2009 Wish List
By Ron DeLegge, Editor
January 7, 2009

SAN DIEGO (ETFguide.com) - Now that last year is officially in the history books, we can look ahead to 2009.

As with any new year, there’s uncertainty and anxiety about what the future holds.

Instead of wasting valuable space on market predictions that may never come true, I’ve constructed a 2009 wish list.

Here’s what it looks like:

Accountability at the Federal Reserve and U.S. Treasury Department
Isn't it a paradox that the same government insiders who talk about financial accountability in corporate America, don't practice it themselves? A perfect example of the fiscal nonsense that has become a daily routine is how the Treasury Department has overcommitted almost $10 billion more than the $350 billion authorized by Congress' first part of the financial bailout. The drunken sailors at the Treasury are spending money faster than the law permits! And if that wasn't enough, the decrepit Federal Reserve is printing money faster than we can count!

A Better Personal Savings Rate
Through the first three quarters of 2008, the U.S. personal savings rate as measured by the U.S. Department of Commerce averaged around 1.36%. Isn't that a pitiful showing for the wealthiest nation on the planet? The lack of disciplined savings by the U.S. population continues to be our Achilles heel. History proves those who save and invest grow and prosper. Those that don't crash and burn. It's true in both good times and bad.

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A Police Force that remembers how to catch criminals
One person that would approve of how the Securities and Exchange Commission has handled its botched $50 billion Madoff heist is Inspector Clouseau from the Pink Panther movie. Do you remember that old saying? Art imitates life? In this case, the failure of the SEC to nab one of the biggest financial scams of our generation isn't just art, but a first class embarrassment to everyone that works in law enforcement. Catching big time criminals is the answer. Prosecuting Dennis Kozlowski's gardener isn't.

Stablization in the Housing Market
The S&P/Case-Shiller home-price index dropped 18% over a 12-month period ending in October and the 3-year chart looks like a patient that's ready for the grave. Will mortgage rates at or below 5% be enough to stabilize home prices? 2009 won't be pretty, but let's hope it's not any worse than  last year. A stable housing market is one of the keys to getting the economy healthy. The SPDRs S&P Homebuilders ETF (NYSEArca: XHB) fell 35% in 2008. 

Regulators De-monopolize the credit rating business
The 2007-08 subprime mortgage debacle showed just how horribly inadequate the current credit rating regime is. The top three U.S. rating agencies were scrambling to explain why they assigned credit worthy status to junk subprime debt and guess what? The world still awaits a believable explanation. Instead of trying to reform a broken system, financial regulators should allow new competitors to give Standard & Poor's, Moody's, and Fitch Ratings a run for their money. Make no mistakes about it; Rating agencies are co-conspirators in the financial meltdown and they share a central role in its unraveling.

Fix the Broken 401(k) Retirement Plan System
When $2 trillion in retirement savings evaporates as it did in 2008, something besides the stock market is broken. 401(k) savers have been getting hosed with lousy returns, obscene fees, and a poor selection of rigged investment choices. Few if any of these 401(k) plans will ever offer their participants adequate retirement income. What's the answer? Lawmakers should break-up the mutual fund industry's monopoly on 401(k) plans. It's time that workers are offered truly diversified investment choices with rock bottom costs. How about index ETFs? For the financial well-being of America’s retirement savers, let's hope the Department of Labor and its ring of bureaucrats can actually get something meaningful done. 

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Less Hedge Funds and Less Mutual Funds
There's roughly 7,000 hedge funds and over 20,000 mutual funds when you include the maze of different share classes. Isn't that too many? It is after considering that our flawed financial system has been subtracting around $600 billion in value, according to some estimates. Even though the vast majority of these funds are piloted by people that propose to help investors, the dismal returns tell another story. What happened to the hot streak of can't miss fund managers like Kenneth Heebner, Bill Miller, and Kenneth C. Griffin? And what about the myriad of other failed financial gunslingers? We can only hope more of these funds will go out of business.

ETF and index providers focused on education not just product development
Over the past few years, the entire exchange-traded fund (ETF) industry has been so busy developing new products, they’ve lost sight of what investors really need: Simple financial tools that clearly explain what all of these ETF stock, bond, and commodity indexes are actually doing. It’s become a confusing mess. What one fund marketer calls a passive index, another is calling a fundamental or equal weight index. It’s time for ETF sponsors and index providers to adopt an organized system of explaining the indexes behind their products. They owe it to themselves and to the ETF investor. Call us biased, but we happen to think ETFguide's Index Strategy Maps are a major step in the right direction.

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