ProShares’ newfound tax efficiency is surprising and welcome. Will the other leveraged funds follow suit?

In case you missed it, ProShares announced today that it will pay zero capital gains on its complete family of ETFs in 2009. That’s shocking, given the huge cap-gains payouts by inverse ETFs in 2008. I would have thought, given the huge run in the market this year, that leveraged funds would have accumulated large distributions.

In fact, I had a half-written blog warning investors to sell out of leveraged ETFs ahead of the 2009 distribution announcements. I was worried that investors would get stuck with large distributions yet again, and didn’t want to see that happen. It was lucky timing that the ProShares announcement jumped ahead of me publishing that blog.

The question now is, will other leveraged and inverse ETF providers like Rydex and Direxion Shares follow suit?

On one level, I think the answer

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Law Firms Threatening Action Against Leveraged ETF Providers

At least two law firms say they're talking to clients who use leveraged exchange-traded funds about potential lawsuits against the funds' providers.

The list is large and includes ETFs sponsored by ProShares, PowerShares, Direxion and ETF Securities, which recently entered the U.S. (see story here.)

How do we know this? The law firms, of course, put out a press release. You can read it here.

 

Two Deutsche Bank Funds Hit By CTFC Ruling

A pair of PowerShares-DB commodity ETFs will be curtailed in how much they can buy in soybeans, wheat and corn due to a decision by the Commodity Futures Trading Commission.

You can read this Bloomberg News report for more details. Also, check Matt Hougan's blog here.

 

SSgA's Hoguet: Sovereign Wealth Funds To Buy SDRs

Special drawing rights, or SDRs, are what the International Monetary Fund uses internally as currency markers to traverse

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It was bound to happen, I suppose. While exchange-traded funds have not yet attracted the multi-trillions of dollars that mutual funds have, ETFs have become popular enough they’re starting to acquire some of the bad habits of their older rivals.

The first generation of ETFs were low-cost, broadly diversified products from firms like Barclays and Vanguard, well suited to average investors wishing to expose the core of their portfolios to the broad equity market.

But we are well into the second phase of ETF proliferation, with more volatile sector ETFs sporting considerably higher price tags. How complex it’s become can be inferred from the fact BetaPro Management Inc. is hosting an all-day Horizons ETF University session today at Ryerson University, part of a seven-city road show. 

BetaPro came under fire last week from consumer advocacy group FAIR for not disclosing clearly enough

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NYSE exec provides update on everything from AMEX's 'black box' technologies for more actively managed ETFs to progress on merging platforms.

 

Earlier this month, NYSE Euronext completed its acquisition of the American Stock Exchange. With the addition of AMEX's 416 ETF listings and 13 ETNs, the exchange-traded product listings at NYSE Euronext now number 680, excluding overseas ETFs, and a total of $595 billion in exchange-traded product assets.

IU.com's Eric Rosenbaum recently spoke with NYSE Euronext Senior Vice President Lisa Dallmer about the specific benefits of the completed acquisition for the ETF industry, and the current outlook for ETFs given the tough markets. 

 

IndexUniverse (IU): With the Amex deal completed, what are the major benefits to the NYSE as a competitor for ETF listings and ETF servicing business, beyond the bragging rights that are always a part of the battle among exchanges for market share?

Lisa Dallmer (Dallmer): At the broadest

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Andrew Snyder says a rapidly unraveling economy means crude oil prices have further to fall. He recommends investing in the UltraShort Oil & Gas ProShares ETF (AMEX:DUG).

This from Today’s Financial News:

Thanks to fears of a strong global recession and larger-than-expected downturns in pivotal countries like China and India, crude prices are on the decline. Right now, a barrel of oil is selling for nearly half of what it did during its record-smashing peak just a few months ago.

But we have not seen anything yet. Crude prices will continue to fall. And if you invest accordingly, you can put some hefty profits in your pocket.

Earlier today, OPEC announced it has significantly reduced its oil-demand forecast. The group says it now believes the world will require 87.2 million barrels of oil each day next year, a decline of 450,000 barrels. It also announced its members will most likely cut production

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Andrew Snyder says a rapidly unraveling economy means crude oil prices have further to fall. He recommends investing in the UltraShort Oil & Gas ProShares ETF (AMEX:DUG).

This from Today’s Financial News:

Thanks to fears of a strong global recession and larger-than-expected downturns in pivotal countries like China and India, crude prices are on the decline. Right now, a barrel of oil is selling for nearly half of what it did during its record-smashing peak just a few months ago.

But we have not seen anything yet. Crude prices will continue to fall. And if you invest accordingly, you can put some hefty profits in your pocket.

Earlier today, OPEC announced it has significantly reduced its oil-demand forecast. The group says it now believes the world will require 87.2 million barrels of oil each day next year, a decline of 450,000 barrels. It also announced its members will most likely cut production

...

Andrew Snyder says a rapidly unraveling economy means crude oil prices have further to fall. He recommends investing in the UltraShort Oil & Gas ProShares ETF (AMEX:DUG).

This from Today’s Financial News:

Thanks to fears of a strong global recession and larger-than-expected downturns in pivotal countries like China and India, crude prices are on the decline. Right now, a barrel of oil is selling for nearly half of what it did during its record-smashing peak just a few months ago.

But we have not seen anything yet. Crude prices will continue to fall. And if you invest accordingly, you can put some hefty profits in your pocket.

Earlier today, OPEC announced it has significantly reduced its oil-demand forecast. The group says it now believes the world will require 87.2 million barrels of oil each day next year, a decline of 450,000 barrels. It also announced its members will most likely cut production

...

The Dow Jones index plunged through 9,000 points today, as the credit crisis continued to rip through US stocks. The slump came on the one-year anniversary of the Dow's record high of 14,279. It has lost over a third of its value since then.

[Expanded with quotes from Michael Sapir, CEO of ProShares.]

Trading has reopened on the ProShares Short Financials (AMEX: SEF) and ProShares UltraShort Financials (AMEX: SKF) ETFs, after being halted this morning as part of the fallout from the SEC's ban on short-selling in Financial stocks.

See our earlier story on the topic here.

The two ETFs are not functioning normally, however: ProShares has banned "creations" until further notice, meaning that no new shares can be created to fill demand. Shares can, however, be redeemed as usual by Authorized Participants.  

What does this mean for the average investor?

It depends. Importantly, investors can still buy and sell the shares of both funds; in fact, more than 10 million shares of SKF have traded today, with high liquidity and tight spreads.

However, ProShares has warned in a statement that "these ProShares ... may trade at prices that are not in line with

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The world is all pissed off about high oil and gas prices; protesting is happening in Scotland, Hong Kong, Nepal and Europe as I write.  Spanish truck drivers are blockading their country’s border with France for crying out loud. There's only one way to play it - UltraShort Oil & Gas ProShares (AMEX:DUG). DUG is the answer, and it's probably wise to build a small position before everyone else does.  What the hell is DUG? UltraShort Oil & Gas ProShares (AMEX:DUG) seeks daily investment results, before fees and expenses, which correspond to twice the inverse of the daily performance of the Dow Jones U.S. Oil & Gas index. The fund normally invests 80% of assets in financial instruments with economic characteristics that should be inverse to those of the ...