After all, if a social media ETF can work, whoâs to say ETFs
focused on concrete or toll roads canât?
Some of the themes that follow may prove to be impossible to
execute from a registered investment company (
) compliance perspective, but that never stopped issuers before.
After all, Netflix is to cloud computing what the neo-Keynesian
economist and New York Times columnist Paul Krugman is to Ludwig
Von Mises, the late laissez-faire economist for whom gold was the
best store of value.
If anything, the rash of recent exotic ETF ideas proves that if
the index provider is willing to get creative with the methodology,
the investable universe can expand enough to include all the
large-cap companies needed to make a portfolio investable. Just
call it a supply chain play, or better yet, include
Now that Samsung; Research In Motion; Motorola; the Taiwan-based
computer maker ASUS; and Hewlett-Packard have all entered the
tablet market with iPad killers, it only seems appropriate for a
tablet index and subsequent ETF offering to be stuffed into
someoneâ s pipeline.
Tablet PC sales are forecasted to nearly triple in 2011 compared
with 2010, according to IC Insights. What better idea than to build
an ETF to take advantage of the American publicâs latest gadget
obsession? Not only could the portfolio own small component firms
like STMicroelectronics (
) or LG Display (
), it could also justify owning mega-cap tech companies like Google
Never mind that the portfolio would end up looking and acting
like existing large-cap technology ETFsâthe iShares Dow Jones US
Technology Fund (NYSEArca:IYW) comes to mind. Just imagine the
marketing and stock photo opportunities! The ticker could be
ETF Of ETF Issuers
As Iâm sure youâre aware, there are plenty of financial ETFs
and plenty of ETFs-of-ETFs.
There are not, however, ETFs that seek to capture the fantastic
growth of the ETF industry. Now clearly this portfolio would not
work as a pure play. WisdomTree, after all, is the only publicly
traded ETF firm in existence whose business is solely focused on
ETFs. The company, which has a few blockbuster ETFs attached to its
name, just recently moved from the Pink Sheets to the Nasdaq and
characterized the move as something of a move up in the world.
To make the portfolio investable, it would not only need to
include diversified ETF issuers like BlackRock and Invesco
PowerShares, it would have to expand its portfolio to own European
and Asian ETF issuers like HSBC. Congratulations; your ETF-of-ETFs,
made up of ETF companies, is essentially a watered-down version of
the iShares S&P Global Financials Sector Index Fund
(NYSEArca:IXG). The ticker could be âETF.â
Michelle Obamaâs healthy-eating initiative is the perfect type
of dynamic around which to center a ridiculous ETF premise.
Americaâs well-publicized battle with obesity will funnel
money into organic food companies like Whole Foods Market
(NasdaqGS:WFM) or supplement firms like GNC Holdings (
Obviously, grocers sell foods that will end up on the wrong side
of the newfangled food pyramid, or rather âMy Plate,â as the
U.S. government now calls it, so the portfolio will need to own the
entire supply chain.
Companies like Monsantoâwhose Roundup-infused
seeds promote the use of dangerous agricultural chemicalsâdo
allow for enhanced crop yields, which would be vital to satisfying
the food and vegetables requirement in the governmentâs new
It doesnât matter that you can get this exact exposure via the
Market Vectors Agribusiness ETF (NYSEArca:MOO). At least youâd be
doing your part to promote healthy living.
It seems that everywhere you turn, some corner of the world is
being featured in a reality TV show. Housewives, rock stars, truck
stops and pawn shops are just a few of the topics covered in the
reality TV space.
This explosion is also big business. For ETF investors, it could
mean opportunity. This hypothetical portfolio would own names like
Comcast Corp (
), whose purchase of NBCUniversal gives it ownership of BravoTV,
the self-proclaimed epicenter of reality TV.
Of course, just as with all these themes, any iteration of a
reality TV portfolio would end up being kissing cousins with an
existing ETF, in this case the PowerShares Dynamic Media Portfolio
(NYSEArca:PBS). The ticker could be âREAL.â
Listen, Iâm not opposed to innovation or ETF creativity.
The problem is that many of the new ETF portfolios provide seem
to claim new or better exposure to hot trends, when in fact many
are simply retreads of existing portfolios that seem to be coming
with inflated expense ratios.
In other words, weâre hearing a lot of noise without much
For investors, this just means getting familiar with the
underlying index methodology and becoming acquainted with the
portfolio, because thereâs no sense in paying a higher fee for
what amounts to clever marketing.
Don't forget to check IndexUniverse.com's ETF Data
2011 IndexUniverse LLC
. All Rights Reserved.