Making Money Alert
BREAKOUT OF MARKET BLIP?
02/27/2008
What kind of bad news? Well, the latest Producer Price Index number was up 1% in January. This is the highest monthly rise in the index in 26 years. Then, we got a report that housing prices nationwide fell nearly 9% in the fourth quarter of 2007.
As if those setbacks weren't enough bad news, we witnessed a slide on Tuesday in the consumer confidence numbers, which fell to their lowest levels since February 2003.
Now given all of the negatives this market has had to grapple with during the past few days, weeks and months, it is telling that we have staged a rally here of late.
So, is this current rally a breakout, or just a bear market blip?
My gut tells me that the current breakout is more of a bear market rally rather than a true bullish move to the upside. That said, if we do manage to climb above 1,400, we could be in for a lot more short-term upside in equities.
The question for investors now is what do we do?
One lesson my father taught me a long time ago is that the toughest thing to do during bear markets -- especially during bear market rallies -- is nothing.
We all want to be active and make moves with our money, but right now there is just too much uncertainty and way too many unknowns to start putting your serious money at risk.
If you still have your investment portfolio fully exposed to the risk inherent in the equity markets right now, I urge you to pare down your holdings and start building up your total cash position.
Right now, subscribers to my Successful Investing advisory service are sleeping well at night knowing they are safe from the whims of this bear market. More importantly, they have a plan in place that will help them determine when the coast is clear, and when to safely get back into equities with all that cash.
Blogs Away: A Fabian Aural 4
Want to hear my latest rant on the state of the financial markets? Well, now listening, and even watching, is as easy as a mouse click.
To listen to the audio blog, simply click here.
ETF Talk: A Passage To India
If you've ever read the great E.M. Forster and his seminal novel A Passage To India, you are probably already acquainted with the riches of India's culture. Now thanks to exchange-traded fund (ETF) providers Wisdom Tree Investments and PowerShares, it's going to get easier than ever to get acquainted with the financial riches of India's equity markets.
WisdomTree Investments launched what the company claims is the investment industry's first exchange-traded fund (ETF) focused on India. The fund, called WisdomTree India Earnings Fund (EPI), began trading on Feb. 22 and is listed on the NYSE Arca. Rival ETF provider PowerShares is right behind in readying an Indian ETF, with its PowerShares India Portfolio (PIN) slated to be introduced this week.
WisdomTree India Earnings Fund invests directly in local Indian securities by selecting from a universe of approximately 150 profitable companies that are included in the WisdomTree India Earnings Index. The fund uses a fundamentally weighted-indexing strategy, as do other WisdomTree ETFs, to reduce the potential risks of investing in emerging markets through more commonly used market capitalization-weighted indexes, company officials said. The company's fundamentally weighted-indexing involves anchoring the initial weights of individual stocks to a measure of fundamental value to avoid the disadvantages of capitalization-weighted indexes.
In a capitalization-weighted index, the market value of each holding is used to determine the percentage of an individual stock that should be owned in the fund. A flaw in this approach is that capitalization-weighted indexes tend to overvalue securities or sectors that dominate the market capitalization indexes at a given time, while under-representing undervalued securities or sectors. The Internet bubble in the late 1990s is an example of how a significant overvaluation problem can affect market-capitalization weighting.
The PowerShares India Portfolio is designed to replicate the Indian equity markets as a whole through a proprietary index that company officials contend also is superior to a capitalization market-weighted index. The PowerShares index consists of a diverse group of 50 Indian stocks selected from a universe of 200 of the largest companies listed on the Mumbai Stock Exchange and 200 of the biggest companies listed on the National Stock Exchange.
Thanks to both of these new ETF offerings, a passage to India has never been easier.
Mr. B's Musings
Federal Reserve Chairman Ben Bernanke warned Congress today that the nation is in for a period of sluggish business growth, but the good news for the markets is that he also sent a clear signal that interest rates will be cut yet again.
Here are a few of the best quotes from Mr. B's musings, given today to the House Financial Services Committee.
On the current economy:
"The economic situation has become distinctly less favorable…"
Incoming barometers continue to "suggest sluggish economic activity in the near term."
On rate cuts:
The Fed "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks."
On housing and credit:
"The risks include the possibilities that the housing market or labor market may deteriorate more than is currently anticipated and that credit conditions may tighten substantially further."On inflation:
There are "slightly greater upside risks" that inflation could turn out to be higher than the Fed currently anticipates given the recent run-up in energy and food prices.
"Should high rates of overall inflation persist, the possibility also exists that inflation expectations could become less well anchored."
Your Term Policy Could Be A Gold Mine
By Kevin Yurkus, president of Fairway Capital
If you're like me, you probably have a cheap term life insurance policy. In most cases, our term policies expire without paying a benefit. When the term is up, we simply allow our policies to cancel. We think, "What other option do we have?"
Well, think again, because now there is an alternative for many term life policy holders -- an option that the majority of the public is unaware of -- an option to sell an expiring term policy for cash. Yes, that's right. You can sell an expiring term policy for cash.
How is this accomplished? In recent years, a secondary market has emerged whereby Wall Street institutions (Deutsche Bank, Credit Suisse, Berkshire Hathaway, etc.) pay policy holders cash to purchase their life insurance policies. In short, these institutions offer cash settlements to buy in-force life insurance policies.
Why does this market work? It's because Wall Street capitalizes on the best-kept secret in the insurance business. It's the secret of "lapse rates" and involves the hundreds of millions of dollars that life insurance companies collect without having to pay claims. Insurance carriers collect our money for years and how do we reward them? By letting our life insurance policies expire, essentially creating an ATM for insurance companies.
Let me illustrate how incredible this opportunity can be. I know of a case where a 73-year-old man owned a $3 million term policy. The policy was set to expire in less than one year. Like many of us, he was prepared to let his term policy expire since the policy had served its purpose of covering his insurance needs for a period of time. He was fortunate enough to read an article in The Wall Street Journal in December 2006 and discovered that his policy might be eligible to be sold for cash in the secondary market. After finding out more, he received an offer of $400,000 to buy his policy.
This opportunity doesn't work for everybody. Wall Street wants policies only on people who are at least 65-years old. Why? It's because Wall Street does not want to wait forever to collect on their investment.
If you are more than 65-years old and have term life insurance (or know someone who does), DON'T LET IT EXPIRE!
You could be eligible to capitalize on a large cash settlement for this otherwise "dead' asset. In fact, if you have any type of insurance, Wall Street might pay big bucks to buy your policy.
If you are interested in this opportunity, please contact me, Kevin Yurkus, president of Fairway Capital, by calling 800.338.1035. You can also contact me via e-mail or by visiting my Web site.
By The Time I Get To Phoenix -- TONIGHT!
By the time I get to Phoenix she'll be rising
She'll find the note I left hangin' on her door
She'll laugh when she reads the part that says I'm leavin'
'Cause I've left that girl so many times before—Jimmy Webb, "By The Time I Get To Phoenix"
The great balladeer Jimmy Webb, who wrote most of his big hits in the 1960s and 1970s, always strikes a chord with me whenever I plan a trip to Phoenix, Arizona -- which is where I'll be tonight, Wednesday, Feb. 27, to present my seminar: Managing Your Financial Assets in 2008.
Of course, I could call this event something like "Financial Survival 2008," but my optimistic nature wouldn't permit that kind of breach into pessimism.
This event will be held at the Ritz-Carlton, Phoenix, on Wednesday, Feb. 27, from 6:30 p.m. to 8:00 p.m.
This event is not simply about portfolio management or about what funds to purchase right now. Rather, this event is all about properly managing all of your financial assets in what has started out to be a crazy year for the equity and housing markets.
In this seminar I will teach you how to navigate the tumultuous economic environment in the face of a real estate bear market, a slowing economy and a falling U.S. dollar. We'll cover strategies and tactics on how to optimize your small businesses, your retirement accounts, annuity accounts, taxable portfolios, life insurance and much more.
My opinion is that we all need to be circling the wagons and protecting our assets from what has proven to be some very serious market damage in this young 2008.
The best part of this workshop is that it is absolutely FREE. The only downside is that this seminar will fill up VERY fast. If you want to attend tonight, you must act now.
The Managing Your Financial Assets in 2008 seminar is sponsored by my asset management company, Fabian Wealth Strategies, and by Fairway Capital. Kevin Yurkus, president of Fairway Capital, will make a special presentation on the most common mistakes millionaires make -- and how to avoid those mistakes.
Kevin is an expert on estate planning and asset protection. He'll be presenting strategies that will help you profit from what could be the beginning of the biggest bear market of our lifetime.
The Managing Your Financial Assets in 2008 seminar is designed for investors who have a million dollars or more of net worth, and for those who:
- Own highly appreciated real estate
- Own a small business
- Have stock portfolios in excess of $500,000
- Have retirement accounts in excess of $500,000
- Are working with brokers, planners or advisors who aren't protecting their assets
- Are preparing for retirement
- Do not yet have an estate plan, or who haven't updated their estate plan
- Own life insurance policies in excess of a million dollars
Both Kevin and I will be on hand to answer your questions and spend the necessary time to make sure that you understand how to grow and protect your assets in 2008 and beyond.
Once again, this event will be held at the Ritz-Carlton, Phoenix, tonight, Feb. 27, from 6:30 p.m. to 8:00 p.m.
Reserve your seat now! Seating is limited and this event will sell out.
To sign up for this event, click here, or call us at 800.391.1118.
NOTE: There is still room left for this seminar, so if you want to attend, we'll see you tonight at The Ritz!
Anti-Bureaucratic Wisdom
"Conditions never persist. They change. Bureaucrats really hate that."
—Jeffrey Tucker, editor of Mises.org
This morning I read a great article from Mises.org editor Jeffrey Tucker. In his piece titled "Rain, Rain, Go Away," he makes a great case for the privatization of natural resources like water as a way of eliminating shortages like we've seen in the South recently. I highly recommend this piece, as well as the many great articles at Mises.org. So, what relevance does this have to investing? Well, the fact that conditions never persist but are always changing is something you must keep in the forefront of your mind whenever your money is at risk. You should never have a bureaucratic mindset when it comes to wealth management, and you should never think that things can't change.