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09/30/2009

I’ve received a number of emails from Alert readers, and from my investment advisory services subscribers, concerning the recommendations that we be patient and pick our spots carefully at this precarious market juncture. All of those emails were positive, and I am very happy that so many readers “get it” when it comes to exercising the virtue of patience. 

Last week, the market saw its first real downturn in many weeks, with equities falling nearly 2% across the board. As you can see by the chart below of the S&P 500, although the market gave back some of its gains last week, overall the trend has been decidedly higher.

I understand if you may have been tempted to take last week’s sell-off as a sign that stocks are ready to be shorted here. But as we’ve seen so often during the past several months, stocks came back strong after a sell-off, and that’s precisely what they’ve done so far this week.

I think the bottom line here still is that it’s too early to short this market, as we aren’t sure how much fuel is left in this rally’s tank. We are, however, pretty certain that right now is not the time to establish any new long positions. The reason being, of course, is that stocks are just way too overextended by just about any technical measure you choose to employ.

I know it may be tempting to jump into this market if you’ve been watching from the sidelines for the past couple of months, but I highly recommend that you avoid the temptation and exercise patience -- particularly with your short-term trading capital. Jumping into an overbought market like this is a fool’s game, and you don’t want to play the fool with your money.

If you would like specific advice about what to do with your short-term trading capital, why not check out my ETF Trader advisory service? Doing so is as easy as clicking here.

A Gross Bet on Deflation

 He’s one of the most respected bond fund managers around, and he’s had a really good track record of making correct calls on the equity and credit markets over the past decade. I am speaking here about Bill Gross, the PIMCO chief.

 
Gross has gone from a Treasury bond skeptic to a Treasury Bond buyer. In a Sept. 29 Bloomberg News article, Gross said he’s been buying longer maturity Treasuries in recent weeks as protection against deflation.
 
Here’s the key quote from the Bloomberg piece: “There has been significant flattening on the long end of the curve... This reflects the re-emergence of deflationary fears. The U.S. is at the center of de-levering as opposed to accelerating growth.”
 
Bingo! Bill Gross and Doug Fabian now are on the same page.
 
As you likely know, I’ve been sounding the deflationary alarm for some time, as I think it’s a much bigger concern going forward than the specter of inflation. Unfortunately, I also agree with Bill Gross when it comes to his assessment of the “new normal” in the global economy. 
 
According to the PIMCO chief, this new normal will include heightened government regulation, lower consumption and slower growth. Moreover, Gross estimates that the economy likely will expand at a 2% to 3% rate going forward. My friends, this is not an encouraging sign for the economy at large, nor is it good news for equity market bulls.

Get Your Q3 Intelligence Report Now

 As regular readers of the Alert know, I am a huge fan of exchange-traded funds (ETFs). An ETF is like a virtual basket of stocks that usually tracks a specific index or sector. To put it another way, ETFs are like a homologous species of mutual funds that allow investors to buy into a specific area of the market without all of the hassles, management fees and trading restrictions imposed by traditional mutual funds. You could say that ETFs are a kind of mutual fund without any of the downsides. 

 
There are quite a few ETFs out there to choose from, and keeping track of them all can become a titanic task. However, that task has just been made easier with my new, FREE Q3 ETF Intelligence Report. 
 
This report groups the universe of ETF offerings by investment objective, sector and country. These data-rich listings tell you the name of the ETF; its ticker symbol; the most recent closing price; and the percentage change in price for the past one week, one month, and three months.
 
You’ll also get the current year-to-date price movement; percentage the ETF is below its all-time high; and where the ETF stands in relation to its 50- and 200-day moving averages. Lastly, we have included the average daily trading volume for each fund.
 
Armed with this extensive information on virtually the entire ETF universe, you’ll be able to glean a really sharp picture of what sectors, countries and types of ETFs are currently outperforming their peers. Perusing this extensive list of ETFs should give you a real sense of what’s happening -- not only in the domestic market, but all over the globe.
 
To get your FREE Q3 ETF Intelligence Report, simply click here.

Obama Impact on Your Money, Part II

On Tuesday, Sept. 15, we conducted the second installment of our teleconference on "The Obama Impact on Your Money." Judging by the slew of emails I received, the event was a resounding success. I want to thank everyone who joined us on the call. I know many of you have been interested in the material from this presentation, so if you missed it, all you have to do is click here.

Five Action Steps 

For those of you unable to join us, I shared five action steps that I believe are important to implement now if you want to improve your financial results:

1. Circle the wagons around your liquid assets. You must prepare yourself for another deflationary collapse in stock prices. In order to do so, you must complete an inventory and assessment of your current invested positions.

2. Review the number of service providers you are working with. Sometimes investors end up with too many investment providers. This makes money management more difficult than it should be.

3. List all of your stocks, bonds and mutual funds. The purpose of this action item is to determine how much exposure you have to risky assets. You want to know the percentage invested in stocks, bonds and cash, because having the right asset allocation is a key to prevailing during volatile times. In addition, you want to know how your stocks and bonds did last year, because you want to have stop losses on risky assets that may go down again.

4. Know your safe harbors. Money markets, Treasury bills and notes are safe investments during deflationary times.

5. Prepare for a U.S. Dollar crisis. Review the information in this latest presentation on ETFs that you can use if the dollar continues its downward spiral.

So, what's the next step? Put your knowledge to use!

Knowledge without action is powerless.

Now, you need to put to work what you've learned to take care of your money, and the first step toward putting that knowledge into action is to make sure you listen to part II of my teleconference series by clicking here.

NOTE: Fabian Wealth Strategies is an SEC registered investment adviser, and is not affiliated with Eagle Publishing. 

Doug on Film

I’m no expert on movies, but I do consider myself pretty knowledgeable when it comes to the economy and the financial markets. Well, this Friday, the world of film and financial markets will intersect with the opening of documentarian Michael Moore’s newest release, Capitalism: A Love Story.

Now, I’ve yet to see this film, but it doesn’t take much of a leap in logic to surmise that it’s going to be a knock on businesses and the free market. I find it ironic that Mr. Moore has become a very rich man by criticizing corporate America and the free market in his previous films Roger & Me and Sicko. It’s funny how capitalism is okay for him, but bad for the rest of us.
I am not looking forward to seeing this film, although I may go to see it just to understand why people think the way they do. I just hope that intelligent people read between the lines when watching Moore’s propaganda, because it seems to me that his real agenda is to discredit the very concepts that make wealth production possible.
 
If you do see this movie, try to keep these thoughts in mind. Better yet, don’t go see this movie. You can probably think of a lot better ways to spend your free time.

Mark Your Calendars

In my line of work, I often get emails that are very gratifying. This month, I thought I'd share one such email with you that you also can be a part of. Here's the text straight from my inbox.

Dear Mr. Fabian: 

Thank you so much for making 2009 another very successful year for The MoneyShows.

We truly appreciate your continued support and dedication to educating investors. Therefore, we would like to take this opportunity to invite you to the 2010 MoneyShows. 

Below are the dates of the 2010 MoneyShows that we would like to invite you to speak at next year.

The World MoneyShow Orlando, February 3-6, 2010 
The MoneyShow Las Vegas, May 10-13, 2010
The MoneyShow San Francisco, August 19-21, 2010 

As most of you know, we work on our programming four-six months in advance, so please let us know what shows you'd like to do in 2010 at your earliest convenience.

We're looking forward to another year of working together again.

Sincerely,

The MoneyShow Staff

First, let me say that I am honored to be invited back for all three MoneyShows next year, and I have accepted the company's gracious invitation to attend all three. So, if you are going to be in or near any of the above locations at any of the respective dates, I cordially invite you to join me. These shows are always a great time, and I guarantee you'll learn a lot.

So, mark these dates on your 2010 calendar, and I hope to see you there.

The Heroism of Muscle

 “Muscle, throughout history, has been next of kin to the heroic, and the heroic is eternal.”

 
--TC Luoma, fitness writer and humorist
 
I try to stay in good physical shape, and I do so by lifting weights and swimming. But hey, you don’t have to be a muscle-bound superman to know a sound body is the handmaiden of a sound mind. This concept -- as well as the concept of heroism -- goes all the way back to ancient Greece. I’m a big fan of fitness, and an even bigger fan of heroism. So why not take care of your body and your mind? I suspect you’ll be a lot more heroic in your loved-ones’ eyes because of it.
 
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 that you have about my radio show, newsletters, seminars or anything else.
askdoug@dougfabian.com
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