In the ETF world, some things are backwards. For example, October is a time for costumes, and Zombie costumes are a perennial favorite with healthy humans dressing up as the fictional walking dead. In the ETF world, there are actual Zombie products. However, many of them dress up in a fancy website costume with an NYSE listing mask in an attempt to make them appear healthy.
The sad fact is that more than a fourth of all listed ETPs are probably non-profitable entities for their sponsors. This month’s ETF Deathwatch contains 394 (293 ETFs and 101 ETNs) names out of the 1,456 products listed for trading. Some are so dead they can’t even justify a Zombie label because Zombies at least move. iPath Long Enhanced MSCI EAFE ETN (MFLA) hasn’t traded since January 18, 2012 (260 days ago but who’s counting) and is quoted today with a bid/ask of $67.73/$161.01.
A confluence of bullish and bearish factors leads to the conclusion that municipal market price activity will remain relatively subdued for the summer, with yields likely to be range bound. However seasonal factors could play a positive role. For instance, muni bond issuance tends to decline in the summer. Since 2000, the months of July, August and September have averaged approximately $28 billion, $29 billion and $26 billion in new-issue supply, respectively. In contrast, the post-2000 average for April through June is more than $34 billion, and for the October-through-December period it's nearly $33 billion. In terms of demand, June and July are among the busiest months for bond redemptions on the muni calendar. As a result, many investors will have additional cash positioned for deployment.
Municipals have underperformed the broader US Treasury market, in part because munis do not benefit from the same global flight-to-quality flows that Treasuries do.
ETF Deathwatch membership count increases by twenty for February 2012. Twenty-three new names join the list while only three leave. This marks the fifth month in a row of new record highs being established. The count now stands at 288 (213 ETFs and 75 ETNs). The average age of products on the list is greater than two years at 24.8 months, while assets average about $6.2 million each.
Eight of the new members were launched in July 2011, and having now reached six months of age, they no longer receive a free pass that excludes them from consideration. The other fifteen have been around a while, including BLDRS Europe 100 ADR (ADRU) launched in 2002. Reaching a 3-year or 5-year age milestone is no guarantee of continued success.
Trading activity picked up enough the past few months to allow three products to escape the list: Direxion Daily Retail Bull 3x