Uggggh... "I Like The Materials And Energy ETFs," I discussed how owning Brazil (EWZ) and Global Materials (MXI) is quite risky because the assets have a near perfect correlation (.99).

And for some folks, their overexposure to similar stock ETFs hardly ends there. For instance, there are those who erroneously believe that they are diversified across emerging market investments because they own China 25 Index (FXI), Emerging Asia & Pacific (GMF) and South Africa (EZA). All of these investments have risen and fallen in direct sync with one another... each correlating at .99.

In fact, over the previous 6 to 12 months, emerging market countries and regions have acted as proxies for the basic materials sector. Or perhaps one might say it has been the other way around. (Note: I alluded to this phenomenon last month in a feature, "The Country With the Most Stuff... Wins!")

Regardless, Vanguard Emerging Markets (VWO) has been moving in the same direction as Basic Materials (XLB), Global Materials (MXI) and International Materials (IRV). Moreover, performance differences can be tied almost as much to currency fluctuations as actual differences in index components.

This is not to say that there aren't performance differences between highly correlated assets. It simply means that you are effectively doubling or tripling down on the singular theme of basic industry/"stuff."

If you need to lighten up on your materialism, and if you're looking for low correlating or non-correlating assets, State Street offers a free correlation tool on the web. Eddie Kwong and Larry Connors of Trading Markets reminded me of the Select Sector SPDRS Correlation Tracker.

If you're looking to fill out that portfolio with assets that can zig while your other assets can zag...
If you want some assets to be heavy on capital appreciation potential while others deliver consistent income...
If you want to hedge against dollar devaluation and/or inflation, but don't want to "do it all" in stock assets or industrial-use commodities...

You may want to review the column "Best ETFs To Diversify Your Portfolio."

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" or via podcast or on your iPod at this link.

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site

ETF Expert: Taking Another Look At The Forgotten Frontier Market ETFs

Could the ETF providers have introduced frontier country investing at a less opportune moment in time? Probably not.

It was just about 1 year ago when intrigue in MENA (Middle East North Africa) began to take root. With emerging Asia ETFs and emerging Latin America ETFs having posted extraordinary gains for nearly 6 years, providers began touting the potential of even more exotic investing landscapes.

"South Africa?" some would scoff. The monster opportunities existed in northern Africa, in places like Morocco and Egypt. "Israel?" others retorted with apparent frustration. Real Middle Eastern growth taps Kuwait and Bahrain.

Unfortunately, the entire world's economic engine had been derailed by financial stupidity in the westernized, developed nations. Further, the idea that emerging markets or frontier markets could "decouple" from the U.S. was premature at best.

(Note: Unlike frontier markets, emerging markets like China and Brazil seem to have a leg up on decoupling going forward. Review "Emerging Market Success and the Return of "Decoupling.")

Frontier markets, for the most part, are still too dependent on selling their goods to the developed world. Whereas China and Brazil can sell to one another, bolstering the respective middle classes, many in the Middle East and in Africa require developed world purchasing of their exports.

It follows that the Vanguard Emerging Market Fund (VWO) is handily outpacing PowerShares MENA (PMNA), Claymore Frontier Markets(FRN), Market Vectors Gulf States (MES) as well as Market Vectors Africa (AFK).

 

Year-over-year, the "Gulf" region appears to be having more difficulties; the precipitous drop in oil form $145+ per barrel to $34 per barrel has a great deal with the misfortune. Moreover, countries like Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates rely heavily on their financial segment. Not surprisingly, then, a global credit crisis may have thrown a wrench in the works.

Market Vectors Africa Index Fund (AFK), on the flip side, may be having a decent renaissance due to untapped resources and materials. And then there's the curious case of Claymore Frontier Markets (FRN), with a 65% weighting in Chile, Poland and Egypt. Chile is hardly an emerging market, but FRN at least strives to be a "frontier" alternative to the Vanguard Emerging Market Fund (VWO).

Still, I can't help but feel that purchasing a frontier market ETF like Claymore Frontier Markets (FRN) is primarily a basic materials/natural resources choice. And if that's the case, you're not getting that much diversification from higher-volume investments like VWO, South Africa  (EZA) or Global Materials (MXI).

 

Want to know more about the success of Brazil and South Africa? They're highly regarded as energy and materials havens. It follows that the optimism that began in March concerning the reflation of the global economic industrial cycle helped these areas the most!

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" or via podcast or on your iPod at this link.

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.

ETF Expert: More Evidence That "Risky" Foreign ETFs Are Less of A Gamble Than U.S. ETFs

I remember when I first began to think that U.S. economic dominance was waning. I lived in Taiwan at the time, and things in Asia were moving with surprising speed.

First came the '87 crash, which had me questioning U.S. stock market stability. Thereafter, the S&L banking crisis solidified my fears that the "#1 economy" was falling apart. (Note: Ross Perot was amusingly persuasive with those charts too!)

The end wasn't near, however. The U.S. shrugged off the '91 recession. Consumers began spending freely on their credit cards again. Meanwhile, state and federal governments didn't see a need to spend less either.

I was wrong about U.S. economic rule. Or at the very least, as financial folks like to say... I was "early."

In the mid-80s, I expected that China would be the next economic powerhouse by the mid-90s. As it turns out, China did not vault to the top spot in the mid-90s or even after the dot.com collapse in early '00.

But right now? Post-2008 financial catastrophe? With GM and Chrysler declaring bankruptcy in '09, and the entire "bank concept" still in the process of revision?

Several weeks ago, I acknowledged that if push came to shove, I'd choose a China ETF over a U.S. ETF. A few days later, I explained why I believe emerging markets may be safer than developed markets. Quite a few readers sent me e-messages with nods of agreement.

It's not that the iShares Emerging Markets Fund (EEM) isn't "overbought." It is. Yet a high growth investment like EEM isn't going to retest 2008 lows. After all, emerging markets set "higher lows" in March of 2009, unlike developed world ETFs like the iShares S&P Global 100 (IOO); the latter set "lower lows" in March of 2009.

Now there's more evidence regarding risk and reward. For example, over the last 4 weeks through the end of May, the iShares Emerging Market Fund (EEM) picked up 16%. The S&P 500 SPDR Trust (SPY) picked up 2.4%. Yet EEM was only 1 1/2x as volatile with respect to beta.

Assume for a moment that the volatility has been roughly the same for the first 5 months. I am sure it's pretty close. What you get for 1.5x risk with EEM is 33% YTD versus <2% for SPY.

If safety resides with the countries that stand the best chance of thriving post-recession... if we are counting on "green shoots"... it's China that has the manufacturing pick-up on direct spending on infrastructure. Again, 75% of China stimulus is going to infrastructure, whereas 5% in U.S. stimulus spending is going to "rebuilding America." You have to consider the China 25 Index (FXI) during pullbacks.

Similarly, it's Brazil's middle class that is spending more freely; American's are saving more... a good thing, but coming at the expense of consumption. You have to consider Market Vectors Brazil Small Cap (BRF) to capitalize on Brazilian consumer spending.

The U.S. economy is better off than it was 6 months ago. And it'll be better off 6 months from now. Yet we already need to consider how massive debt and higher inflation may contribute to an exceptionally slow-growing, stagnant environment. Some feel we may even face the dreaded double-dip recession.

To the extent that you need "beta" in your portfolio, you'll still have developed market exposure. Alpha seekers, on the other hand, are already reevaluating the meaning of playing it safe.

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" or via podcast or on your iPod.

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.