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Circle The Wagons

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08/01/2007

Well my friends, it finally happened. The correction that I felt was so long overdue has now befallen us, and it's done so in spectacular fashion. Last Thursday we witnessed the Dow plummet more than 300 points, while the following day we saw the Industrials cave another 200-plus points.

Simply put, stocks are not the place you want your hard-earned investment capital right now. In fact, I've been advising subscribers to my Successful Investing advisory service that they should be near 90% cash for some time now.

The result of that high cash position meant we sustained no damage to our model portfolio last week. Instead, we watched placidly from the sidelines while panic sellers reached for the Advil, the Johnny Walker and a nice warm blanket.

Based on the shear technical picture of this market, I do think we may get a little bit of a snapback rally this week along the lines of what we saw on Monday. But as you can see by the chart of the Total Market VIPERs (VTI) below, the overall market is now trading well below its short-term 50-day moving average (blue line) and just a tad above the long-term 200-day moving average (red line). This is a bad prognosis for the continued strength of this bull market, and reason enough to be ultra-cautious right now.

My recommendation is to use any rally here as an opportunity to unload equities, particularly if your portfolio still is heavily exposed to stocks. And, if you are allocated to any stocks in the financial sector, then you absolutely must get yourself out of this collapsing market segment. One look at the Financials Select Sector SPDR (XLF) below tells a tale of woe that you don't want to experience first hand.

The silver lining to this cloud of widespread selling is that we now are set up for a big buying opportunity once this market turmoil subsides. The time for buying equities may not come for a few more months, but I suspect that by October subscribers to my advisory services will have a healthy exposure to the market -- a market that is much less likely to experience another big correction in the near future.

Want to learn how subscribers to my Successful Investing advisory service were able to sidestep the latest market malaise? And, do you want to find out when it will be safe to get back into the equity waters?

Click here to learn more about Successful Investing

A Real Estate Bear

As much as people wish it wasn't so, we have to acknowledge that we now have entered a bear market in real estate.

Why are we in a bear market in real estate? Well, foreclosures will reach an all-time high this year, and the speculation is that the total number will be greatly exceeded next year. Also, home builders are dumping inventory by slashing prices. Both of these events are putting more supply on the market. This added supply comes in the face of an already existing excess inventory of unsold homes. Economics 101 tells us that this combination of factors means home prices soon will be getting a lot lower.

I expect home prices to fall 10-15% nationwide, and 30-40% in some of the hottest speculative markets. I suspect that most of you will not be moving in the next few years, and you may be asking yourself what difference it makes if home prices fall. Well, it makes a big difference in many ways.

This bear market in housing likely will have a very negative effect on the economy, on lending standards, and on stock prices. Just look at the above charts of both the Real Estate iShares (IYR) and the S&P SPDR Homebuilders (XHB). These sectors have been beaten down as a result of the new bear market in real estate. Of course they've also had a little help from the subprime mortgage mess and some very high-profile companies announcing that they may not make it out of this downturn alive.

But the real estate bear also could affect you personally, especially if you don't have a fixed rate mortgage in place on your properties. You see, the entire lending landscape may be completely different six-to-12 months from now.

One piece of very important advice that I can give you is that you absolutely MUST have fixed financing in place on any property you own. If you have some type of loan that is adjustable, or that soon is approaching a reset point, now is the time to fix this potentially disastrous problem.

I recommend that anyone in this situation call my real estate and mortgage expert Josh Lewis to get a free mortgage assessment.

To contact Josh, go to his web site, e-mail him, or call him at 714.661-5976.

Remember, wishing doesn't make things so, despite our deepest child-like desires. Take action and get yourself sheltered from the real estate bear.

INTERESTED IN 8-12% YIELDS?

The big sell off in the stock market has created a lot of opportunities for income investors. I can't get into all of the details here in the Alert, but I do have a complete presentation for you that I call, Creating Passive Income. It's my latest live workshop, and it now is available online.

All you have to do is go here for all of the details on how you can download one of the most important seminars to your wealth that you will ever see.
In this unique workshop event, my mortgage and real estate expert Josh Lewis and I team up to show you the keys to creating the passive income you need to build the life of your dreams.

You will discover:

For more on how to download this seminar right now, simply go here.

BLOGS AWAY 4

I am starting a new feature in my weekly audio blog this week. This new segment will be all about my favorite investment tools, exchange-traded funds (ETFs). I just returned from the San Francisco Money Show and my ETF workshops there were packed. This tells me that investors want more education and a greater understanding about what I clearly think is the future of investing.

Join me today for my new series on ETFs. I will be highlighting the latest ETF offerings from ProShares, which have designed funds that profit on the short side and on the long side of this tumultuous market.

To listen to the audio blog, simply click here.

ETF NEWS: READY FOR THE NUCLEAR OPTION?

Despite the current market sell off, the march toward more new ETF offerings hasn't subsided in the least bit. Case in point is the news out of Van Eck Global, which announced yesterday that the Securities and Exchange Commission (SEC) authorized the registration statement for two new Market Vectors ETFs. I expect to see these new ETFs on the American Stock Exchange later this year.

The first of these new funds is the Market Vectors Agribusiness (MOO). This ETF follows the DAXglobal Agribusiness Index (DXAG) and includes stocks from 40 companies engaged in agriproduct operations, agriculture equipment, ethanol/biodiesel and livestock operations. The companies within MOO generally generate 50% of their income from agribusiness.

The second, and perhaps most intriguing of the two new Van Eck Global offerings, is the Market Vectors Nuclear Energy ETF (NLR). This ETF is the first of its kind listed in the United States. It tracks the DAXglobal Nuclear Energy Index (DXNE), which comprises 38 stocks that participate in uranium mining, enrichment and storage, nuclear plant infrastructure, fuel transportation and energy generation, as well as providing equipment for use in the provision of nuclear energy. Companies in NLR usually derive 50% of their income from nuclear energy.

I know that I will be keeping a keen eye on both of these new Van Eck Global funds once they begin trading. Both the agri-business and nuclear energy sectors are becoming interesting places to invest.

WEALTH COACHING WITH DOUG

The coach is back from a very fruitful trip to the San Francisco Money Show, and I am happy to report that many of the attendees took me up on my offer and scheduled their very own coaching session.

If you are feeling uneasy because of this stock market decline (and who isn't?), or if you don't have a clear roadmap designed to help you reach your retirement destination, I can help.

I invite anyone concerned with his or her investment situation to contact me at Fabian Wealth Strategies, my fee-only investment advisory firm. Our management fees vary depending on the scope of your needs, and our prices start at just $500.

For more information on how to schedule your very own coaching session, call David Fabian at 800.391.1118, or e-mail him.

THOUGHTS ON LOST TIME

“We all look for lost time."

—Christian Lacroix, fashion designer

I'm not really sure in what context the eminent French fashionista uttered these words, but when I read this quote it reminded me of how many people run their own investment portfolios. Often we see people jumping on the bandwagon in stocks just when they should be proceeding with extreme caution. In an effort to make up for lost time due to bad decisions or not saving enough, many people tend to take too much risk with their wealth. Yes, you have to take risks to make money; however, the worst thing you can do is expose yourself to too much risk in a vain search for lost time. Be smart, and act in defense of your our money.

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.

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