We were reminded of one other tool for managing volatility this week, as Merrill Lynch announced that it had filed the paperwork to form the eighth in its series of HOLDRs investment vehicles. HOLDRs are baskets of twenty stocks that each focus on a specific and limited area of the "new economy"; they trade like a single security on the American Stock Exchange. Merrill introduced the first of these exchange-traded portfolios last September when it created its "Internet" HOLDR under the symbol HHH. The company has since added Internet Architecture (hardware) under IAH and Internet Infrastructure (software) under IIH, as well as Telecom (TTH), Biotech (BBH), Pharmaceuticals (PPH), and B2B (BHH). Despite being able to trade only in round lots of 100, these market capitalization-weighted baskets have proven wildly popular with technology investors.

Merrill's next HOLDR will be a monster. The ticker BDH will be used to trade a basket of twenty broadband stocks, positioned right at the very heart of the Internet-go-Faster (IGF) revolution. According to the prospectus, Merrill is defining "broadband" as companies that "develop, manufacture, and market products and services which, among other things, facilitate the transmission of data, video, and voice more quickly and more efficiently than traditional telephone communications." An astounding number of these stocks already appear on the Rightline play list. The included stocks are LU, NT, MOT, QCOM, JDSU, BRCM, GLW, SCMR, AMCC, TLAB, TERN, PMCS, CMVT, SDLI, SNXT, NXTL, RFMD, SFA, CIEN, and CMTN. We're certain BDH will take off when it comes to market, but look for a runup in these companies as professionals and brokers load up in advance of BDH's introduction.