MARKET COMMENT

December 18, 2006




Some ETFs and funds will be paying significant dividends over the next 10 days. For example TRF [Templeton Russia Fund] has been on a tear lately as investors want to capture what would amount to a 10% dividend per the following press release.

FORT LAUDERDALE, Fla., Dec 14, 2006 (BUSINESS WIRE) -- Templeton Russia and East European [TRF] today announced a year-end distribution comprised of net investment income of $0.9445 per share, long-term capital gains distribution of $7.5995 per share and short-term capital gains distribution of $0.3049, payable on January 16, 2007 to shareholders of record on December 29, 2006 (Ex-Dividend Date: December 27, 2006).

You can expect others to follow suit with dividends [not this high naturally] which are typically done over the last week of December. Candidates would include EEM, EFA, ILF, EWW, EWZ and others with substantial gains this year. How much?

In 2005: FXI paid $1.25, EWW $47.6, EWZ $58.3, IEV $1.89, ILF $1.69, EFA $1.11, EEM $.98 and so forth. Also in June 2005 both EFA and EEM split 3:1 which is not anything you can depend on going forward.

Most will be announced probably starting Friday and continuing thru next week.

It’s common for prices of securities with dividends to drop by the amount of dividend. Depending on the amount of enthusiasm for owning the shares this may not always be the case. Nevertheless, don’t be surprised by sudden price drops in some ETFs and funds over the next week or so that “may” be unrelated to overall market conditions.

One thing to remember, at least these ETFs and funds share the wealth with their shareholders as opposed to some of the Megabanks that pay-out most earnings to corporate chieftains and insiders in bonuses.

By the way, Seattle area based StockCharts was shut down due to the storm that knocked out power throughout the region.






So any ETF or fund doing well in 2006 should put a gift in your Christmas stocking this year.

Despite a lot of good news early, markets faded into the close just as they did on Friday. Much of the previous day’s negative conclusion could be attributed to quad-witching oddities. But, today was just not positive period.

Volume was respectable but as on Friday, market internals were negative.



With money cheap and available M&A deals still dominate the news. Private equity hedge funds are zeroing in on as many targets as they can acquire. After the close today it was reported that Tribune executives along with some funds may try to acquire TRB. Further, the Chandler family, the largest shareholder is also putting together a bid. [Bye bye Cubs!]

Aside from TRF the standout positive sector was financials. Now why would that be? With all the M&A activity and with interest rates “comfy” it shouldn’t surprise.







The casualties of the day can be found just about everywhere else including tech and commodities.












Silver can be “the” heartbreaker market. I remember being long silver in the futures market @ $8.50 20 years ago. I was attending a meeting in Arizona and when I entered the room silver had hit $11. While in the meeting I was thinking about what color the new Porsche should be. But, when leaving the meeting two hours later, silver had dropped to $9. That’s the way it can be when trading silver or energy for that matter.


















Overseas things were calmer except for hot emerging markets where volatility is high.












Dividends are always important to investors and at this time of year, especially given the outstanding performance of some ETFs and funds, expect substantial dividends from those hot markets.

As to the rest, the commodity “smack down” isn’t too surprising given that we’re nearing the end of the year, traders will be taking off soon and conviction is lacking. One would assume that we get a lot of choppy activity going through the holiday period. The bulls have left some soldiers at the front line to protect their year-end performance and bonuses. Let’s see how it all plays out.

Have a pleasant evening!


Disclaimer: Among other issues, the ETF Digest maintains positions in: TRF, USO, GLD, SLV, CEF, DBC, FXE, IEF, EFA, EEM and FXI.