Making Money Alert
Brother Can You Spare A Quarter?
04/02/2008
Fellow Investor,
The first quarter of 2008 now is officially in the books, and history will look back on this three-month period as one of the worst ever for stocks.
Let's face it; nobody thought we'd see this kind of sell off in equities. Sure, some of us thought we were due for a pullback, but I don't know anyone who actually thought the NASDAQ Composite would be down more than 14% in one quarter.
Man, oh man, I'm glad I had my money in the safety of cash!
The interesting thing about this dismal quarterly performance is that it occurred not only domestically, but also internationally. The table above shows just how poorly all of the major market indices -- both U.S. and foreign, performed in the first quarter. It also shows just how weak things have been in most of the major averages during the last 52 weeks.
Is there more to come, or is this the beginning of a bottom in stocks?
I don't know for certain, but one way you as the investor can make sure you don't fall victim to more damaging declines is to ensure that you don't have all your eggs in one equity basket.
Keeping your distance is the only wise approach to managing your money in this market. So, remember that whatever moves you make right here, you must make them with the full realization that stocks have a long way to go before this bear is chased out of the woods.
Another Bear Market Rally?
On Tuesday, April 1, we saw a huge jump in stocks that was nearly across the board. The major averages all were up more than 3% on the day, and that brought the bullish commentators out in droves.
I heard a lot of chatter Tuesday about how we've reached a bottom in stocks, and how the worst is over for the financial sector and other severely beaten-down market segments.
And while I acknowledge that this sentiment could turn out to be correct, I say it's way too early to start ushering in the bull.
The more likely scenario, in my opinion, is that yesterday's big jump in stocks was another bear market rally. It's the same kind we've seen during the past several weeks -- featuring big one-day gains that are followed by a series of down days that take the major averages back to where they were before the rally.
One needs only to glance at the chart above of the S&P 500 to see what I mean. This ultra-choppy market has broken above the 50-day moving average (blue line), yet we are still way below the 1,405 "line in the sand" that we drew back in January.
I think we will see a lot more volatility and a few more big bear market rallies, followed by the now-familiar bear market sell offs before the cobwebs get cleared from this market.
In the meantime, big up days are your opportunity to lighten up on stocks (if you still own them). Remember that bear market rallies give you a chance to get out of stocks at a much better price than you had before the downtrend started.
Don't be afraid to act in defense of your own money. Lighten up, and be proactive rather than reactive with your wealth.
Want to find out how subscribers to my Successful Investing advisory service lightened up their portfolios way back in January? All you have to do is click here.
ETF Talk: It’s All So Very Precious
At least the gains were precious while they lasted.
The precious metals sector seemed to have been a safe haven from the downward trend in stock prices until recently. Exchange-traded funds (ETFs) that invested in precious metals such as gold and silver now are taking financial hits. Such ETFs absorbed losses of 2.5% or worse on Tuesday, April 1, as if the markets were playing an April Fools' Day joke on precious metals investors. But the losses incurred by those investors were real. The biggest losers yesterday among the precious metals ETFs were PowerShares DB Precious Metals (DBP), down 4.18%, and PowerShares DB Gold (DGL), which dropped 4.13%.
Precious metals lost a bit of their luster yesterday when the stock market rose strongly and enticed investors to chase the opportunity for profits in equities. The current volatile market conditions make it risky to place any big bets on commodities, so I am not recommending them right now. However, they are interesting to track -- especially from the safety of the sidelines.
Gold soared to a high of $1,030.80 an ounce on March 17, before suffering a pullback. Its price has bounced around since then but lately is trending downward. Gold traded at around $935 on March 28, then dipped to $886.01 on April 1. With gold sliding, it is difficult to predict when the traditional hedge against inflation might recover.
Silver ran up less than gold and therefore should not fall quite as much on a percentage basis. Silver closed at $17.03 an ounce on April 1 to mark a fall of 11 cents on the day. Certain prognosticators are forecasting a rise in the prices of gold and silver. However, I follow trends and so far I am seeing the prices of both heading in the wrong direction to be a buyer of either.
Above is a chart of seven ETFs that track precious metals. Three are from the PowerShares ETF fund family, two from iShares and one from streetTRACKS. Market Vectors also provides a precious metal ETF -- Market Vectors Gold Miners ETF (GDX). GDX differs from the other six ETFs above because its index tracks the performance of publicly traded companies involved in mining for precious metals, while the indexes for the other ETFs track the actual performance of gold and silver.
Despite the dips taken by gold and silver in recent days, silver has shined with its year-to-date performance. Two top-performing silver ETFs are iShares Silver Trust (SLV) and PowerShares DB Silver Fund (DBS). Both still are nicely positive so far this year, despite the recent price drop in silver prices.
Even though I am not recommending any of these ETFs at this time, I do think it's important to familiarize yourself with how precious metals are performing during this turbulent market. Precious metals may regain their waning appeal in the not too distant future.
For now, I'll let the speculators take the risks.
Risk Management: A Primer
Do you know the six threats to your retirement nest egg?
In my experience, most investors are woefully unaware of what could happen to the most important money they manage -- the money that will fund their retirement years.
In a new special report by Fabian Wealth Strategies, a fee-only investment advisory firm specializing in ETFs, I will tell you how to manage the following risks to your nest egg:
Risk #1: Faulty Investment Advice
Risk #2: The Bear Market Cycle
Risk #3: High Yield Equals High Risk
Risk #4: A Catastrophic Loss
Risk #5: Mutual Funds
Risk #6: Unnecessary Fees and Expenses
More importantly, this FREE report will show what you can do about these threats.
For your copy of this report, titled The Successful Investor's Guide to Managing Risk, simply click here.
The only thing you have to gain is the financial life you desire.
Join Doug for A FREE Retirement Income Conference Call 3
Are you prepared to live out your retirement for 25-30 years? How will you generate the income you need from your retirement plans and real estate? How will you stay ahead of inflation and maintain your standard of living?
These are important questions, and Doug Fabian can help you answer them all.
Retirement income investing is a whole new ball game. It's about the proper asset mix; the right investment products, and the right income investing strategies. Most people are comfortable with growth investing by the time they've reached retirement, but they are not prepared to make the most important decisions of their lives -- the decisions that will help to generate retirement income.
To help investors get on the proper path to achieve their retirement goals, Doug will host a monthly conference call to share his views on how to generate the income you need from the assets you've worked so hard to accumulate.
Join Doug for his first conference call on Saturday, April 5, 12 p.m. Pacific. This call will be limited to the first 100 investors who register, so don't delay.
Click here to sign up now for Doug's FREE retirement income conference call.
Blogs Away: A Fabian Aural & Visual Fixation 3
Want to hear my latest rant about 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.
Not satisfied by just listening? Would you rather watch me on YouTube?
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Just click here for your Fabian aural -- and now visual fixation.
A Fountain of Great Quotes
"Confidence is contagious. So is lack of confidence."
"Success demands singleness of purpose."
"The measure of who we are is what we do with what we have."
--Vince Lombardi
There are some people from whom wisdom -- and more importantly the means to convey that wisdom -- flows like one giant fountain. Football great Vince Lombardi was one such person. Lombardi is quoted often in sports circles, as well as in business circles, because many of his verbal nuggets really get to the heart of how we need to act in order to not just survive, but also to prevail in life. The above Lombardi quotes are three of my favorites, but with so many to choose from, I could have equally picked a dozen more. Here's to a great man -- and a great leader of men.
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.
Sincerely,
Doug Fabian
