The Obama ETF Portfolio

ETF Investing Alongside the New Administration

With Chrysler in bankruptcy and General Motors trading under $2 per share, the Obama administration ordered stricter fuel goals that will require the ailing industry to invest $47 billion that it doesn’t have.

EWGThe new rules require auto makers to increase the fuel economy of automobiles sold in the U.S. to 35.5 miles per gallon by 2016, four years faster than current federal law requires.

The Transportation Department had previously estimated that achieving 31.6 mpg by 2015 would cost the industry $46.7 billion.  The administration estimates the new rules will raise the cost of new cars by $1,300 each.

Asian and European automakers are better prepared to meet the new rules than U.S. manufacturers.  Toyota and Honda are leadig the industry in the introduction of hybrid and electric vehicles while Daimler and BMW have invested in fuel efficient technology.

ETF investors can gain exposure to the German car companies through iShares MSCI Germany Index Fund (EWG) which tracks an index that captures 85% of total German market capitalization.  Daimler (5%),Volkswagen (4.5%) and BMW (1.8%) are top holdings.  The AP has recently reported that all three companies see little negative impact from the stricter US rules.

The iShares MSCI Japan Index Fund (EWJ) claims Toyota, Mitsubishi and Honda as its top 3 holdings, together making up 12% of the fund’s holdings.