Random News: Northern Trust to Close 17 ETFs, More Bank Closures, and $1,000 Gold (?)

In the exchange-traded fund (ETF) world, things have happened fast and furious. According to an article on Financial Planning, a total of 434 ETFs were launched in 2006 and 2007. In 2008, a very bad year for stock and mutual fund investors in general, another 164 new ETFs were introduced, as financial firms try to grab a piece of the ever growing pie. While companies kept luring investors with creative offerings, not all the new comers can survive. For instance, 46 ETFs were shut down in 2008 due to the lack of investor interests. Late this month, another 17 ETFs from Northern Trust Corp will join them. After getting into the ETF business for less than a year, Northern Trust will shut down its entire ETF division and liquidate all its 17 ETFs on February 20, 2009.

As a ETF investor, we shouldn’t be attracted to a fund just because it invests in a certain area or tracks a fancy index. We also have to pay attention to the fund’s trading volume. If nobody is trading a fund, it’s unlikely it will survive, just like these Northern Trust ETFs. You can go to Morningstar to find out a ETF’s daily trading volume.

Yesterday, the Congress, after intense negotiations, has passed the final, compromised version of  the economic stimulus plan. In addition to the $789 billion stimulus package, the Treasury Department has already been authorized $700 TARP fund to rescue troubled banks. However, with all these government efforts, the pace of bank closures showed no sign of slowing down. To the contrary, bank closures have accelerated since 2009. After 6 banks being shut down in January, another 7 have been closed so far in February (see the full list of 2009 failed banks). With 14 days left of the month, the number of failed bank this month could reach double-digit.

Finally, did you notice how fast gold has risen lately? After closing at $810 an ounce on January 15th, the precious metal has surged $120 to close at $936.50/ounce on Friday. What’s behind the latest gold rush? Obviously, the fight over the stimulus package played a role. Now that the stimulus is a done deal, gold may pull back, but gold investors have many reasons to believe the bullion will reclaim the $1,000 mark soon (the last time gold broke $1,000 an ounce was nearly a year ago on March 14, 2008) . One of them is if the $789 billion package does stimulate the economy and, thus, the inflation, the appeal of gold will go nowhere but up. If you are interested in gold, you can follow the move of gold using INO’s free stock analysis (symbol XAUUSDO) and receive daily trend update.

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