Posted by: Aaron Pressman on October 26, 2007
ProShares appears to have some supremely well-timed exchange-traded funds to announce. Two of the funds short major international benchmarks for developed markets (Symbol: EFZ) and emerging markets (EUM). The other four offer a more volatile cocktail, offering to double the short exposure to developed (EFU) and emerging (EEV) markets as well as China (FXP) and Japan (EWV). Although you could certainly use these funds to make an outright bet on a decline, they’re more prudently used as a hedge. Only EFZ and EFU are trading, according to blogger Richard Kang. The other four will hit the tape in November. And coming down the pike from ProShares are short funds covering commodities and currencies, according to IndexUniverse.
Surely there will be some commentary decrying these new products as dangerous, risky and/or volatile. Such a critique is both correct and beside the point. Almost any investment product can be dangerous if misused. The real focus should be on the added flexibility and opportunities that new products create. Don’t know much about China or commodities, stay away. But a more sophisticated investor seeking diversification benefits, capital gains tax avoidance or a hedge against current positions or a recession should keep a close eye on the ProShares product pipeline.
And, on an unrelated note, for your weekend reading pleasure, don’t miss my colleague Steve Hamm’s fascinating tale of the decline of the San Jose Mercury News, exploring the larger theme of newspapers struggling in the Internet era. The newspaper industry still looks like more of a value trap than an undervalued gem, at least from a stock market perspective. Former Intel bigwig Andy Grove agrees, telling Hamm the industry’s medical prognosis would be something along the lines of: “Your doctor says you’re going to die, but if you don’t smoke, you’ll live a little longer.”