Mark Hulbert at MarketWatch wrote about influential investment newsletter editor, Richard Band's outlandish forecast that the Dow Jones Industrial Average may end the year at 16,000. This very bullish estimate of a 33% gain in the index from someone who's not typically a headline-grabber made Hulbert take note.

Hulbert, who tracks performance of some of the best newsletters in the business, has been tracking Band's Profitable Investing newsletter since 1991. In that time period, Band returned a 8.6% annualized return compared to an almost 11% annualized return in the Wilshire 5000.

Not bad but not outstanding. So why is Band all bulled up?

Technical factors have Band singing a very upbeat tune. The first, according to the article "has to do with the stock market's internal characteristics when it hit a low earlier this month. Band argues that that low possessed "many striking technical resemblances to the great bear market bottoms of the past.""

So, how does Band recommend playing the markets at this important juncture. He recommends a couple of market ETFs. Specifically, Band points to the iShares Russell 1000 Growth Fund (NYSE: IWF), the iShares MSCI Emerging Markets Index Fund (NYSE: EEM). Another recommendation is in a fund I've never seen before (but maybe I should): the Selected American Shares (SLASX). This fund, a 4-star fund according to Morningstar, invests in US large caps and has returned an annualized return over the past 5 years of almost 13%.

Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.

If you've ever delved into investing in ETFs (exchange-traded funds, basically entire indexes and sectors that trade like stocks), you're already familiar with the most popular, those being Powershares QQQ Trust (Nasdaq: QQQQ), SPDR Trust Series 1 (AMEX: SPY), Diamonds Trust, Series 1 (AMEX: DIA), iShares Russell 2000 Index (NYSE: IWM) and lately Financial Select SPDR (AMEX: XLF) and UltraShort QQQ ProShares (AMEX: QID). But have you ever looked into those that are much less followed, but more capable of yielding some big-time returns?

I primarily trade fun smallcap stocks, so until the past few days, I hadn't either. But when I began researching, I just kept finding more and more interesting ETFs -- it was addictive! Almost addictive as my new Twitter account where I've discovered I can chat with business legends, yesterday it was the founder of eBay Inc (Nasdaq: EBAY). Okay, maybe ETFs will never be that addictive!

Out the few hundred ETFs I looked into, here were some of the more interesting of the bunch:

According to The Wall Street Journal's Weekend Edition, investors are in for a treat:

A potentially cutthroat price war is shaping up between two of the biggest firms in the exchange-traded-fund business.

In coming weeks, Vanguard Group plans to roll out an ETF designed to directly undercut one of the biggest products on the market, from rival Barclays Global Investors, a unit of Barclays PLC (NYSE: BCS).

Vanguard is launching the Vanguard Europe Pacific ETF to track the MSCI EAFE index, which provides investors with broad exposure to developed-market equities.

The fund and its obscenely low 0.15% expense ratio take direct aim at Barclays' iShares MSCI EAFE ETF, which has an expense ratio of 0.35%.

Given that low expenses are perhaps the single greatest predictor of a fund's performance, this is awesome news for investors. Baseball speedsters like Kenny Lofton and Carl Crawford are often seen as reliable because it is said that "speed never goes into a slump." A power hitter like Barry Bonds or David Ortiz might lose his home run stroke for a while, but base-stealers can always run when healthy.

Low-expense funds are the Rickey Hendersons of personal finance, and as expense ratios continue their descent, investors will reap the rewards, although the profits of fund managers may decline.

This week's issue of Barron's [subscription required] takes an interesting look at Exchange-traded funds, and their growing prominence. According to the piece, "A survey by Schwab Institutional [...] taken in January, covered nearly 1,400 advisers representing $347 billion in assets under management, and found that 76% of them currently use ETFs in client portfolios. No other instrument had a higher usage rate. Fully 36% said they expected to increase their ETF use, and one in five advisers who don't yet use them expected to begin doing so."

It's great to see advisers increasing the use of ETFs. ETFs often have lower expense ratios than mutual funds, partly because the vast majority are passively managed index funds. A shift to ETFs in all likelihood means a shift away from actively-managed funds, and as reams of data show, that is great news for investors.

However, as always, I think investors can do better with ETFs without a financial advisor. ETFs generally are tax efficient and have low expenses, but adding the expense of a financial advisor can make those fees look a lot more expensive. Active trading tends to eliminate their tax advantages.

I consider myself a proponent of exchange-traded funds (ETFs) as the best way for investors interested in making short- to medium-term macroeconomic bets. The Wall Street Journal has a nice article on the pros and cons of these investments. ETFs provide the potential for concentrated exposure to certain sectors or countries that can be very difficult to get through a conventional mutual fund -- In many cases, the expense ratio on an ETF is lower than that of a comparable index mutual fund.

Just as the tradability of ETFs is one of their most attractive qualities, it can also get you into trouble: ETFs almost beg to be traded and, even with $10 commissions, frequent trading can wipe out the advantages they have over traditional mutual funds.

The brokerage commissions make ETFs unsuitable for dollar-cost averaging or investing regular small amounts of money. As the Journal writes, "ETFs can be cheaper than conventional index funds for investors who have a big lump sum, like an inheritance or proceeds from a property sale, to invest. But if you are making numerous small investments, conventional index funds are typically a cheaper way to save for the long term."

So if you want to try your hand at George Soros-style macroeconomic bets, ETFs make that easier to do than ever. Marvin Appel's Investing With Exchange-Traded Funds Made Easy: Higher Returns With Lower Costs -- Do it Yourself Strategies Without Paying Fund Managers is the best introduction to to ETFs I've seen.

To do research on individual closed-end funds, visit ETFConnect.com.

The New York Times recently made a case for investing in stocks to gain exposure to commodities:

But there is an easy way to get a shot at commodity-like returns, without investing directly in commodities or their indexes. Investors can buy shares of the natural resource companies that produce commodities.

However, investors need to be careful: just because a stock is in a sector related to commodities doesn't mean that it will move with the prices of those commodities. Other factors, including decisions by management, any hedging the company may have in place, and other company-specific factors, may cause their returns to differ from those of the underlying commodities. While it's quite true that, as the New York Times points out, natural resources stocks have outperformed commodities in recent years, that is not a trend that will necessarily continue.

There may be good reasons to buy these stocks, but if you want to make a bet on commodities prices, the best way to do that is with exchange-traded funds (ETFs). Back in his days at the Motley Fool, BloggingStocks contributor (who is the source for news and analysis for private equity, by the way) Tom Taulli wrote a nice piece about how to invest in commodities through ETFs.

If you really want to learn about ETFs, I recommend picking up a copy of Investing with Exchange-Traded Funds Made Easy: Higher Returns with Lower Costs -- Do It Yourself Strategies without Paying Fund Managers by Marvin Appel.

Just prior to market's sharp decline, Peter Way cautioned his readers, "There are increasing odds that some market-wide bad times are ahead, and may be getting closer."

Unlike many advisors whose forecasts are based on highly subjective criteria, Way's prediction was based on a specific set of factors that he monitors -- the trading activities of institutional market makers, the positions they establish for their "big fund" clients, and the insurance they take out to hedge these positions. It's a fascinating strategy for more sophisticated investors.

Here, in his Block Trader ETF Monitor he explains, "For some time now, the million-dollar market-makers have sensed that their big fund clients are prepared to flee at a moment's notice. And they know that the exit door is only just so big. Nowhere big enough to let them all through.

As a result of the growth of exchange-traded funds (ETFs), volume in certain smaller stocks has spiked disproportionately. This is due to the fact that, when money flows in and out of ETFs, funds are forced to buy and sell the holdings proportionately. Consequently, more money flows in and out of ETFs than mutual funds because they are so easy to trade (bought and sold through any broker at any time during the day), so ETFs have had a much larger impact on small company stock prices and volumes than mutual funds have had historically. According to a Wall Street Journal (subscription required) piece on this issue, when the markets fell during late February, "Between Feb. 22 and Feb. 28, just one ETF, the iShares Russell 2000, reported outflows of $2 billion, whereas major small-stock mutual funds combined had outflows of only $101 million, according to AMG Data Services." (emphasis mine)

While this is seemingly insignificant beyond the obvious (price and volume increases in some index-held small-cap companies), when you consider the implications of a volume spike, the issue becomes more important. Many technicians (people who trade stocks based on their price and volume patterns) use volume as an indicator of "special knowledge." However, ETF buying is certainly not special knowledge, and it is actually the direct opposite -- "insensitive buying." As a result, one must certainly question the validity of volume spikes as a method of choosing stocks with smaller market capitalizations if they previously had any confidence in the methods of technical analysis.

According to Marketwatch, investors fled global equity mutual funds to the tune of $2.39 billion last week, compared to a net in-flow of more than $2.7 billion in the week prior. What does this mean? If we use the lemming-like retail investors as a contrarian indicator, this is a screaming buy signal.

But there's a problem for mutual funds: If these retail investors are prone to buy at the tops and sell at the bottoms, their redemptions force mutual funds to buy and sell at precisely the wrong times. In January, I wrote about how this trend can effect mutual fund performance. I referred to a recent study that has shown that "liquidity-motivated trades" underperform trades made based on fundamentals. Mark Hulbert has suggested that investors consider using ETFs which, because they are closed-end funds, are not as vulnerable to shareholder redemptions.

I believe that investors should take a long look at exchange-traded funds for this, among other reasons. ETFs are often lower cost, easier to trade, and ideal for making macroeconomic bets. To learn more about ETFs, visit etfconnect.com.

Today is the last installment in the Financial Times' series on exchange traded funds. While most ETFs are passively managed index funds, the newspaper discussed fundamental ETFs, which are sort of a hybrid between active management and passive management. While traditional index funds are composed and weighted based on market cap, fundamental funds are weighted based on fundamental metrics, such as earnings, dividends, or the book value of companies. In some cases, they can be weighted to fit a certain investment style. For instance, a value ETF might select companies based on price/book ratio or dividend yield.

John Bogle, founder of Vanguard and probably the best friend individual investors will ever have, is skeptical of the funds. He told the Times, "They come armed with vast statistical studies that prove how well their methodologies have worked in the past....but in mutual fund investing, the past is not prologue." As any fund prospectus warns, past performance is not a guarantee of future sucess. Yet in spite of that warning, most funds brag about their past performance in advertising.

I would stay away from fundamental ETFs and stick with traditional index ETFs as a way to make investments based on macroeconomic bets. That has always been their greatest strength and I think it still is.

With the growing popularity of exchange-traded funds, Doug Fabian, long one of the advisory industry's leading mutual fund advisors, has expanded his coverage to ETFs, with the launch of a newsletter devoted exclusively to these funds.

Unlike more diversified portfolios, in his new ETF Trader, Fabian focuses on building large trading positions -- often up to a quarter of his portfolio --in just one sector. His latest such move is into gold and energy - two sectors that he warns "can move fast" and therefore require "immediate" action.

He notes, "The real news as been the bottoming out and reversal in the price of crude oil. Concerns that producers were complying with OPEC's production, as well as expectations of continued cold weather in the northeast pushed the price of crude off higher.

Because of this "reversal of fortune in oil" Fabian is now recommending that ETF traders buy the Energy Select Sector SPDR (ASE: XLE). He notes that he has used this energy sector ETF in the past to help bolster his portfolio returns, and now he says, "with the resurgence in oil prices in general and energy stocks in particular I think we're likely to get another nice move higher soon."

In addition to XLE, he is also adding to his gold position, recommending Market Vectors Gold Miners (ASE: GDX). This ETF contains the top gold and precious metals mining stocks, and it generally performs well when gold prices are on the rise.

He explains, "Gold mining stocks are generally more volatile than actual gold prices, but this volatility means that you can capture some nice profits when gold mining stocks go on a big run."

He concludes, "With GDX now trading well above its support level of $36, this fund may just be ready to make one of those big runs."

According to a study written up in the New York Times (subscription required) this week, it isn't lousy management's frequent trading that's responsible for the poor performance of mutual funds. Nope, it's the investors who redeem their shares and force the funds to sell even if they don't want to. The study found that "liquidity-motivated" trades perform poorly compared to trades based on fundamentals.

Mark Hulbert, the author of the piece, suggests that investing in closed-end funds may be a way to avoid this problem, because they generally don't face redemption. In an exchange-traded fund, an investor who wants to sell shares just sells them to another investor. It's just like how selling shares of McDonald's Corp. (NYSE:MCD) would have no impact on the operations of the company.

And yet there's still a problem: Regardless of what any study says, mutual funds simply cannot, on average, outperform passively managed indexes. It's a zero-sum game. Before expenses, the average fund's performance can only be average. After expenses, the average fund is considerably below average. The fact that ETFs are almost always passively managed (rebalanced/adjusted once a year generally) is a large contributor to their outperformance. The fact that they are immune to redemptions by panic-stricken shareholders at precisely the wrong time adds to their value.

The more I study it, the more obvious I think it becomes: ETFs are probably better than traditional mutual funds for most investors.

For years I've thought that exchange-traded funds were a great resource for individual investors interested in betting on macro-economic trends [subscription required].

ETFs are like mutual funds in that they are portfolios of investments managed by professionals, but like stocks in that they trade throughout the day based on supply and demand for the shares rather than the net asset value of the fund.

At any given moment, an ETF can be trading at a premium or a discount to its net asset value. These funds allow investors to short indexes (without the normal risks/margin requirements), bet on currency fluctuations, choose individual sectors, and invest in foreign countries. One can also invest in commodities, and of course, in index-tracking funds.

To learn more about ETF investing and to research individual ETFs, be sure to visit ETFConnect.com.

In the new issue of Business Week, Maria Bartiromo conducts an excellent interview with Carlyle Group co-founder David Rubenstein about his outlook for private equity in 2007.

Rubenstein predicts more money going into emerging markets, and he said the Carlyle Group will double its investment in Asia this year. He is also weary of increased government regulation of private equity groups, and provided a great quote: "The Declaration of Independence says we're supposed to pursue happiness, but when people are too happy, the government doesn't like it."

If other private equity groups follow Carlyle's lead of doubling up on Asia this year, emerging markets could see a buyout-fueled bull market similar to what the United States saw in 2006. I suspect that exchange-traded funds could be the best way to make that bet.

Whenever I come across a cool investment-related website in my trek across the Internet, I'll be sure to post it here. Today, I'm featuring ETFConnect.com, which I consider to be the resource for anyone who is even considering investing in exchange-traded funds.

Today, I decided to look into Israeli ETFs. I used their "Find a Fund" feature to locate the First Israel Fund (ASE:ISL). After one click, I found this. It tells me just about everything I could ever want to know about this fund in an easy, searchable format. All the data comes from Thomson Financial.

Though several other sites have similar features, for ease of use I consider ETFConnect to be one-stop shopping for all my ETF research.