Making Money Alert
Happy New Year, Happy New Decade
12/30/2009
I want to start this final Alert of the year with a few thoughts on the market of 2009, as well as a few thoughts on the market as we head into a new decade. If we stop and think about where we are at the end of 2009 compared to where we were at the end of 2008, I think we all can agree that we’d much rather be where we are right now than where we were just 12 months ago.
Take a moment to reflect back on just how worried, scared and, for some, how downright panicked you were at the end of 2008. I must admit that I was worried, too, although I wasn’t really worried about the holdings in my personal accounts, in my advisory services, or about how we were going to weather the fiscal storm. Rather, I was worried that so many investors around the globe were losing so much of the wealth that they worked so hard all of their lives to accumulate.
I knew from more than three decades of dispensing market advice that “this too shall pass,” as the Biblical passage reads. I also knew that we had a proven plan in place to cope with whatever the financial markets threw at us.
You see, the same principles that protected our money from harm during last year’s financial crisis -- adherence to a plan, and an unswerving vigilance toward preserving capital -- also will continue protecting us against the inevitable pernicious downturn that almost certainly will afflict investors again sometime within the next decade.
And, as we enter into this second decade of what has so far been a truly tumultuous 21st century, those principles will continue guiding us through the ebb and flow of both barren bear markets, and bountiful bull markets.
Finally, I want to thank you, the Alert reader, for letting me in your life each week. It is because of you that I’m able to continue doing what I love most in this world -- helping people achieve the wealth, and the lives, they deserve.
Now, no year-end issue would be complete without a market snapshot, so let’s take a quick glance at the chart below of the S&P 500.
As you can see, it’s been a very good year for the bulls, and one that I hope you participated in. If you did make money in this market in 2009, I applaud you. If you didn’t make money this year, then rest easy. There will be plenty of opportunity to make money in the equity markets in 2010.
These opportunities may not be as widespread, or as easy, as they were in 2009, but as the old adage says, “There’s always a bull market somewhere.” Of course, identifying those bull markets and positioning your money to best take advantage of them is much easier said than done, but hopefully, the Alert will help you identify those opportunities, and take advantage of them in the year -- and decade -- that lies ahead.
Investment Themes for 2010 -- Part 2
Last week, we talked about what I think will be a big investment theme for 2010, rising interest rates. This week, we take a look at the second installment in our series about the top 10 investment themes for 2010 -- currency upheaval.
Now, when I say currency upheaval, I am talking largely about the fortunes of the U.S. dollar. To be certain, the dollar has had a lot of upheaval in 2009. Just look at the chart below of the U.S. dollar index, a measure of the greenback compared to a basket of the most heavily traded foreign currencies.
After starting the year with a stout surge, the dollar’s fortunes turned tail in March. And with a few brief periods of sideways movement, the greenback plunged to record lows in late November.
Interestingly, the dollar has been on a sharp run higher since the first week of December. In fact, the dollar recently broke above its short-term, 50-day moving average (blue line), and now appears on route to break above its long-term, 200-day moving average (red line). If the greenback can breach this technical barrier, it could be the start of a protracted bull in the U.S. dollar vs. rival foreign currencies.
This is the kind of currency upheaval I expect will take place in 2010. As more and more countries try to keep the value of their currency low to help stimulate exports, we are likely to see more money move into dollars. Also, the rise in the dollar could mean a pullback in the price of gold.
The price of gold, as represented below in the chart of the SPDR Gold Shares (GLD), has been on a tear for most of the year. However, since the dollar’s December resurgence, the value of gold has declined precipitously.
I think that the currency upheaval we’re likely to see with the dollar -- and with other currencies around the globe -- will mean opportunities on both sides of the gold trade in 2010. It also will mean opportunities on both sides of the international equity market trade, and on both sides of the domestic market trade.
Just about any way you look at it, currency upheaval in 2010 will cause both dislocation and opportunity for investment capital. The trick, of course, is to know which is which, and to be on the right side of the trade.
ETF Talk: Profiting from the Falling Euro
Investors who like to profit from well-timed currency investments may want to consider betting against a weakening euro. Indeed, the U.S. dollar rallied overnight and pushed the euro down today as U.S. stocks, oil and gold dipped.
With investor interest waning in higher-yielding currencies such as the euro, the dollar is ascending. You may recall me voicing my belief in the Dec. 16 ETF Talk that the dollar had fallen below what I viewed as its true value, and that its downward trend was starting to change. Well, that reversal of the dollar’s fortunes appears to be taking hold.
One way to profit from a flagging euro is to invest in the UltraShort Euro ProShares (EUO), an exchange-traded fund (ETF) that seeks to replicate, net of expenses, twice the inverse performance of the EUR/USD daily price change. Basically, with EUO, you are betting on the dollar’s rise vs. the euro. Right now, betting against the euro is looking like a shrewd move.
The dollar hit intraday highs against the euro, yen and the Canadian dollar after the Dow Jones Industrial Average opened lower today. Reports also surfaced this morning that loans to companies in the euro zone fell in November, which put further downward pressure on the euro. The chart below shows the rise of EUO throughout December as the euro pulled back.
In my experience, currency trends often seem to last longer than they should. With the trend now working in EUO’s favor, the fund could be a place where currency investors may want to put a small percentage of their funds. I recently recommended EUO in my ETF Trader service as a short-term trade.
With equities and commodities under pressure in recent weeks, the dollar is strengthening at the expense of the euro and other currencies. With the economic recovery in Europe appearing as though it may lag behind other regions of the world, the European Central Bank could be forced to remain in neutral as other central banks look to fend off inflation in the months ahead. If that situation arises, the euro will be vulnerable to further declines.
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. Remember, I am pleased to answer any of your questions about ETFs, so do not hesitate to contact me. To send your question to me, simply click here. You may see your question answered in a future ETF Talk.
Are You Ready for Rising Rates?
Last week, Federal Reserve Chairman Ben Bernanke and his band of central bankers signaled the market that the near zero cost of capital is going to continue for some time. However, what you have to remember is that the Fed doesn't control the long end of the interest rate spectrum. Long-term interest rates, i.e., long-term Treasury yields, are a function of market activity.
I think rising interest rates are a very real possibility as we head into 2010 and beyond. In fact, I am of the opinion that interest rates are going to be much higher in the years to come, and that means you should consider an allocation to investments that move higher along with interest rates.
In my latest Rising Interest Rates Special Report, I outline my concerns for the bond market, ways to profit from rising rates, and actions you can take to shelter your portfolio now.
If you have a portfolio made up of bond funds or individual bond positions, now is an excellent opportunity to get a second opinion on your holdings. Contact us for a brief introduction and to schedule a follow-up phone call. We'll conduct a revealing assessment on your holdings, and give you specific recommendations for what you can do to better position your assets for the year ahead.
You can call our offices at 800/391-1118 to setup a consultation, or register online.
NOTE: Fabian Wealth Strategies is an SEC registered investment adviser, and is not affiliated with Eagle Publishing.
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!
My Favorite 2009 Quote
“The system worked.”
-- Homeland Security chief Janet Napolitano on the Christmas Day airliner attack
These days, the absurdity that comes out of Washington is almost too common to notice. But even I was taken aback by the truly contemptible words uttered by the head of our nation’s Department of Homeland Security. If Secretary Napolitano thinks this near-terrorist disaster is evidence that “the system worked,” then that’s all you need to know about the warped definition of both “system” and “worked” in the minds of bureaucrats. The only good thing about this quote is that it takes top honors as my favorite statement of the year. The reasons are because it clearly illustrates not only how out of touch the political class is, but also how backward their thinking has become on just about every issue.
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!