Making Money Alert
Could This Be the Beginning of Good Trade Location?
01/13/2010
In last week’s Alert, we introduced the concept of “trade location,” a term that simply refers to establishing a good entry point for any equity position you enter. Well, Tuesday’s pullback in the markets could be the first signal that we now are approaching a good trade location in the broader equity markets.
Let’s review here what’s meant by a good trade location, as this concept will be one we use repeatedly in the weeks and months to come. Getting a good trade location refers to buying a stock, mutual fund or exchange-traded fund (ETF) before it’s gone too far above both its short- and long-term moving averages.
If we look at the chart below of the S&P 500 Large Cap Index (SPX), we see that the index is well above both its short-term, 50-day moving average (blue line), as well as its long-term, 200-day moving average (red line).
Buying into the S&P 500 right now does not give you good trade location. Now, that’s not to say that you can’t make money if you buy into an S&P 500 fund right now. But what it does mean is that you stand a far greater chance of making money by buying the shares once they pull back toward a much better trade location.
I think that if we see a 5% to 10% pullback in the S&P 500, it will finally set up the good trade location I’ve been looking for. If this does happen, it will not be the end of the current bull market. Rather, I think it will be your chance to add money to your broad-based equity holdings.
In the weeks to come, we’ll be watching closely for more signs of good trade location, not just in the S&P 500, but also in various market sectors that are showing good trade location -- so be sure to tune in each and every Wednesday!
Investment Themes for 2010, Part 4 -- Rising Food Prices
Food is getting expensive. In 2010, this trend could be a chance for you to make some serious money. No, I’m not talking about opening a restaurant. Rather, I’m talking about investing in agricultural commodity ETFs that track the price of the raw materials that make up the food we eat. Commodities such as corn, wheat, soy beans and sugar all are in demand right now, and that’s what’s making the price of food increase worldwide.
You see, the world’s developed-nation population continues to grow, as does the world’s collective income. More people with more money will equal more food consumption. This greater food consumption is really being seen in China, and the sheer population numbers in this massive country mean that we could see increased food demand for many years to come.
On the supply side of the equation, we have bad weather in many food-producing nations such as Argentina, India and the Philippines. Here in the United States, we’re likely to see stockpiles of corn and rice drop before the 2010 harvest. Also, sugar supplies are woefully low this year. According to the Department of Agriculture, sugar stores will drop to their lowest point in nearly 15 years. Finally, the total global production of rice has lagged demand in four of the past eight years, and increasing global rice consumption is expected to cut into stockpiles by more than 40%.
All of this adds up to rising food prices worldwide, a trend that I think will continue to be in play throughout the year.
Right now, subscribers to my Successful Investing advisory service have an allocation to an ETF that takes advantage of this rising food price scenario. If you’d like to find out more about how you can get allocated to this fund, then I invite you to check out Successful Investing today.
ETF Talk: Investing with the Strength of Steel
As we usher in a new year, the economy is projected to improve from the doldrums of 2009. One way to ride the expected economic turnaround this year is to invest in steel. Savvy investors can invest in steel by buying the Market Vectors Steel ETF (SLX). This exchange-traded fund (ETF) has been climbing since last spring and should gain further momentum from rising demand. An ETF also offers diversification by investing in a basket of companies in the steel industry, not just one that could melt down unexpectedly.
J.P. Morgan appears to be taking notice of steel’s improved outlook. The investment firm recently raised its price targets on three of the industry’s major companies, U.S. Steel (X), AK Steel (AKS) and Arcelor Mittal (MT). The report also mentioned that scrap prices have rebounded by roughly 25% since their mid-November lows and could rise by another 15% due to seasonal supply constraints, strong exports, and low inventory levels at the mills. This data is significant because the price of scrap metal is an economic indicator. When the price of scrap metal rises, the economy typically is on the upswing.
A big reason for the increased demand in steel is the voracious appetite for the metal that is coming from China. The Chinese economy has been growing quickly in recent years, while many other economies around the world have been languishing. China's surging demand for steel is gaining widened attention.
“Already the world's largest producer by far, the country is expected to rev up production by nearly 10%, The Wall Street Journal reported Jan. 11. “But the higher output likely won't exceed demand, pushing prices higher world-wide for steel, its raw materials and even coal.”
Steelmakers that temporarily closed a number of mills and cut production as economic conditions sagged last year now are boosting production to address the increased demand. Resurgence in the steel industry is lifting the share prices of the public companies that produce steel. The following chart shows the dramatic improvement in the fortunes of the steel industry ETF, SLX.
As you can see, SLX has been trending upward since last March. However, the ETF has shown occasional weakness during its rise. Such dips present good buying opportunities. With the market at large and, steel companies in particular, taking minor hits from investors during the past couple of trading days, those of you interested in buying SLX may be tempted to do so soon.
If you want advice from me about which ETFs to buy and to sell, I encourage you to sign up for my ETF Trader service by clicking here. As always, I am pleased to answer any of your questions about ETFs, so do not hesitate to contact me if you have one. To send your question to me, simply click here. You may just see your question answered in a future ETF Talk.
Listen to my Investment Strategies Conference Call Now!
On Saturday, Jan. 9, I held my first investor teleconference of the year. This call was tremendously successful, and I want to thank all of you who called in and joined the fun.
Now, if you didn’t get a chance to call in, then don’t fret. A recording of the call is available now at my Web site. To get your FREE download of this call, click here.
In the call, I discussed the investment landscape for 2010, and I reviewed several of the investment themes for 2010 that we’ve been talking about here in the Alert for the past several weeks.
I believe 2010 will present an entirely new list of winners, and losers, in the equity and bond markets. To find out what these are, and how you can take advantage of these trends, all you have to do is listen to the call.
Here are just some of the important points we covered in this one-hour teleconference:
- The direction of stocks in the new year.
- The sectors I believe have the most profit potential.
- What you can do to hedge your portfolio against rising interest rates.
- My thoughts on gold prices in 2010.
- Which commodity ETFs deserve your attention right now.
I urge you to devote an hour of your day to listen to this call. I think you’ll find it well worth the time.
To start listening to this call right now, simply click here.
NOTE: Fabian Wealth Strategies is an SEC registered investment adviser, and is not affiliated with Eagle Publishing.
The List Is in -- Get Your ETF Report Now
The list is in, and it’s time you got your copy. I am talking here about the final ETF Report of the year -- a report that contains both the fourth-quarter performance, and the full-year performance of every fund in the entire ETF universe.
I recommend that you download this FREE Special Edition of the ETF Report today, as it will tell you how each and every sector of the market did in 2009. This valuable list also can be used as a quick reference guide to all the ETFs currently available.
If you follow any of the advice I give in my investment advisory newsletters, or in the Alert, then you already know how fond I am of ETFs. I recommend these low-cost, transparent and objectively managed investment vehicles to all my readers, so if you still haven’t started using ETFs in your portfolio, this is the year to get on board.
2010 -- Back to the Future?
By David R. Clarke, President, Miracle Debt Solutions
If you read the economic history books, there’s not much fondness for the 1930s. This was the decade of the Great Depression, where unemployment was well over 20% for much of the time. It’s also when food lines literally stretched miles long, as many American citizens could not afford to even eat. Our economy had never seen such economic peril, and the prevailing conditions of the decade shook the very core of our great nation. All of us can only hope that our country never sees such hard times like this again.
Now, by the title of this article, you might assume that I’m going to equate the coming decade with the 1930s. Well, this kind of fear-inspired parable is not my intention. What I do want to do here, however, is to tell you that thinking about those rough times can be inspiring, particularly if we look at the good that came out of it. You see, the sheer resilience and perseverance of those who survived the Great Depression helped to usher in some of the best economic times our country has ever known.
Fast forward past the war years and into the 1950s. The average family had much more wealth than it did in the 1930s, but when it comes to luxury items, the average American family in the 1950s had little when compared to today. What they did have was an abundance of time for family, a proper perspective on material goods, and most importantly -- minimal or no debt.
Today, many of those luxury items have been purchased with debt. In fact, the average household carries more than $8,000 in credit card balances! How much debt do you think the average family carried in the 1950s? I can’t tell you, because the number wasn’t even measured due to its insignificance.
One of the goals of my company, Miracle Debt Solutions, is to help people go back to the future. I want my clients to have the kind of priorities and debt levels that most Americans had in the 1950s. I also want them to have the resilience and fortitude to prevail -- whatever the economic circumstances are, the same way the citizens of the 1930s did.
At Miracle Debt Solutions, we offer a number of programs that help people get out of debt once and for all. We can lower your credit card rates down to 0% - 4.99%, and we can work with you to significantly lower your current monthly payments, and possibly get you a loan-balance modification. My goal is nothing short of helping people free themselves from burdensome debt.
In 2010, and in the decade ahead, I hope that many of us learn from the past and set our priorities anew. Let’s take control over our personal and financial situations once and for all. Let’s spend our time and treasure on family, friends and faith, rather than debt and materialism that we cannot afford -- and that won’t even yield us the happiness and fulfillment we so desire.
Please contact me at 877.332.8650 for a free, confidential, no obligation consultation today. I can also be reached at dave.clarke@miracledebt.com or via my Web site at www.miracledebt.com.
Here’s to a debt-free decade!
Hemingway, the Financial Advisor
“Hesitation increases in relation to risk in equal proportion to age.”
--Ernest Hemingway
The great novelist stumbled upon a truism when it comes to investing. That truism is that as you get older, you’ll want to take less risk, especially with your money. If you’re at a stage in life where you want to protect what you’ve already earned, then make sure you take a little advice from Hemingway, the financial advisor, and keep away from the riskier side of the investment spectrum.
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. Click here to ask Doug.
Sincerely,
Doug Fabian
P.S. My publisher, Eagle Financial Publications, is now on Facebook. Click here to see our page and be sure to become a fan when you get there.
P.P.S. With the help of global financial stimulus, a number of global markets have rallied from their lows of 2008, providing investors who were invested in the right markets at the right time with healthy returns. Although the question remains -- how do you become one of those investors? For an answer, I encourage you to attend The World MoneyShow in Orlando, February 3-6, 2010, at The Gaylord Palms Hotel and Convention Center, to hear more than 60 leading experts. They will be on hand to provide you with insights and recommendations to help you identify emerging opportunities around the globe. I hope that you will join me there! Visit The World MoneyShow Orlando to register FREE today!