Making Money Alert
Happy Anniversary, Mr. Bull Market
03/10/2010
The date was March 9, 2009, and the S&P 500 Index was trading at its lowest level since the mid-1990s. The equity market was in literal freefall, and nearly everyone on both Wall Street and Main Street was worried that the U.S. economy -- and the U.S. equity markets -- were about to collapse.
Well, a funny thing happened about midway through that March 9 trading session. People all of the sudden started to get bullish. And during the next 12 months, we witnessed the S&P 500 Index rise nearly 70% off of its lows.
The tremendous bull market recovery during the past 12 months can be seen in dramatic fashion with a quick glance at the one-year chart below of the S&P 500.
As you can see, it’s been nearly a rocket ride higher for much of the past year. Even a sell-off at the beginning of 2010 now has morphed into a near recapturing of the recent 52-week high.
Now, I don’t want to throw water on this market’s flame, but if we widen our perspective a bit when it comes to stocks, we can see that even with the tremendous gains of the past year, holding an S&P 500 index fund over the past five years resulted in essentially flat performance.
The five-year chart above shows just how little progress was made over the last half decade. If you followed a buy-and-hold strategy, you’ve basically been holding onto dead money.
If we widen our lens even further, we can see that if you had been following a buy-and-hold strategy for the past decade, you are in very deep trouble. In fact, over the past 10 years, your S&P 500 holdings would be down nearly 25%!
I think what these three charts make very clear is that the idea of getting rich through simple buy-and-hold investing is flawed -- even with high-performance years like the one we just had.
If you want to get yourself acquainted with a strategy that’s actually bested the buy-and-hold method for more than three decades, then I invite you to check out mySuccessful Investing advisory service. It’s the one strategy proven to get you in the market when the bull stampedes, and keep you out of the market when the bear’s eating Wall Street’s lunch.
Tax Day Is Right around the Corner
It’s March 10, and that means you have a little more than five weeks before you need to send that tax return to Uncle Sam. During the past month, I’ve been working particularly hard on my own tax situation by meeting regularly with my CPA, Lee Haight. You may recall that Lee wrote an excellent article back in December that detailed ways you could make the most of your tax planning in 2010.
Well, there’s still time to get your fiscal house in order before you have to complete and send in your return, so it behooves you to arm yourself with the best intelligence you can as we approach the dreaded tax deadline.
To help you plan further for this year’s taxes, I conducted an interview with Lee, recorded it, and I now have made that interview available at DougFabian.com.
If you want to find out what you need to be doing right now to get yourself prepared for April 15, then I highly recommend that you listen to this interview now.
I guarantee you’ll find our discussion most insightful -- and it could save you a whole lot of money April 15.
ETF Talk: It's Time to Talk Turkey
If you’re anything like me, you enjoy turkey at Thanksgiving. But my sights at this time of the year now are set on the country of Turkey, which is offering what could be an appetizing investment opportunity through the iShares MSCI Turkey ETF (TUR). That exchange-traded fund (ETF) gives investors exposure to a promising emerging market.
This ETF zoomed a jaw-dropping 98% in 2009 when the Turkish stock market was one of the world’s top performers. An interest rate cut to record lows by Turkey’s Central Bank last year probably fueled the stock market’s gains. Unfortunately, though, the first two months of 2010 have not been quite as kind, with the fund dipping 3.6% year-to-date through March 9 and dropping 13.3% in February alone.
TUR is a pure play on the Turkish stock market, since it seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI Turkey Investable Market Index. That index measures the performance of the Turkish equity market.
So far, 2010 has ushered in new insecurities about the country’s ability to get its economic and political act together. In fact, The ISE National 100 stock market index dropped in February on news that the Turkish government arrested 40 military officials due to an alleged coup plot in 2003. The unexpected development and concerns that it could snowball sent the country’s market and its currency, the lira, falling. It seems that wary investors have headed for the exits, but Turkey still could provide a good opportunity for investors who are willing to take a bit of a risk. And now may be the perfect time, since prices are far lower than they were just two months ago.
If you are unfamiliar with Turkey, here’s a quick snapshot of its tumultuous past and promising future. With a population of 72 million people, Turkey is positioned on the strategically important border between Europe and Asia. A persistent candidate for entry into the European Union (EU), negotiations between Turkey and the EU keep stalling because of Turkey's lack of economic reform programs.
While it once was an economic basket case, Turkey has been rebounding during the last decade by reining in inflation. Turkey’s reward is that its economy grew an average of nearly 6% between 2002 and 2008. Unfortunately, the credit crunch in 2008 and 2009 hit the Turkish economy hard and caused it to shrink 13.8% in the first quarter of 2009 and by 5.8% for the full year. However, Turkey’s fiscal and monetary stimulus programs, combined with a healthy banking sector, helped to cushion the blow. Unlike other emerging markets in Europe, Turkey survived the financial downturn without relying on an emergency bailout package from external lenders. The country now is expected to grow 3.5% to 4% this year.
A further encouraging sign arose Feb. 19, when Standard & Poor’s raised its long-term foreign currency and local currency sovereign credit ratings to BB and BB+, respectively. Although such ratings are still below investment grade, this action should have been positive for the Turkish stock market. However, news broke shortly thereafter of the alleged military coup plot from 2003 that sent the ETF plummeting. It simply shows that Turkey is a volatile market and investors must be ready to brave the plunges, while they also look to ride the surges.
Given Turkey’s resilience in the face of economic crisis, I think TUR is worthy of considering as an emerging market investment. Of course, TUR carries risk, so this ETF is not for the faint-hearted. If you are willing to take a risk, this ETF’s recent price dip could let you buy shares in the fund at a relatively discounted price.
If you’d like particular advice about which ETFs to buy and sell, please sign up for my ETF Trader service by clicking here. As always, I am glad to answer your questions about ETFs, so do not hesitate to email me if you have one. To send an ETF question to me, simply click here. You may see your question answered in a future ETF Talk.
Listen to My FREE Teleseminar
On Saturday, March 6, we held our latest teleseminar, titled “The Return of the Bear Market.” I want to personally thank all of you who joined me for this event, and as you know, we had a great time discussing ways to deal with the changing tide of the markets.
If you didn’t get a chance to participate in last Saturday’s call, don’t worry. We’ve recorded the entire teleseminar and posted it at our Web site for you to listen to it absolutely FREE.
This one-hour teleconference covers topics such as:
- Why stocks and bonds have the potential to enter a new bear market
- What are the warning signs to look for in the markets
- Where investors can seek safety during the next 12 months
- How you can profit from the crisis
If you would like the answers to all of these questions -- plus a whole lot more -- I invite you to click here for all the details.
NOTE: Fabian Wealth Strategies is a SEC registered investment adviser, and is not affiliated with Eagle Publishing.
A Very Insulting -- and Instructive -- Comment
“But we have to pass the bill so that you can find out what is in it, away from the fog of the controversy.”
-- House Speaker Nancy Pelosi
You may have seen this news on Tuesday, as that is when Speaker Pelosi uttered what has got to be one of the most insulting things I’ve ever heard a politician say. Basically, what the House leader is saying is -- just trust us, we know what’s best for you when it comes to your own health care. Well, that sounds like a lot of snake oil to me.
Ironically, this comment comes from the Speaker who, just a few weeks ago, was touting the transparency of the political process that actually produced the health-care bill. This is truly frustrating to me, as the issue of health care is something every American needs to know about intimately.
I guess the only lesson here to be learned is that politicians always think they know what’s best for us, but usually it’s really all about what’s best for them. The other, more practical lesson here is that when it comes to your money, nobody knows -- or cares --more about what’s best for you than you do.
Sure, you can get expert advice about how to invest, how to handle your personal finances and how to do your taxes from people like my associates and me. But ultimately, you have to be the one to take control of your own financial destiny.
Unlike the health-care debate and so many other things largely out of your personal control, your finances and the choices you make with them are almost entirely within your control. So, whatever you do, don’t abdicate your responsibility when it comes to your money.
Choose to do the right thing, and choose to take control of your destiny.
Don't Let This Happen
“A long habit of not thinking a thing wrong gives it a superficial appearance of being right.”
--Thomas Paine
There’s a lot of change going on in Washington these days, and some of it is downright frightening to freedom-loving citizens like me. I think we all need to remember the great Thomas Paine’s thoughts in the above quote, because if we get used to more and more infringements on our pocketbooks, the politicos of both stripes are going to continue thinking everything’s okay. Remember, not thinking a thing wrong gives it the appearance of being right, so let’s not let this happen on our watch.
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 that you have about my radio show, newsletters, seminars or anything else.Click here to ask Doug.
Sincerely,
Doug Fabian
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