The pure-play ETF is Market Vectors Egypt Index ETF (NYSE: EGPT).  A week ago it was at $18.80 and it closed at $16.22 on Friday.  After having much of the morning with shares halted, the ETF is up 5.6% at $17.14 on just over 600,000 shares right after 2:00 PM EST.

Market Vectors Africa Index ETF (NYSE: AFK) was down over 4% at $32.36 late on Friday and shares are up 0.4% at $32.44 today.

The Morgan Stanley Frontier Emerging Markets (NYSE: FFD) was down over 5% at $14.28 late on Friday and shares are up 1.8% at $14.42 today.

Turkey is even farther away than some peers, but the drop happened last week and the recovery is here today.  The iShares MSCI Turkey Investable Market Index (NYSE: TUR) was down 6.9% at $58.07 late on Friday and shares are up 3.1% at $59.84 this afternoon.  The Turkish Investment Fund Inc. (NYSE: TKF) was down 5.6% at $15.10 late Friday and shares are up 2.3% at $15.45 this afternoon.

North African and Middle East tension always causes concern in Israel… The Aberdeen Israel Fund Inc. (NYSE: ISL) was down 4.3% at $16.75 late Friday and shares are down another 1.5% at $16.50 today.  The iShares MSCI Israel Cap Investable Market Index (NYSE: EIS) was down 3.1% at $57.84 late on Friday and shares are today trading down another 2.4% at $56.59.

The SPDR S&P Emerging Middle East & Africa (NYSE: GAF) was down almost 5% at $68.62 late on Friday and shares are up 0.9% at $69.21 on Monday afternoon.

Apache Corp. (NYSE: APA) had traded ad low as $110.20 on Friday and closed at $114.84 with its substantial exposure in Egypt.  Shares have recovered yet another 2.8% today to $118.05.

Partner Communications Company Ltd. (NASDAQ: PTNR) offers cellular phone service under the Orange brand in Israel.  Shares closed down over 2% Friday at $20.04 and shares are down another 4.7% at $19.09 this afternoon.

Vimpel-Communications (NYSE: VIP) is a Russian cellular provider but it is in the midst of acquiring Orascom’s telecom assets in Egypt and shares closed down almost 3% at $13.96 on Friday.  Its shares are down another 0.5% today.

JON C. OGG

The regional frontier market for a broader Africa is the Market Vectors Africa Index ETF (NYSE: AFK).  After looking through its regional exposure, this has just over 20% exposure to Egypt as of September 30, 2010 per the Market Vectors data on its website.  Shares closed at $33.83 on Thursday against a 52-week range of $26.60 to $36.45.

Egypt’s stock market was down roughly 10% on Thursday, and Friday is always a closed day of prayer.  A more specific play on Egypt is the Market Vectors Egypt Index ETF (NYSE: EGPT).  Shares closed on Thursday at $16.79 versus a 52-week range of $15.90 to $22.42.  Be advised that the market cap here is tiny at only about $8.6 million for the ETF and average volume is only about 28,000 shares. Shares were above $18.50 on Tuesday, but have dipped under $16.50 so far on Friday.

Morgan Stanley Frontier Emerging Market Funds, Inc. (NYSE: FFD) has only 1.5% of its fund tied to Tunisia, yet the latest semi-annual report showed no direct Egypt exposure.  Shares closed at $15.08 on Thursday and the 52-week range is $10.52 to $15.72.  The average volume here is only about 19,000 shares and the market cap is close to $100 million.  This one has only come down from about $15.50 this week to $15.02 so far on Friday.

Egypt has roughly 80 million people, while Tunisia’s population is just above 10 million.  The esteemed emerging market money manager Mark Mobius has always held the philosophy that you invest in these emerging markets when there is blood in the streets.  The reasons should be self-explanatory.  In Tunisia, the latest government figure we saw was 78 dead in reports but other reports indicated slightly higher figures.  The figures in Egypt are not yet known as much internet and telecom access has been cut or severely lowered due to outages.

Other protests have taken place om Yemen, Algeria, and Jordan.  Stay tuned.

JON C. OGG

Predicting markets and economic patterns is difficult over the next 20 years because there are many unknowns.  After all, who will be President in 2016?  What will tax laws be in 2020?  Which of today’s deadly diseases will be cured in 2020?  Which regions will experience wars by 2020?  This is why futurism may be one of the more unique approaches in investing. ETFs are often called the mutual funds of the future and our goal is to meld a futurist outlook into an investing strategies.

A rule of long-term investing is that what investments feel good today, such as those in Chinese and Indian markets, may not generate returns tomorrow.  Investors will face short-term pain for long-term gain. Futurists are always thinking beyond the next recession and the next boom behind it.

Beyond Emerging Markets… Frontier Markets

If you are thinking about China or India over the next 10 to 20 years, there is plenty to consider.  Both countries have grown exponentially as they became some of the world’s largest economies. Think post-Chindia and post-BRIC.  ”Frontier markets,” a term which has come up in recent years that goes beyond ‘emerging markets’ is ‘frontier markets.’  These “frontier market” economies still have room for growth.  Perhaps nothing illustrates this better than The NatGeo World Map at Night.

When it come to Africa and other Frontier Markets, there are three exchange-listed vehicles that we usually choose.  All are generally more volatile than the broader market stock indexes in the developed world.  Many frontier funds base performance  off of the MSCI Emerging Markets Index rather than the S&P 500.

Morgan Stanley Frontier Emerging Market Funds, Inc. (NYSE: FFD) is a small closed-end fund with roughly $105 million in assets.  This fund has diverse investments in banks, breweries, miners and utilities.  At its semi-annual report, the fund listed holdings in 21 nations including Nigeria, Argentina, Bangladesh, U.A.E., Kenya, Kuwait, Pakistan, Serbia, Qatar, Lebanon and Greece.  Average volume is light at just under 20,000 shares in a day and its 52-week range is $10.52 to $15.23.

Market Vectors Africa Index ETF (NYSE: AFK) from Van Eck seeks to track the performance of the Dow Jones Africa Titans 50 Index, which is full of companies that are headquartered in Africa or that generate the majority of their revenues in Africa.  It holds banks, breweries, miners, utilities, and more.  South Africa is where the largest number of the fund’s holdings are based. Assets under management were listed as $92 million in mid-November, its 52-week trading range is $26.60 to $34.88, and average daily volume is close to 25,000 shares per day.

iShares MSCI South Africa Index (NYSE: EZA) is an ETF that seeks to track the MSCI South Africa Index and it is one of the largest  vehicles out there since South Africa has a more established markets and is more politically stable compared with other African nations.  The fund invests in South African companies and has roughly $520 million in assets.  It trades close to 400,000 shares a day, and its 52-week range is in the low-$50s to $72.77 (flash crash low was listed as $23.00).  Its holdings include Anglo Platinum, AngloGold Ashanti, Firstrand, Gold Fields Ltd., Sasol, and Standard Bank.

Is Africa risky?  Are many other nations in the Frontiers markets risky? Absolutely.  But many of these nations have some of the biggest undisturbed deposits of natural resources.  That’s why we have highlighted these ETF and fund products rather than make individual picks.

Are You Ready For The International Water Wars?

Americans, Canadians, and many Europeans take potable water for granted.  However, Montezuma’s Revenge and many water-borne illnesses are rather common around the globe.  Building water filtration systems and desalination plants is costly. Nations are already setting limits on water resources.  Don’t ever discount the future of water.  Wars could be fought over potable water sources.  If you refer to that Nat-Geo World at Night Map, you can guess where much of the water resources are needed.

Many speculators have invested in the water industry for years.  It is no wonder that GE, 3M, and many other conglomerates have invested in the sector.  PowerShares Global Water (NYSE: PIO) and PowerShares Water Resources (NYSE: PHO) are two ETFs that compete in the world of water investing.

The PowerShares Water Resources (NYSE: PHO) seeks to track the Palisades Water index and it tends to have more of a U.S. focus.  Of course, many of these companies were hurt because they built new infrastructure ahead of housing developments that were scraped when the bubble burst.  PowerShares Water U.S. assets are close to $1 billion. It trades well over 200,000 shares per day, and its 52-week range is $14.70 to $18.68. (outside flash crash listed low of $6.99) to $18.68.

The PowerShares Global Water (NYSE: PIO) seeks to track the Palisades Global Water index, and it invests in U.S. companies and large international companies.  This is a smaller fund than the domestic water fund (PHO) from PowerShares.  Still,  it has more than $300 million in assets and trades close to 60,000 shares per day, and it has a 52-week range of $15.60 to $19.46.

J.P. Morgan Asset Management and Water Asset Management acquired Southwest Water, and that Water Asset Management is a private investment vehicle.  These are four small water mutual funds: Kinetics Water Infrastructure Advantaged Fund (KWIAX), PFW Water Fund (PFWAX), Allianz RCM Global Water Fund (AWTAX), and Calvert Global Water Fund (CFWAX).

NANO-NANO… Take Me To Your InnerSpace

The word nanotechnology, or nanotech for short, is another futurist technology. Many aspects of nanotechnology are already in use today in chemicals and other products.  This may also be one of the most controversial issues in the world of technology.  Think about atomic and molecular scale systems comprised of compounds between 1 to 100 nanometers, or one billionth of a meter.  There have been fortunes made by investors and there have been many fortunes lost.

Imagine machines so small that they could operate and move freely in your blood.  Imagine coatings that are comprised of molecules and materials small enough that they get a perfectly flat surface.  Unfortunately, you also have to consider toxicity, regulation, and the potential for a destructive use for such small products.  There is one ETF in the PowerShares Lux Nanotech (NYSE: PXN).

The PowerShares Lux Nanotech (NYSE: PXN) from Invesco seeks to track the the Lux Nanotech index.  It is comprised of some well-known companies and many companies have nanotech as a portion of their business.  The ETF has been around since the end of 2005 and has never recaptured its former highs.  It is also small at about $6 million in assets and trades under 25,000 shares a day on average.  Its 52-week range is $7.74 to $10.85.  Some of the companies in the fund include A123 Systems, Elan, 3M, GE, and Headwaters; but this ETF has some very risky and very volatile holdings as well.

Harris & Harris Group, Inc. (NASDAQ: TINY) is a nanotech venture capital fund whose website address tinytechvc.com tells what it is all about.  Its market capitalization is roughly $137 million, it trades close to 100,000 shares per day, and its 52-week range is $3.70 to $5.50.  While this is not a fund, it is close enough as the VC-company’s portfolio has more than 30 investment company holdings.  The company claimed a net asset value of $4.51 per share as of September 30, 2010, but founder Charles Harris also passed away at the end of September 2010.

Advanced Batteries… High on Lithium

All of those rechargeable batteries, batteries in consumer electronics and electric cars need lithium, which makes it a trend for futurists to consider.  There are two key risks here for this precious commodity: it could eventually run out or become uneconomical.  Moreover, China and Russia are major suppliers, which gives the sector an element of political instability.

Is it possible a better technology could come along?  Of course.  Still, there are many opportunities in the industry and it is probably no accident that behemoths such as General Electric have already invested in advanced batteries and have vowed to continue to do so. Lithium demand has nearly doubled in the past decade from above 15,000 metric tons in 2002 and is expected to rise to 55,000 metric tons by 2020 , according to the TRU Group.

Global X Lithium ETF (NYSE: LIT) is a very new ETF that launched in the summer and its holdings are solely in companies active in exploring and mining of lithium and producing lithium batteries.  So far it has been a big success.  The fund seeks to track the Solactive Global Lithium Index. Some key holdings are Sociedad Quimica Y Minera De Chile (above 22% of the fund), FMC Corp., Rockwood Holdings, Sanyo Electric, Ener1 and A123 Systems.  Assets under management are $91.5 million, it trades over 100,000 shares on an average day, in a range of $15.63 to $21.30.
Alternative Energy, In A Broader Sense

Investing in alternative energy may hold the promise of the future.  It has also been very painful even for futurists with a decade or longer outlook.  True futurists may seek an answer out of wind, solar, wave, geothermal, biofuels and even nuclear energy.  Not all alternative energy is technically renewable.  But the world needs alternative energy sources.  That is no longer even debated in public by most oil executives.

A problem that arises even for futurists with a ten-year outlook or longer is that the oil and gas giants of today may be the leaders of alternative energy in the future.  BP plc (NYSE: BP) has one of the worlds largest solar operations, and it is not unchallenged by other oil and gas giants.  Another caveat is that you do not need to be a futurist to see how many alternative energy and renewable energy investments are often considered nothing more than highly leveraged bets against the future price of oil.

PowerShares WilderHill Clean Energy (NYSE: PBW) is one of the go-to ETF products in alternative energy.  The fund is meant to track the performance of the WilderHill Clean Energy index.  Its largest holdings do seem to be more geared toward solar, which is most established alternative energy technology.  Some of its key components are First Solar, Broadwind Energy, IDACORP, JA Solar, and Suntech Power.  The fund has more than $550 million in assets, it trades over 300,000 shares per day, and its 52-week range is roughly $8.25 to $11.95.  The biggest issue is performance as it was worth over $25 at the 2008 peak versus close to $10.00 currently.

PowerShares Cleantech (NYSE: PZD) is the international and smaller competing version of the PowerShares Wilderhill Clean Energy ETF.  It is meant to track the price and yield performance of the Cleantech index.  Some of its top holdings are ABB, Corning, First Solar, IBERDROLA, Novozymes, Siemens, and Vestas Wind Systems.  Assets are about $150 million, it trades only about 14,000 shares a day and its 52-week range is $20.00 to $25.95.  This too suffers from poor performance as its shares were above $35.00 in the 2008 peak versus under $25 today.

An even more international focus in clean energy is the PowerShares Global Clean Energy (NYSE: PBD).  Its focus is to track the performance of the WilderHill New Energy Global Innovation index and many more companies are global.  Most of its larger constituent members are not known to most US investors.  The market cap is fairly small at about $160 million, it trades about 40,000 shares a day, and its 52-week range is $11.51 to $17.64.  It is far from alone in performance anxiety as this was above $30 at the peak and it is closer to $13.00 in November-2010.

Rare Earth… Not So Rare, But….

Any investors thinking of investing in rare earth should consider what happened in 2010 before putting on a futurist’s hat and taking a shot.   All caveats aside, nations such as the United States have to depend upon foreign sources of rare earth materials and these are critical for defense equipment  autos, clean energy, electronics and medical devices.  It is vital that these REOs and REEs have a local source and it is vital that we have our own sources.  The risks in investing in this might be like comparing biotech to DJIA components.  Futurists down the road will likely concede that many of the companies in this field were little more than Hail Mary passes with a story rather than real assets that could be monetized economically.

The Market Vectors Rare Earth/Strategic Metals ETF (NYSE: REMX) is the only current fund-oriented instrument that revolves around the REE and REO trade.  It is extremely new, its methodology is unproven, and its company constituents are often very risky companies with promises rather than operating histories.  The launch came at the end of October-2008 and it has been very actively traded.  For 2010, we are going to not discuss price ranges, performance, and more because of all the risks here.  Either way and regardless of how this performs, the rare earth theme is unlikely a theme that purchasing managers will not have to consider for the future.

Back to futurists and secular themes in general…

If you want to learn more about futurist thoughts and ideas, one source I have used for some time is the World Future Society.  This is not an investment web site.  It has offered insight for futurists and those who think beyond the next month for years and years.  It publishes The Futurist magazine, has free email newsletters, conferences, books, blogs, and links to many local chapters throughout the U.S. and around the world.

Predicting markets and sectors is a tricky game, and most forecasting models have a hard enough time getting the next week or month accurate.  Modeling for a decade or a generation is that much harder.

JON C.  OGG

Akamai Technologies Inc. (NASDAQ: AKAM) has more losses coming.  An options trade screened by OptionsHawk.com notes that the negative earnings effect and the drop in market cap still does not make shares attractive from a valuation perspective.  Our technical analysis affiliate, Adam Hewison of INO, has the same conclusion in his detailed chart analysis with a different target.  The conclusion is that a 15% drop for the week to $38.36 is likely to see a partial repeat with more losses.  The 52-week range is $16.11 to $46.72, and this trades at over 27-times the expected 2010 earnings.

Alcatel-Lucent (NYSE: ALU) seems like one of the earnings reports where a turnaround that couldn’t turn around was being rewarded for bad behavior.  The report in Euros showed 17% sequential growth on a 2.4% contraction year over year, but the $4.95 billion in revenues did beat the $4.72 billion estimate.  The -$0.10 per ADR loss was wider than a number of -$0.06 expected, but it kept a forecast of 1% to 5% margin growth on Flat to 5% revenue growth for 2010 based upon a growing order book and strong second half expected.  Normally we’d pan this as a failure because it is Alcatel-Lucent.  But getting a fresh AT&T designation for a contract and the magnitude of the bounce might be making this worth a look.  The 14.6% gain on triple-normal trading volume took shares from $2.60 to $2.98 versus a 52-week range of $2.25 to $4.95.  If we take our “recovery to the mid-point of a year’s range we’d have a clear sailing up to $3.60 before raising any red flags.  We also now have stable support at the 50-day moving average of $2.65 and no 200-day moving average until $3.22.  Any pullbacks would seem to be solid entry-points for longer-term turnaround investors.  It is almost painful to endorse Alcatel-Lucent because of a history of disappointments, but money is money.

American Apparel, Inc. (NYSE: APP) is a tug of war that just won’t end.  Shares fell last week from $1.80 to $1.40 before ending at $1.61 after Deloitte resigned as its accountant.  Ouch.  Where this gets interesting is that it was disclosed a month ago that billionaire Ron Burkle took roughly a 6% stake in the company and shares popped up to $1.95 from $1.77 way back then.  American Apparel has effectively not participated in the recovery.  There is a huge headline risk in this company as it has a history of questionable moves on surprising news announcements.  Get the coin toss game out here.

Bank of America Corporation (NYSE: BAC) is large enough that it might not have a huge jump, but Andrew Bary’s ‘No Card Games’ article in Barron’s this weekend called the recent weakness over it losing out from fee cuts and overdraft and late charges a buying opportunity.  At $14.04 and a 52-week trading range of $13.30 to $19.86, this is one of our ongoing Large Banks With Large Upside features.

CROCS Inc. (NASDAQ: CROX) is one we recently said that the products were not on our personal clothing shopping lists but the stock was on our radar (back at $10.50) based on a very insightful stealth research call.  The company does have earnings this coming week and it hit a 52-week high of $12.99 on Friday after announcing a settlement with Columbia Sportswear based on employee hiring issues.  The market cap is back to $1.1 billion, the stock closed at $12.83 on Friday, and its new 52-week range is $3.34 to $12.99.  This one has more than doubled so far in 2010 and CROCS will have to have a blowout quarter with much higher annual earnings guidance for it to not trade at a premium to apparel peers.  After a run up like this, taking some of that risk-based capital would seem sensible.

Ford Motor Co. (NYSE: F) is going to be one to watch this week.  Edmunds.com released a study and prediction last week that Ford was going to be the winner of the July auto sales with a gain of more than 13% year over  year for July, or  over 9% if you adjust for the one extra day of selling.  Ford and other auto companies will confirm this data early in the week.  The $12.77 close on Friday was up about 0.4% for the week.  This weekend’s Barron’s says better says are still ahead.

General Electric Co. (NYSE: GE) is one that we’d want our readers to be involved in for a longer-term outlook. It has gotten through earnings season and is continuing to eliminate some of the finance unit’s dominance.  NBC-Universal is still a deal under review but it is still in the process of being a stake divesting that will generate cash.  With a 3% dividend yield after the hike and with its share buyback commencing immediately, there is probably more of a floor under the shares.  After our review of conglomerates and their leadership over the broad market, we also found that G.E. is the conglomerate with the most implied upside for investors.

These are emerging markets rather than the emerging markets which arealready developed like the B-R-I-C nations of Brazil, Russia, India,and China.  These pertain to smaller or under-developed nations andregions throughout Africa, the Middle East, Asia, Eastern Europe, LatinAmerica, and the Caribbean.  These are also the countries that the IMFor World Bank do not include in the MSCI Emerging Markets Index.

This particular closed-end fund has been given an indication of 12.5million shares and will likely come public at $20.00 per share.  MorganStanley is of course underwriting this offering as it is their fund,but the fund is also being sold through Oppenheimer, RBC Capital, andJanney Montgomery Scott.

Jon C. Ogg
August 21, 2008