The best time to clean up is after there is blood in the streets, as they like to say.  A Greek ETF makes straightforward plays on public perception about Greece’s status much easier.  Institutional investors already have several options for direct investment in Greece, but a Greek ETF ensures the opportunity to play directly on retail investment in Greece.

New Global X Greek-Only ETF

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The Global X FTSE Greek 20 ETF (GREK) began trading on the NYSE Euronext Arca exchange on Thursday, December 15, 2011.

This may be the perfect time to invest in Greece, as troubled as it is.  The MCSI Greek Index is down at least 90% from October 2007 levels (i.e., a year before Lehman!), and between 35-60% from the beginning of 2011.

This fund tracks the FTSE/ATHEX 20 Capped Index – the top 20 companies on the Athens Stock Exchange (ranked by market cap).

20 Largest Greek Companies

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By market capitalization, these are the top 20 companies that comprise the FTSE/ATHEX 20 (and the Global X GREK):

1. Coca-Cola Hellenic (EEEK)
2. Greek Org of Football Prognostics (OPAP)
3. National Bank of Greece (ETE)
4. Hellenic Telecom (HTO)
5. Titan Cement (TITK)
6. Hellenic Petroleum (ELPE)
7. Public Power Corporation (PPC)
8. Bank of Cyprus (BOC)
9. Marfin Laiki Bank (MARFB)
10. Jumbo S.A. (BELA)
11. Motor Oil (Hellas) (MOH)
12. Viohalko Hellenic Copper (BIOX)
13. Marfin Investment (MIG)
14. FF Group (FFGRP)
15. Mytilineos Holdings S.A (MYTIL)
16. Piraeus Bank (TPEIR)
17. Alpha Bank A.E.(ALPHA)
18. Ellaktor (ELLAKTOR)
19. EFG Eurobank (EUROB)
20. TT Hellenic Postbank (TT)

The GREK ETF might also be capitalizing off the media exposure that Greece’s troubles have been given over the past two years.  More attention to the Greek market means more potentially interested investors in that market.

Given all these factors, it is actually a little surprising that until now there hasn’t been a dedicated Greek ETF.  There have been Europe-focused ETFs with partial exposure to Greece, of course, but this is the first Greek-only ETF.

Based on forecasts from the WTO and The Economist, here are ten key facts about the growth of the emerging market economies, some of which you should be nothing less than shocked by.

Amazing Facts About the World’s Developing Economies

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1. Emerging economies already produce 50%+ of the world’s exports
2. In 2012, emerging economies will also handle 50%+ of world imports
3. Almost 60% of U.S. exports will go to emerging economies in 2012
4. The total real GDP of the developed economies in Jan 2012 will be no higher than it was in Jan 2008, but the same figure for the emerging economies will be up 25%
5. Emerging markets combined GDP will account for 40% of world GDP in 2012
6. Emerging markets will comprise about 50% of total global retail sales in 2012
7. Emerging markets already purchase the majority of the world’s automobiles and cell phones
8. China will surpass the U.S. as world’s biggest importer in 2014
9. In as little as 10 years, emerging market revenues might be as much as 50% of those of the biggest multinationals

This means that emerging markets should, perhaps, comprise a proportionate amount of your investment portfolio if they don’t already.

While U.S. multinationals will certainly benefit and ride the wave of emerging markets growth for at least the decade to come, don’t place all your eggs in that basket, but start keeping an eye out for emerging blue chips abroad.

It also means that it is definitely time for aggressive investors to have a foothold in the frontier markets (Africa, the Middle East, Eastern Europe), which are rapidly emerging as the new emerging markets.

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The United States is looking at about 1.3% projected GDP growth – nothing exciting, but also nothing to sneeze at when you see some of the other disappointing figures out there.

Top 10 Worst GDP Growth Rates for 2012

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1. Greece – -3.5% GDP growth

2. Portugal – -3.1% GDP growth

3. Italy – -0.2% GDP growth

4. Finland - -0.1% GDP growth

5. France, Germany, Ireland, Netherlands – 0% GDP growth

6. Switzerland – 0.2% GDP growth

7. Spain – 0.3% GDP growth

8. Denmark, Slovenia – 0.5% GDP growth

9. Hungary – 0.6% GDP growth

10. UK – 0.7% GDP growth

Of course, the “PIIGS” are all represented here – as is most of Europe, the region projected to fare the worst by far for 2012.  The UK still looks paltry but will fare slightly better than France and Germany, the most vibrant economies of Europe – which are expected to have no growth at all.

Of the countries looking forward to negative growth – pay attention to the public debt.  Japan has the highest public debt as % of GDP anywhere, but it is still expected to see 2.2% growth in 2012.  Finland has no public debt problem.  So that leaves Greece, Portugal and Italy.  Greece’s public debt ranks third highest in the world – after Japan and Zimbabwe – at 167% of GDP.  That’s just over one and a half times the amount they expect to bring in.

Portugal and Italy come in close next, with Italy owing 121% of GDP and Portugal owing 119%.

Of note – Spain is not looking anywhere near as bad by the numbers as its fellow PIIGS counterparts.  It will see more growth than Germany, for one, and it doesn’t even rank in the top 10 worst public debt victims worldwide.

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So which countries are projected to see the most GDP growth?

Top 20 Global GDP Growth Rates for 2012

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1. Macau – 15.0% GDP growth

2. Mongolia – 14.8% GDP growth

3. Libya – 13.6% GDP growth

4. Iraq – 10.9% GDP growth

5. Angola – 9.9% GDP growth

6. Niger – 8.5% GDP growth

7. China – 8.2% GDP growth

8. Ethiopia, Rwanda – 8.0% GDP growth

9. Laos – 7.9% GDP growth

10. India – 7.8% GDP growth

11. Afghanistan – 7.2% GDP growth

12. Uzbekistan – 7.0% GDP growth

13. Nigeria – 6.6% GDP growth

14. Vietnam, Sri Lanka, Indonesia, Bangladesh – 6.3% GDP growth

15. Kazakhstan – 6.2% GDP growth

16. Kenya – 5.9% GDP growth

17. Saudi Arabia – 5.3% GDP growth

18. Peru – 5.0% GDP growth

19. Colombia – 4.8% GDP growth

20. Chile – 4.7% GDP growth

Clearly, Latin America is still growing strong, and Central Asia and Africa are rapidly becoming the next emerging markets frontiers.  On top of that, world oil needs are clearly keeping Libya, Iraq, Nigeria and Saudi Arabia in the top 20.

It might be a bit disheartening, however, to note that Macau’s growth, of course, comes from casino gambling.  Meanwhile, Mongolia is #2 because of its rich mineral deposits, supporting a growing mining industry serving the insatiable appetites of China, to start.  All the parts for your green cars and smartphones? They rely on the rare earths deposits in Mongolia.

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You’ve heard of the gigabyte and terabyte, but unless you work in the computer industry you might still need to be introduced to the petabyte (PB) (1 million gigabytes or 1000 terabytes); exabyte (EB) (10 to the power of 18, or just over 1 billion gigabytes); and the zettabyte (ZB) (1 trillion gigabytes, or 1000 exabytes).

Apparently, as of 2011, there is not yet any storage system on the planet which contains a zettabyte of data.  By 2009, the entire amount of information on the internet was taken to be about 500 exabytes (so, a half zettabyte).  Clearly, we are still a ways away from reaching the next magnitude up – the yottabyte (YB) (1000 trillion gigabytes). But it won’t be long. Data from the EMC/IDC Digital Universe Study (2011) show that between 2012 and 2015, the amount of global digital data is expected to more than double – from 2720 exabytes to 7910 exabytes (that would be over 7 zettabytes!).

Big Data and Data Exhaust

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The Economist predicts that 2012 is going to be the year of “Big Data,” the year in which big data is popularly recognized for the phenomenon that it is.  The analysis and storage of gigantic amounts of digital data is going to become a growing industry, in need of analysts.

Now that the price of storage is increasingly getting cheaper and cheaper, it is possible to not have to throw away any data at all.  One market research firm predicts that by 2020, storing a petabyte (PB, i.e., 1000 terabytes) will cost a mere $4.

All this data comes at a new cost, however, known as “data exhaust.”  For example, smart phones and sensors generate data when they engage in real-time processing of information. There will be even more real-time data exhaust with the increasing, real-time analysis of data by databases such as Hadoop.

In another sign of the age of Big Data, take a look at the number of data-driven start-ups.  You know of Klout, which measures the influence of users of social media, but there is also Lexalytics, that purports to analyse the mood and sentiment of social media messages on Twitter, Facebook and other applications.

All this storage requires electrical energy, however, and with its growth will come increased strain on electrical systems.  Digital may seem green compared to paper, but it still comes at a cost that cannot be taken lightly, especially in light of projected global data growth.

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In the face of the debasement of currencies worldwide (prompted by the massive quantitative easing led by the Federal Reserve – a process known as exporting inflation), the past year has seen gold climb astronomically, particularly in the summer of 2011.  So what’s changing now?

The fact is that institutions are clamoring to sell gold in order to take cash and keep cash positions.  This could be for a variety of reasons.  One, gold is seen as having topped out – it had climbed parabolically past $1900/oz, and a parabolic chart is never a good thing. So it was a good time to sell.

Two, it’s always a good idea to have extra cash on hand in the face of real fear in the markets, since this is the time to go bargain shopping when everyone else is selling.  No doubt, you are still holding on to some winners you bought in November 2008 and February 2009.

Third, investors have been pulling out of all asset classes, from European equities to most base metals as well, in order to secure cash ahead of the potential Greek debt default.

Fourth, gold, while an appropriate currency substitute in times of stress, is not as liquid as US Treasuries – which have, correspondingly, seen prices rise and yields fall.

Credit Crunch Redux?

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Banks worldwide have been raising short-term interest rates on all major currencies this month as well as having become less likely to lend to each other in order to protect themselves against further exposure to the  debt on the peripheries of the Eurozone.

If you recall, this was one of the first major issues we saw globally following the August 2007-August 2008 decline in U.S. mortgage markets.  Worldwide we saw a massive credit crunch, and it was this illiquidity that central banks first sought to address.  This time, however, the Fed’s tools are much more limited – rates are already as low as they can go, and there is not much more the Fed can do – just this past week it bought more 30-yr Treasuries in order to bring the long-term yields down.

Despite this 10% drop in gold, however, it still remains one of the few asset classes left in positive territory for the year.

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Then National Bank led the way, quickly followed by TD.

It’s earnings week for Canadian banks this week, and TD (Toronto Dominion Group) just posted a 23% gain in profits, while raising its dividend for the second time this year.   This jump in profit is up about 13% from last year, most of it coming from personal and corporate loans.

It appears as though operations are back to normal for Canada’s second largest bank.  It has been an excellent earnings week for Canadian banks, with three leaders handily beating street expectations.

The new dividend is 68 cents a share, up 2 cents from 66 cents previously.

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Economists are now pointing to several weakening indicators that suggest the possibility of falling back into recession – all the more highlighted by the White House’s lip service promoting the injunction that “there will be no double dip.”  Here are several of the latest warning signs that forecast gloomy skies ahead, at least domestically.  As CNN Money reports, both Martin Feldstein (former president of the National Bureau of Economic Research) and Larry Summers – top economists from either side of the spectrum – cautioned Wednesday that there is a “significant threat of a new recession.”

Consumer and Government Spending Cuts

First of all, housing continues to drag down the economy, and this has put a brake on any growth in consumer spending.  Meanwhile, about $2.1 trillion in spending cuts was called for as part of the debt ceiling agreement, and some economists are certain this will further pull down the economy, expecting that it could cost 320,000 jobs in 2012.

Manufacturing and Industry

No one is expecting any rebound in real estate or home starts anytime soon, and other industries are plagued by the threat of coming regulations – such as health care and financial services.  Other sectors, such as defense, energy, and higher education, will be set back by the spending cuts.

Job Cuts

This Friday’s jobs report is expected to forecast a gain of only 75-77,000 jobs, leaving the unemployment levels unchanged at 9.2%.  The debt ceiling agreement is also not expected to promote any new growth in job hiring, since overall demand is still sluggish.  Forecasts are confusing, as Moody’s Analytics still expects hiring to improve by the end of the year, but a recent report reveals that planned layoffs have hit a 16-month high.

Gross Domestic Product

GDP has been nearly flat for the first half of 2011, and given expectations for manufacturing, it doesn’t look like this can improve very much.  On Wednesday, JP Morgan revised down the Q3 GDP forecast from 2.5% to 1.5%.

Technical Breakdown

Markets have responded negatively to the rise in the debt ceiling, with the DJIA dropping 2% Tuesday as well as Wednesday.  The S&P is now in negative territory for the year.

With all of the above taken into consideration, it is no wonder that gold is hitting new record highs again, topping up at an intraday high on Wednesday of $1664 an ounce. Further confirmation of bearish growth sentiment can be found in the slouching oil prices - WTI is now down to just $91.88, a low we haven’t seen for 6 months.

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If you had also bought Hinterland Metals, and you’ve checked into your brokerage account in the last week, you will have noticed that there’s an extra line in there for “Stakeholder Gold Corp (TSXV: SRC).”  What happened is that Hinterland Metals (TSXV: HMI) spun out its Yukon gold assets into Stakeholder.  So your previous holdings of Hinterland have been divided into Stakeholder and what is now listed as “Hinterland Metals Inc – New.”  The new shares of both began trading on June 21, 2011.

From the Hinterland Press Release:

The common shares of Hinterland will continue to trade as HMI, but on a consolidated basis.  Stakeholder’s main asset will be a plot about 100km south of Dawson City, while Hinterland is going to focus on the Kipawa Rare Earth Element property in Quebec.

The point of the spin-off was said to be in order to focus the efforts of each company.

For more information, you can even follow Hinterland Metals on Facebook, Twitter, YouTube and Flickr:

• Facebook: http://www.facebook.com/hinterlandmetals
• Twitter: http://twitter.com/hinterland_hmi
• Youtube: http://www.youtube.com/user/HinterlandMetals
• Flickr: http://www.flickr.com/photos/hinterlandmetals/

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With the added risk, though, comes added (potential) reward.  25 years ago the emerging markets barely constituted more than “zero” in terms of a percentage of the world economy. Today, they stand at about 17%.  In another 25 years, this number may be more than double again.  Expect some air pockets along the way, of course.

So until then, park your money in a broad-based emerging markets ETF to start. You can always specialize later on.

In Canada, you have three to choose from (to US readers: this doesn’t, of course, mean that Canadians have to line up behind one of only three ETFs – we’re talking about Canadian-dollar-hedged ETFs here – we’re all able to shop on the NYSE quite easily and pick up all those Vanguard offerings if we want, too).

Claymore – TSX: CBQ

Claymore was the first leader in innovating ETFs in Canada and the CBQ is the oldest emerging markets ETF in Canada. The CBQ tracks the Bank of New York Mellon BRIC Select ADR Index.  This means that the ETF focuses only on the BRIC countries (Brazil, China, India, Russia) and their stocks in ADR form on the NYSE.  Current market price is $31.43 (the NAV is $31.50). The management expense ratio (MER) is 0.66%.  Distributions vary considerably and have been paid so far on a somewhat inconsistent schedule, but appear to be attempts at quarterly distributions.

iShares – TSX: XEM

This is from the Canadian edition of iShares, of course.  The XEM tracks the MCSI Emerging Markets Index.  Current price and NAV are $26.47.  The management expense ratio (MER) is 0.79%.  Distribution amounts vary and are paid at least once a year.  They were paid twice in 2010 (June and December).  In terms of holdings, this ETF is clearly the most diversified of the three, with Samsung Electronics currently the largest holding at just 2.1%.

Bank of Montreal (BMO) – TSX: ZEM

The newest provider of ETFs in Canada, BMO has been surprisingly innovative at filling in market niches where there were no ETFs before.  A case in point is the recent, popular covered calls ETF.  In terms of emerging markets, though, you can buy the ZEM.  The current market price is $16.60 (NAV is $16.59); the MER is a maximum of 0.54%, and distributions will be paid at least once a year (the only apparent distribution so far is scheduled to be paid in January 2012.  Top-weighted holdings (between 11-14% each)  include the Brazil, Taiwan, and India indexes.

Each of these is slightly different, so do some further reading.  Think about diversification and which countries you want to be in.  Consider the MERs.

But you don’t have to worry about “track records” with ETFs.  You should be able to trust that the ETF will follow its benchmark (manager strategy or talent is not an issue as it is with mutual funds).  So you don’t need to think about who is managing it or what their “past performance” is (not that you should ever look to past performance anyway – don’t.).

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