I agree that there are real issues with some of the ETF gains being paid out, but let's put this in perspective.

The tone of Matt's blog from yesterday was that while distributions have been issues in the mutual fund business, they're REALLY issues in the ETF business. I think it's time (as we sometimes find with Matt) for a reality check. For long-only asset-allocation-focused investors, ETFs have been a BOON, almost NEVER paying out distributions even as traditional mutual funds shower their investors with the unwanted prizes.

The reason is that by and large, ETFs ARE a better mousetrap in terms of tax efficiency. The creation and exchange mechanism makes it so that these products generally benefit from  rather than are hurt by trading activity in a fund, enabling the underlying portfolio to continually raise its cost basis and lessen its potential capital gains exposure (overhang). And the data bears this out. While there have been very few (and generally small) exceptions, ETFs almost never pay out capital gains, even while traditional funds do, sometimes in big ways.

So the ProShares and Rydex issues are a BIG story, don't get me wrong. But you're nuts if you're long those funds for any period of time, and if you are using them, you'd better understand what you're getting (which I think many investors DON'T). But the leveraged products are sort of a beast of their own, and if you use them, you need to add being aware when the distribution will be to your list of things you've got to know about those funds if you're going into them. But they are NOT representative of the bulk of ETFs, which are generally more tax efficient and pay out lower gains than their traditional mutual fund cousins.

Currencies As Key Drivers For 2009

Currencies have really been on my mind of late. Some of the movements in the markets have been absolutely stunning. And in a market world that is looking increasingly flat or down, the zero sum part of the market may be one of the few places where you can see some big upward movements. So you'd best be paying attention to currencies as you invest. Here are some of my thoughts on currencies posted to our European Web site.

Bobo Goes Global

Also, for you Bobo aficionados out there, our little monkey has taken his European Vacation, and has put together his first portfolio of ETFs using our new European ETF database. We expect Bobo to conquer yet another continent full of active advisors with his blindfolded dart-throwing acumen.