Bill or anyone interested

I found your website over MLK holiday weekend via the Forbes article on Blogs and this is my first posting. If I'm violating any protocol by posting an "off topic" here let me know.
I read your section on ETFs and found it extremely instructive. However on the topic of trading ETFs like stocks, is it possible for investors to trade these ETFs beyond their intrinsic value thereby increasing inherent risk?
This isn't a trick question, I'm just a newbie on a steep side of the learning curve.

Thanks

Generals fight the last war, particularly where it was a great victory. "General" Mahmoud Ahmadinejad fought the feckless, gormless, hapless Jimmuh Carter in 1978 as one of the students who took over the U.S. embassy in Tehran and held the diplomats hostage for 444 days. He seems to be working from the same playbook this time around.

oratier-

Are you referring to 1) a difference (spread) in net asset value and market price of the etf OR 2) a distortion in the commodity itself due to investment demand?

Regarding Iran here are several things to remember:
1. Iran has no nuclear weapons.
2. Before Iran can acquire nuclear weapons it must build a uranium hexafluoride fractionation plant, to separate U-235 from the other isotopes, principally U-238. The size of a nuclear fractionation plant is about the same as 2 football fields, so that it can be easily spotted from an airplane or satellite. Russia has offered to sell Iran the U-235 it needs to generate nuclear power, but Iran has not accepted Russia's offer yet.
3. Irani politicians are prone to exaggeration, just like politicians in the U.S.
4. Iran has no nuclear weapons.

"1) a difference (spread) in net asset value and market price of the etf)" because,

I'm assuming that the distortion of a commodity price within the ETF would not significantly impact its price due the "smoothing effect" of the other fairly priced commodities. However, what would deter investors from bidding up the price of of the latest "in the news" ETF. As a far-fetched example, assume an ETF that tracks the US defense industry who just announced the deployment of a ray gun capable of not mass but mega-destruction?

Over.

Oratier

You can check for historic and current premium / discount here: http://www.etfconnect.com/select/fundpages/etf_funds.asp?MFID=137311

Here is an article explaining why ETFs do not normally experience the spread that you see in closed end funds-

http://www.ifa.com/archives/articles/spence_john_20030509_interview_with_patrick_oconnor.asp

Q: Can you explain how the ETF creation/redemption process and arbitrage reduce premiums and discounts to the net asset value (NAV)?

A: Arbitrage definitely exists and it's probably one of the more interesting features of the ETF structure. Remember, the liquidity of the ETF is based on the individual stocks, and the ability to price the basket of stocks versus the ETF share allows the arbitrage mechanism to happen.

Closed-end funds often trade away from the NAV of the underlying portfolio. If the ETF was to trade at a significant discount to NAV, for example, an arbitrageur could come in and buy the underlying ETF share, sell short the underlying stocks in the basket, and redeem the ETF share on the close. After delivering up the redeemed shares and covering the short, the arbitrageur would lock in a profit from the discount to NAV.

The chances for those arbitrage opportunities, because of the ETF transparency, do not happen frequently, and if they do it's short-lived.

The sad thing is that there are lots of rational people now stuck in Iran.

On the market side of things, Oil will still be traded in US dollars. If things cool off Iran will start selling Oil in Euros. Listen to Last weeks interview of William Clark – author of Petrodollar Warfare @ http://www.netcastdaily.com/fsnewshour.htm.

MurryMom wrote:
>Regarding Iran here are several things to remember:...

I am sure most people here are used to good old old-media scare tactics, nothing like pumping up the fear factor to sway the masses to sell, do or condone what you want. No need to let facts and evidence (or lack of) stand in the way either:
"Col. Lawrence B. Wilkerson (Ret), Chief of Staff at the Department of State from Aug 2002 - January 2005, addressing some of the skepticism surrounding the pre-war claims made by the Bush administration. Wilkerson claims in no uncertain terms that he ´participated in a hoax on the American people, the international community and the United Nations Security Council.´"
As not seen on CNN:
http://www.pbs.org/now/politics/wilkerson.html
http://www.thewashingtonnote.com/archives/Wilkerson%20Speech%20--%20WEB.htm
http://www.latimes.com/news/opinion/commentary/la-oe-wilkerson25oct25,0,7455395.story?coll=la-news-comment-opinions

MurryMom-
I agree with you, that's why I think oil prices will fall soon(double top on dailies, lots of hype etc etc) after the dust settles.

Oil falls $2 to $63 today. FirstConsul strikes again :D.. Wonder if this is indicative of Iran crisis solved tomorrow.