Making Money Alert
A Year-End Rally?
11/25/2009
This time of year, we normally can count on the market being in full-rally mode. There is a term that I use in my book "Maverick Investing" to describe this time of year. I call it the growth season, and it’s from Nov. 1 through April 30. Historically, this is the time when the market grows three times faster than it does from May 1 through Oct. 31.
As we’ve been pointing out for weeks now, the current rally does not have widespread participation from the small-cap segment, nor has it included a rally in financial stocks. If we look at the chart below of the S&P 500 Index, we see that while this broad-market measure of stocks is trading near new highs, we haven’t yet seen a really strong breakout from the psychologically and technically significant 1,100 mark.
Moreover, if we look at stocks in the small-cap segment via the iShares Russell 2000 Index (IWM), we can see that this area of the market is well below its October highs. The Russell now is trading below its 50-day moving average (blue line), a sign that the growth season has yet to kick into high gear for small caps.
So, are we going to see a year-end rally in stocks?
I suspect we could; however, I also think we may see a lot of profit taking in the coming weeks. Profit taking after the year we’ve had is to be expected, so don’t be surprised if you see stocks get really volatile as we head into the final month of this remarkable year.
The possibility for a less-than-robust, year-end rally means you must have an exit strategy in place that protects your gains and allows you to weather any kind of year-end storm.
Keep in mind that nearly every investor who held on and rode out the 2008-2009 bear has likely seen his or her portfolio recover sizably since this rally began in earnest back in March. I don’t want anything to happen to that recovered money, and the only way to protect those gains is to have a plan in place that gets you out of the market with your profits intact.
My Successful Investing advisory service has just such a plan firmly in place, so if you are looking for a way to protect your 2009 bull market gains, then I invite you to check it out.
What I'm Truly Thankful For
I can’t let this Thanksgiving week go by without addressing a few things that I’m truly thankful for. On Monday, I had a great conversation with a new Successful Investing subscriber who told me that prior to joining the service he was so worried about the market and his investments that it actually was making him physically ill. He told me that he now has a plan in place that will protect him in the event of a market downturn, and he now actually feels at ease with his money once again.
It’s this kind of success story that makes me so very thankful for the work I get to do each and every day. Helping people to attain financial peace of mind is the most rewarding aspect of what I do, and that is something I am truly thankful for.
I also am truly thankful for the fact that I was born and raised in a country where I am free to make my own decisions, and where building wealth is chiefly a function of hard work and perseverance.
But what I am truly, truly thankful for this Thanksgiving week -- and indeed every week of the year -- is you, the Alert reader. It’s because of you, and those of you who subscribe to my Successful Investing, High Monthly Income and ETF Trader advisory services, that I am able to do this extremely rewarding work.
So, this Thanksgiving, while you are giving thanks for all the great things in your life, please know that I will be giving thanks for all of the great things in my life -- and that means I am thankful for you.
Give Thanks to Those Who Deserve It, 2009
Now, for another perspective on being thankful, here is my good friend and writer extraordinaire Jim Woods with a few unconventional thoughts on the matter. Enjoy!
By Jim Woods
This Thursday is Thanksgiving, and I suspect that most of you reading this have plans to spend time with friends and family feasting on a sumptuous meal. I know I will be gourmandizing on various gastronomic delights, not the least of which will be of the fine fermented variety.
Now, amidst tomorrow’s day of celebration, I undoubtedly will be bombarded by numerous television news spots aimed at making me feel guilty for my bounty. Although not directed specifically at me, the purpose of these stories will be to remind me that I should feel fortunate to have a roof over my head, warm clothes on my back and a hot meal on my plate. Because, these stories will imply, it could be me -- or any one of us -- who suffers the indignity of poverty, hunger or homelessness.
The plight of those less fortunate, shown to us via remote telecast from the nearest homeless shelter or inner city soup kitchen, is supposed to be a stark reminder that those whose lives aren’t immersed in peril should be thankful for all that we have.
Well, to this I ask, thankful to whom? Who are the people responsible for providing us with the tremendous bounty most Americans enjoy?
This year, I want you to give thanks to those who truly deserve it.
This year, I want you to thank the men (and women) of genius who first discovered how to harness fire and how to forge tools for hunting. I want you to thank the men of genius who discovered how to cultivate crops and how to ferment grapes and create wine.
I want you to thank the men of genius who are responsible for creating the planes, trains and automobiles that delivered the bounty to your table. And I want you to thank the men of genius who, throughout history, plied their various trades -- often in the face of unimaginable opposition -- to help lift us all out of a squalid state of nature and into the magnificence that is 21st-century America.
And finally, I think we should all give extra thanks to the real unsung heroes, the capitalists, who put their money and their livelihoods at risk to fund the various enterprises throughout the ages that made modern life possible.
To all of the great capitalist heroes, I thank you from the very core of my own productive mind. I can offer you no greater tribute this Thanksgiving than to enjoy, without the slightest hint of guilt, the life-sustaining bounty you all have made possible.
This Thursday, we need to thank the men and women of genius, both past and present, who truly deserve the gratitude, yet who so often get nothing but condemnation in exchange for their tremendous achievements.
I toast you all in the name of the best within us.
Cheers,
Jim
Jim Woods is a freelance journalist specializing in the economy, the markets and politics. He is a frequent contributor to Doug Fabian’s Alert, as well as many other publications. He champions the cause of the men of genius from his home on the California coast. He welcomes your comments, and can be contacted at Woodsish@yahoo.com.
ETF Talk: Does the Yen Offer a Safe Haven?
If you are concerned that the stock market’s rise in recent months could be running out of steam, you may want to consider protecting yourself by making a short-term investment in a stable foreign currency, such as the Japanese yen.
With the yen appreciating in the face of a weakening U.S. dollar, the Japanese currency could be considered a relatively safe way to protect your money and to give you a chance for a bit of appreciation if stocks pull back significantly. Currency investments typically do not make you rich. However, they do offer a way to invest that is not directly correlated with the direction of the equity markets.
You do not need to think back any further than last fall’s steep market drop to appreciate the value of owning a short-term investment that allows you to sleep at night. Even though the Dow retreated Wednesday, Thursday and Friday last week, the CurrencyShares Japanese Yen Trust (FXY) exchange-traded fund (ETF) closed up during that three-day period. It also rose again Monday, as it strengthened against the weakening U.S. dollar, even as the market advanced.
Signs of a subdued economic recovery pushed investors out of stocks last Thursday and into safer assets such as the Japanese yen and the U.S. dollar. On a day when the Dow slid over 93 points, or .9%, to fall to 10,332.44, the CurrencyShares Japanese Yen Trust rose .37% to $111.50. With the Dow closing down last Friday an additional 14.28 points, dipping .14% to 10,318.16, FXY rose a penny to $111.51. It climbed again Monday to $111.60.
Clearly, the yen offers a way to avoid the fallout of short-term equity pull backs and also lets you escape the downward draft of the dollar.
The dollar traditionally is a currency that is viewed as a source of safety when the markets flounder. With U.S. interest rates about as low as they can go, the dollar is losing value, while the yen and selected other currencies are appreciating. The preceding chart gives a graphic indication of FXY’s upward trend.
With U.S. interest rates among the lowest in the world, U.S. investors who seek the highest rates of return can put their money in foreign currencies such as the yen. This so-called “carry trade” activity further depresses the dollar and boosts the yen. Of course, this situation can reverse, so you need to monitor currency fluctuations closely.
For now, the yen is gaining value. Indeed, the Bank of Japan reported on Nov. 20 that the country’s economy is picking up due to various policy measures taken domestically and abroad. An improving Japanese economy further buoys the yen.
In bull markets, the yen tends to lag behind. In unstable markets, the yen is a defensive buy.
For those of you who want advice about which ETFs to buy and sell, check out my ETF Trader service by clicking here. As always, I am pleased to answer your questions about ETFs. To send me a question, please click here. You may just see your question featured in a future ETF Talk.
The Obama Impact on Your Money -- Part III
Last Saturday, I conducted my third installment of the five-part series titled, The Obama Impact on Your Money. In my presentation, I share three simple strategies you can use to grow and protect your wealth using exchange-traded funds. The world of ETFs keeps getting better and better. We now can invest in almost any asset class, currency or country in the world with just a few clicks of a mouse. But in order to use ETFs properly, you have to learn a few key concepts.
Here are three important concepts you'll learn in this audio presentation:
- How to get defensive with your stocks and mutual funds
- How to prepare for rising interest rates and how to profit from them
- Which commodity ETF deserves your attention right now
During the past several months, I have been sharing my views on how to manage your portfolio in these unprecedented economic times via this teleconference series . If you missed our recent "live" call, or if you haven't yet had a chance to listen to this FREE presentation, then you're in luck.
To listen to all three installments of The Obama Impact on Your Money series, simply click here.
I guarantee you'll come away with a solid grasp of how ETFs can play an integral role in your future financial success.
JFK on Gratitude
“As we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them.”
-- John F. Kennedy
As the late president so poignantly put it, gratitude is much more about action than mere words. This Thanksgiving, don’t just merely speak about the things you’re grateful for. This year, act on that feeling of gratitude and do something special for the people you value most -- including yourself.
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 radio show, newsletters, seminars or anything else.