I am retired and take educated guesses on all things financial.

January 22, 2008

January 23, 2008: The "Surge" Might Work.

If a surge can be successful in Iraq, why not in the worldwide financial markets - especially for the benefit of the large cap behemoths? A safe way to play this mildly contrarian instinct is with the iShares S&P Global Financial Sector Index Fund (IXG).This ETF has been around a since 2001 and has shown decent performance and tax efficiency.IXG sports a paltry .48% expense charge.

What does the investor get within this fund? A gold mine of world class financials that just might shortly be ripe for picking. The top holdings of IXG include HSBC Holdings, Bank of America, JP Morgan Chase, AIG, Citigroup, Banco Santander SA, Unicredito Italiano SP,Mitshubishi UFJ Financial, BNP Paribas, Allianz SE, Wells Fargo, UBS, Banco Bilbao Vizcaya Argentina, ING Groep NV, Goldman Sachs, Royal Bank of Scotland, Intesa San Paolo, AXA, Deutsche Bank AG and the Commercial Bank of Australia. Of the 256 financial institutions in this portfolio, the companies listed above comprise approximately 30% of assets totalling over $243 million dollars. The fund trades at $69.60 and has a yield of approximately 3.95%. IXG tracks the Standard and Poors Global Financials Sector Index, a subset of the Standard and Poor Global 1200 Index.

The portfolio includes 40.92% in banks, 26.19% in diversified financials, 21.25% in insurance, 6.28% in real estate and less than 1% in short term securities.

It is apparent that there is a worldwide effort now to shore up financial weaknesses, give financials breathing room to move forward and regain profitability, and to prevent the shorts and the bears from roaming over the landscape chewing up and spitting out one financial institution after another. It is in every country's political interest that features a free market to have the flow of capital resume. If it means almost free money, so be it.

The individual investor should look beyond the current crisis and be ready to strike at financials worldwide. IXG is a vehicle to consider for this situation.


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