The markets have been obsessed with fiscal-cliff worries ever since the election. While I understand why the resolution of this potential $600 billion erasure from 2013 GDP is rightly a giant concern, it’s by no means the only thing markets need to be fearful of right now.
In fact, the recent myopia over the fiscal cliff reminds me of a scene in perhaps the best martial arts film ever, “Enter the Dragon,” starring the late, great Bruce Lee. The scene I’m referring to features Lee providing instruction to a young student. After the student is taught a lesson on how to put “emotional content” into his martial arts moves, he begins to think about what was learned and he then stares down at Bruce’s finger.
Bruce then tells him, “Don’t concentrate on the finger, or you will miss all that heavenly glory.” To investors, I offer my own version of this proclamation, “Don’t concentrate on the cliff, or you will miss all of the real danger.”
What is that real danger?
Well, for starters, there is the market on a decided technical sell-off that began in October and that has taken stocks in the S&P 500 Index down below both the 50- and 200-day moving averages.
Then we have earnings, which have been abysmal in Q3. In fact, as an aggregate, earnings in the market have been some of the worst we’ve seen during the past three years. I suspect this could once again be an issue in Q4, and that means we could be in for some very rough fundamental waters going forward.
Then there’s Europe, which has been largely drowned out by the fiscal cliff, but it shouldn’t be. In fact, the bailout negotiations, along with protests over austerity measures in many countries that need bailout funds, has put the fate of this key region up in the air once again, and this is something that likely will be around much longer than the fiscal cliff.
Finally, there is a growing realization that the effect of the Federal Reserve and its “QE Infinity” program is basically wearing off, and that it’s already priced in to the markets. If this situation is true, and I suspect it is, the relative upside going forward for a QE stimulus will be minimal at best.
As you can see, there is much more to worry about besides just the fiscal cliff, and concentrating on that singular issue will very likely cause you to miss the real dangers to your money.
ETF Talk: Global Real Estate is on the Rise
The real estate market in the United States appears to be recovering, based on the latest data, and the sector seems to be appreciating in many other parts of the world, too. The real estate bubble that captured great attention during the past few years now appears to have bottomed and investors are taking notice. One exchange-traded fund (ETF) that I like as a way to bet on a global real estate rebound is the SPDR Dow Jones Global Real Estate ETF (RWO).
The ETF seeks to replicate, as closely as possible and before expenses, the price and yield performance of the Dow Jones Global Select Real Estate Securities Index, which is designed to track the global real estate market. The real estate market that I personally follow most closely is the one in the United States. From my vantage point, there is much encouraging news.
One data point that I noticed this week was a decline in the number of existing homes that are for sale. The National Association of Realtors reported on Monday that only 2.1 million existing homes are on the market for prospective buyers. It marks a 22% reduction in the number of homes available for sale, compared to the same time last year.
Housing demand is growing elsewhere, too. That wave of growth is something that a California surfer like me couldn't help but want to catch.
The chart below shows that RWO had pulled back earlier this month but is on the rise again. The dip gives investors who are interested in gaining global real estate exposure a chance to avoid buying when the fund's share price is at a peak.
Another appeal of the fund is that it offers a dividend yield of 3.11%. RWO also gives investors international exposure, with the United States amassing slightly more than half of the fund's holdings. The nations that account for RWO's top five holdings, as of Nov. 16, were: the United States, 53.63%; Japan, 8.73%; Australia, 8.37%; Hong Kong, 5.89%; and Canada, 4.79%. As far as the main categories of the fund, regional malls, 17.21%, and real estate operating companies, 15.14%, are the two biggest subsectors.
If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer your questions about ETFs, so do not hesitate to email me by clicking here. You may see your question answered in a future ETF Talk.
The Election, Your Money, Your Future
So, now that we know President Obama will occupy the White House for the next four years, there likely will be a whole lot of anxiety over what's going to happen to the economy, the markets, the dreaded "fiscal cliff," tax policy, etc. Immediate reaction by the equity markets to the president's reelection was a massive sell-off, and this response is the kind of pernicious trend you want to make sure you guard against.
Now more than ever, what you must do to preserve and to grow your wealth is critical. The ramifications of this election are stunning, and making the wrong move is going to be fraught with peril.
To make sense of what the election results mean for you and your money, Fabian Wealth Strategies recently held a one-hour teleconference titled, "The Election, Your Money, Your Future."
I know that many investors have been sitting on the sidelines for years waiting for this election outcome, and now that the decision has been made, it's time to discuss what the right investment options will be for you and your money.
During this FREE presentation, we discussed investable opportunities for those with a focus on generating income, and for those interested primarily in growth. We also covered which areas of the market you should steer clear of regardless of your focus.
Some of the topics covered in detail include:
• What are the best opportunities for fixed-income investors?
• What areas of the markets are poised for growth?
• What are the risks of the "fiscal cliff" in the aftermath of the election?
• What's next for gold?
• A discussion about the new innovations in the world of ETFs.
NOTE: Fabian Wealth Strategies is a SEC registered investment adviser, and is not affiliated with Eagle Publishing.
The Wisdom of Goethe
"Everyone holds his fortune in his own hands, like a sculptor the raw material he will fashion into a figure. But it's the same with that type of artistic activity as with all others: We are merely born with the capability to do it. The Skill to mold the material into what we want must be learned and attentively cultivated."
--Johann Wolfgang von Goethe
The multi-talented poet, novelist, natural philosopher and diplomat wrote many a memorable quote, but this one really stuck with me because it reminds us all that every skill we have -- including becoming a good investor -- must be cultivated and nourished if we want it to thrive. It's not enough to have talent in something. Talent is nothing without the hard work needed to make that skill come to life.
To cultivate your investment knowledge, check out Eagle Daily Investor, where my e-letter appears each week. To read my e-letter from last week, please click here.
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 audio podcast, newsletters, seminars or anything else. Click here to ask Doug.