Stocks in the United States enjoyed a nice run higher after the mini-deal on the tax side of the fiscal cliff. Next up is the brewing battle over spending cuts and the debt ceiling, and this looming fight likely will have a lot of pros on Wall Street ducking for cover. The next political brouhaha won't really get going until February. Just like the fiscal cliff deadline, things probably won't be resolved until the very last minute. In the meantime, markets are gearing up for earnings season, which began yesterday with a better-than-expected revenue showing from Dow component Alcoa (AA).
The revenue beat by the aluminum and industrial metals maker was seen as a positive for global growth, a theme that I think is going to be a powerful one for investors in 2013. Yes, there is slow growth in the United States and a recession in Europe. However, one country that's staging a growth rebound is China.
In fact, since September, the Chinese economy has seen definitive signs of improvement, and that improvement has been reflected in the share price of the iShares FTSE China 25 Index (FXI). The chart here of this basket of the biggest stocks on the Shanghai Exchange clearly shows the big money has returned to space. During the past three months, FXI is up nearly 16%, so there is no denying that a new China bull is now in place.
Why are we seeing money come back into Chinese stocks?
Well, after a marked decrease in the rate of GDP growth during the past year, the country's economy now is stabilizing and, indeed, showing signs of strength. Manufacturing is picking up, with the latest HSBC flash manufacturing PMI data coming in at 50.9. That metric indicates expansion, and I expect that trend to continue in 2013. Of course, there also is a lot of optimism surrounding China's new political leadership, which has plans to enact more pro-growth economic policies.
Now, in the interest of full disclosure, I currently am recommending FXI, as well as another Chinese ETF, in my Successful Investing newsletter. Both of our China funds are delivering strong gains, so if you want to find out more about how you can benefit from the new China bull, then check out Successful Investing today.
Fiscally Fit for the New Year, Part I
It's the first full week of a brand new year, and that means now is a great time to get your fiscal house in order. During the next several weeks, I will be taking you through a series of simple assignments that will help you to get on top of your 2013 financial goals.
First up is something that we all need to make sure we do from time to time, and that task is to conduct a personal financial inventory of all of our assets. Here we can take a page from corporate CFOs, as they regularly are tasked with determining the precise value of their company's assets.
Determining the value of your assets by conducting a personal financial inventory simply means you need to take a very close look at how much money you actually have, and in what type of asset class that money resides (equities, bonds, real estate, gold or silver coins, checking account, CDs, etc.).
You also have to make sure that you know where, and in what type of accounts, all of your money resides. And while this may seem simple on its face, you'd be surprised to learn just how high the percentage is of investors I speak with who aren't quite sure about where all of their money is, or in what kind of accounts (retirement or taxable) they have.
You can start this process by simply creating a list of your taxable assets, as well as your tax-deferred assets. One of the benefits of this fiscal fitness exercise will be to find out how many companies you're currently doing business with. If that number is more than two or three, then you should consider doing some consolidating.
You also should make sure that you include any life insurance policies or variable annuities in your personal financial inventory, since they also are part of your overall investment picture. Now, in this first step, we are not concerned with the individual equity or bond positions that you own. An analysis of these positions comes later. Rather, we are more concerned with just making sure that we know how much of our net worth is in liquid assets, and how much is tied up in real estate and other non-liquid holdings.
Here is a quick, step-by-step guide to conducting an inventory of your assets.
1) Collect all of your year-end statements as you receive them during the next several weeks, and keep them in one main file folder.
2) Make separate lists of your taxable assets and your tax-deferred assets.
3) Make a separate list of your life insurance and annuities.
4) Count the total number of financial companies you do business with.
5) Tally up all of your current debt, then determine if you can pay off any of that debt in 2013 (hint, start with the highest interest rate loans first).
Next week, we will look at the nuts and bolts of your holdings, including assessing the individual stocks, mutual funds, ETFs, etc., that you might own. That way, you can get a head start in determining if your investable assets are positioned for growth in 2013.
Opportunities and Risks for Investors in 2013
Do you know about the tremendous opportunities in the right market sectors in 2013?
Do you know how to avoid the pernicious risks populating the markets in 2013?
This teleconference, aptly titled "Opportunities and Risks for Investors in 2013," will give you our latest outlook on the equity markets as we embark on another year of uncertainty and unknowns.
During this one-hour interactive presentation, we discussed how to position your portfolio to protect your principal, generate the income you need and achieve your growth objectives.
In 2013, we're expecting an increase in market volatility, and that situation is likely to provide outstanding opportunities for investors -- but only if they are properly prepared.
Here are just some of the topics we covered during the teleconference:
The impact of new, higher taxes on the U.S. economy from the fiscal cliff deal.
What to expect from the looming battle over spending cuts and the debt ceiling.
What strategies you can put in place now to shelter and protect your money from the decisions made in Washington.
The best opportunities for income investors if interest rates rise in 2013.
The best opportunities for growth in light of a slowing U.S. economy and the continued recession in Europe.
Plus much, much more…
As with all of our teleconference events, it's our objective to help you make good decisions about your portfolios. Now more than ever, making sound decisions with your money is the key to achieving success. Let us help you do that in 2013 -- and the first step is our upcoming Fabian Wealth Strategies teleconference.
To listen to this presentation, simply click here.
NOTE: Fabian Wealth Strategies is a SEC registered investment adviser, and is not affiliated with Eagle Publishing.
ETF Talk: Utilities Offer Relative Safety and Income
This week's ETF Talk centers on a sector some may find to be lacking in glamour: utilities. While this sector does not enjoy the potential for rapid growth that other sectors may offer, it does present consistent growth and potential dividend income. People always use utilities, regardless of what the state of the economy may be. To that end, the ETF I am highlighting this week is Guggenheim S&P 500 Equal Weight Utilities (RYU).
This non-diversified fund seeks to replicate, before fees and expenses, the performance of the S&P Equal Weight Utilities Index. It uses a passive management strategy to track the performance of said index.
RYU is up 7.27% year to date and offers a 3.56% annual dividend yield. With projected housing numbers showing a rise, utilities should enjoy a resultant boost. Of course, utilities should continue a slow, steady rise in capital appreciation no matter what happens. RYU, as a utilities-focused ETF, will reflect those gains.
While it is weighted most heavily in the Utilities sector (77.25% of its assets), RYU also has holdings in the Communication Services (20.19%) and Energy (2.56%) sectors. The fund is much more diversified when it comes to individual companies among its holdings: no single holding comprises more than 3% of the total. In fact, RYU's top ten holdings only make up 26.16% of its total assets. The top five companies held, in order, are: Ameren Corporation Common Stock (2.68%), NiSource Inc Common Stock (2.64%), FirstEnergy Corporation Common (2.63%), Sprint Nextel Corporation Comm (2.62%) and Public Service Enterprise Group (2.61%).
Although the ETF had a slight dip in November, RYU has resumed its steady rise from the depths of the market crash of a few years ago. In fact, the dip means that right now presents a good buying opportunity. While RYU and other Utilities ETFs may not offer the most glamorous profits or instant money, they get the job done.
If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to email me by clicking here. You just may see your question answered in a future ETF Talk.
The Year in ETFs—Get Your 2013 Report Now
The books are closed on 2012, and along with a whole lot of major news events affecting the markets, the year also saw the continued growth of the ETF industry.
When the final results on the industry were tabulated, we saw an increase of more than 11% in the total number of ETFs that came to market. By year’s end, there were 1187 ETFs available to investors, a net increase of 131 funds over last year.
By far the biggest story in the ETF space this year was the PIMCO Total Return ETF (BOND), an ETF version of the popular mutual fund managed by the original bond king, Bill Gross.
This fund captured nearly $3.8 billion in assets from its debut in March through the latest figures as of Nov. 29. That remarkable asset capture helped the fund surge nearly 10% over that time frame.
Other notable funds in the latest ETF report include the Morningstar Multi-Asset Income Fund (IYLD), which is the first multi-strategy, “fund of funds” income product. There’s also the SPDR Barclays Short Term High Yield (SJNK), a new way to play the short-term bond market. Finally, there’s the MarketVectors Unconventional Oil and Gas (FRAK), the first ETF of its kind in the unconventional oil and gas extraction space.
"When we argue for our limitations, we get to keep them."
The great British author had a distinct way with words, and that way is on full display here in the above quote. And while I subscribe to the thesis that a man's got to know his limitations, I also think most people are trapped in a cocoon of self-imposed limitations. Don't accept these limits. Doing so will severely curtail your ability to prevail in life.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you'd like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Click here to ask Doug.