Some time ago I commented on the ETF's, stating that in the future they would carry a lot more weight than most would have thought. I think that's come true enough. Back in 00 and 01, not a lot of people were playing with the ETF's, but since then, several major institutions have begun using them for their hedging practices. Volumes, once anemic across the board, has recently exploded.

The reason is really pretty simple. althought he ETF doesn't mirror the underlying basket perfectly because of carry costs, interest rates, etc, it's darned close enough, so if you have a "macro" view of something, the ETF's are often much easier to gauge than say a basket of four or five individual stocks. This is what leads me to this topic, the "macro" view. How many times have you been right about the direction of the market, yet the stocks you are holding fell in the day? Often I'd bet, it happens to all of us. But, with the ETF's, if your macro view is correct, 99% of the time the ETF will trade in the similar direction.

Let's suppose you feel that the chip sector is overdue for a pull back. A quick scan shows there are almost 50 stocks that could be considered "chips". Are you to believe that you will be so adept that you will pick the ones that go down? Probably not. But, if you shorted the SMH, and the chip sector was weak overall, you'd be rewarded.

For short term moves, there isn't a ton of profits to be gained from "most" ETF's. An exception for example would be the BBH basket of biotechs. that thing often gains or loses 3 dollars in a day, making it a really fun trader. But that's the exception really, as the DIA, or QQQ's which track the DOW and NASDAQ respectively will often move just 50 cents to a buck, even on a big market day. For some, that's more than adequate returns and I agree they shouldn't be scoffed at. But I find the ETF's to be much more useful as swing trading vehicles or even semi long term holds.

Please use the ETF's for your macro views folks. It's easier to spot the trend than it is to spot the individual winners every time. I plan on using the ETF's for a lot of the shorting we will do when the wheels come off the market. The charges aren't much different than individual stock selection, and it's easier to trade them. That's not to mention the fact that options are available on them, AND you can buy or sell intra day, something you cannot do in any form of typical fund.