Making Money Alert
Money Show Musings
05/16/2007
Greetings from Sin City!
I am here in Las Vegas for the annual Money Show and I'm pleased to report that I've already spoken with many Alert readers since I arrived here on Monday. I want to thank those I've spoken with for all of their support and constructive feedback on what we're doing here in the Alert, as well as in my various investment advisory services.
One of the messages I've been delivering over the past several months that seems to be resonating well with Alert readers is my admonishment that this recent gravy train in stocks will eventually come to a screeching halt, and when it does, those who aren't strapped in likely will be thrown around the car violently.
We already are seeing signs that this rally in the market is starting to tire, as small- and medium-cap stocks haven't kept up with the Dow's amazing run. One of the things that I want all of my Alert readers to do right now is to really pay attention to all of the holdings in your portfolio. It's essential to know precisely what you own, and to know where the vulnerabilities and weaknesses are in your portfolio.
There is no doubt that we are in a global stock market boom right now. There's tremendous liquidity out there and there's a lot of private equity money coming into the market taking companies private and reducing the supply of stocks to buy.
But I get the sense from talking to many people here at the Money Show that while they all are happy to participate in the recent upside in equities, they also are really nervous about just how long this bull market will last. They know we're in the midst of an economic slowdown, rising energy prices and a slowing housing market. They also know that these factors, along with the simple fact that statistically we are due for a sharp pullback, make for a very nervous bull going forward.When the market pulls back, as it most certainly will, your only form of protection will be to have a preset stop loss on all of your positions. That's why it is critical that you know what you own, what your cost basis is on each position you own, and at what price you plan on selling that position if this market goes against you.
Planning for the worst is the best way to protect your hard-earned gains, so don't be afraid to act in defense of your own dollars. I guarantee you'll be thanking yourself while everyone else is busy kicking themselves for not getting out in time.
THANKS AGAIN!
Last Friday, May 11, I broadcast the final edition of the daily radio show Making Money with Doug Fabian.
Let me start off by thanking all of you who've been loyal listeners to the show from its earliest days. I can't really begin to tell you how rewarding an experience our daily conversations have been. Analyzing the daily swings in the markets; sharing my love of exchanged-traded funds (ETFs) and taking listener phone calls on a daily basis is something I know will be hard to get out of my blood.
I also want to take this opportunity to thank all of my loyal and hard working staff members, as well as everyone at KFNN and all our affiliate stations. Without your tireless efforts, the show wouldn't have been the success that it was. So, from the bottom of my heart, thank you one and all for helping me connect with so many people for so long.
So, why am I leaving the daily radio show that I love so much behind? Well, that's where things really get exciting. You see, I have entered a new chapter in my life; one that I think will be even more valuable to my radio show listeners and my Alert readers.
My productive purpose in life, my mission if you will, is to help people with the proper care and feeding of their finances. My goal is to help everyone I can live the life they've always dreamed of, while having the financial means to do so.
I have learned so much about what people need and want from the hundreds of coaching sessions that I have conducted over the years. Now, I'm going to put those investor needs and desires in the forefront of my everyday life. In lieu of the time I was spending on the daily radio show, I will be focusing much more of my daily efforts on developing personalized plans that are tailor-made to help every individual who seeks a roadmap to riches.
For those of you who are addicted to my radio broadcasts, I am happy to say that you'll still be able to get your weekend fix. I will continue broadcasting my weekend show, Doug Fabian's Wealth Strategies, locally in the Los Angeles area on KRLA News Talk 870 AM, Los Angeles, live, Saturdays from 10:00 to 11:00 a.m. The show also can be heard in Phoenix, Ariz., tape-delayed on KFNN 1510 AM at 1:00 p.m.
For those of you outside the Los Angeles and Phoenix areas, you can listen live via the Internet. To find out how to listen to the show live online just click here.
I also have added a new weekly audio blog to my web site. And, the first edition is available now.
Please take a few minutes and check it out. I am confident you'll really enjoy it.
Here's to the beginning of a beautiful new relationship!
THE YEAR OF THE ETF
Many investment gurus considered 2006 the "year of the ETF" because of the continued expansion of these tools as alternatives to traditional mutual fund investing. There were nearly 150 new exchange-traded funds introduced last year with focuses ranging from dividend-paying indexes to narrow market sectors.
Well, if 2006 was good for ETF fans, 2007 is shaping up to be even stronger. With only five months of the year under our belt, there have been 115 ETF initial public offerings (IPOs), many of which look even more promising than the best of last year's crop. This continued surge has brought the total number of exchange-traded funds available in the marketplace to nearly 500.
Some of the highlights in this new generation of exchange-traded funds include ultra-short and ultra-long sectors; a basket of new health care industry group funds; and even some new country-specific offerings.
It's no surprise that when ProFunds -- one of the true pioneers in the mutual fund industry -- decided to branch out into the ETF arena, the company was bound to turn some heads. Particularly attention-grabbing, especially for those really aggressive investors who love to play short-term trends in sectors, is the latest group of ultra-short and ultra-long ETFs from ProShares, a unit of ProFunds.
The "ultra" means that these funds are "2 beta." In layman's terms, this means the funds are leveraged to perform twice the move of their underlying index. The ultra-long funds move twice as fast on the upside as their underlying index, while the ultra-short funds move twice the inverse of their underlying index.
The ProFunds ultra-short and ultra-long offerings are based on 11 Dow Jones sector indices. These 11 indices produce 22 new ETFs designed to make money not only when the market is going up, but in the case of the ultra-short funds, when the market also is going down. From basic materials to semiconductors and nearly everything in between, these funds give you the ability to invest with the precision that ETFs were designed to achieve. While these volatile tools are not suitable for most investors, you have to credit ProShares on its originality in coming up with offerings suited to all tastes.
Speaking of sectors, when it comes to slicing and dicing our way down to specific industry groups, no one does it better than the 17 new HealthShares funds released this year. These funds drill all the way to the core of the health care sector to bring out the best names in diagnostics, cancer, cardiology and more.
The funds typically target smaller companies in these industry groups to leverage advanced health care techniques that may some day save lives. One of the important technical indicators we are watching with these ETFs is their average daily volume, which has yet to exceed our comfort threshold of 100,000 shares a day.
One of the newest funds to be introduced this year is a country-specific ETF named Market Vectors Russia (RSX). The investment objective of RSX is to give investors direct access to a variety of Russian stocks that range from natural resources to communications companies. This is the first strictly Russian fund to come to the ETF universe. The fund is based on the DAXglobal Russia+ Index, which comprises 30 stocks. Those stocks are mostly large cap and either trade on global exchanges or take the form of American Depository Receipts (ADRs).
Keeping up to speed on all the ETFs coming to market isn't an easy task in this "year of the ETF," but we'll make sure we stay on top of all the action so that you won't miss out on any potentially profitable opportunities.
Want to find out more about how to profit from ETFs on the cutting edge of the secular bull market?
Click here to learn more about ETF Trader
Click here to learn more about Successful Investing
TRUST IN TRUSTS
One sector I am really pleased with lately is the price movement and dividend payouts of Canadian energy trusts. Also known as "CanRoys," these specially designed income-and-growth producing investment vehicles are a fantastic way to get both capital appreciation and income into a retirement or income-oriented portfolio.
Right now, I have two CanRoys in my High Monthly Income advisory service. One of the CanRoys is the Penn West Energy Trust (PWE), which really has been on fire lately.
As the above chart shows, we've seen a nice surge in the price of this trust since the beginning of May. In fact, we currently are holding gains of between 10% and 14% in two of our CanRoy positions. And, that doesn't even account for the near 10% annual dividend yield these trusts are providing us!
THE COACH IS IN 7
I have begun a new chapter in my bag of services that I call "coaching sessions." These sessions are specifically geared toward helping individual investors understand the sometimes confusing landscape of variable annuities (VAs). To make the right decisions with your VA, it is critical that you become aware of all your VA's details and options.
When it comes to annuity contributions, there are two basic options. Knowing the difference between the two will help you to understand the tax consequences when determining your withdrawal strategy. If you are holding pre-tax dollars in your annuity that you contributed while working, or if you rolled over an IRA into an annuity, then all of your future income will be taxable no matter how you withdraw the money. These types of contributions are considered "qualified retirement assets."
The other type of contribution to an annuity is called "non-qualified dollars." With non-qualified annuity contributions, you will not have to pay taxes on your contributions when they are withdrawn. These are part of your cost basis in your annuity and you can receive a combination of both your contributions and growth when you "annuitize" your contract.
Always remember that you have options and choices when it comes to annuities. Here are some important guidelines for you to be aware of if you are considering a VA.
Annuities carry high fees. Always ask about fees, expenses and commissions when you get involved with VAs.
Annuities have multiple investment options. Use the tools in your annuity to your advantage. Do not remain static, or just buy-and-hold, with your critical retirement dollars.
You CAN change insurance companies without paying high commissions. There are great providers of annuities in the marketplace, so don't let yourself be bullied into a product that carries high commission and surrender charges.
Understanding annuities requires experience and knowledge. I want all of my Alert subscribers to know all of their options before making decisions. If I can help you with your annuity questions, please just send me an e-mail and let me know.
If you want to get your FREE annuity coaching session with Doug Fabian, simply send an e-mail.
THE WISDOM OF BRAVERY
"Live your life that the fear of death can never enter your heart."
—Tecumseh, Shawnee Indian leader
It's easy for us to get caught in a rut of "safe" decision making. Let's face it; pushing ourselves out of our own comfort zone is often very difficult. Yet, if you want to achieve truly great things in life, you have to be willing to conquer the unknown. Indeed, you have to live your life as Tecumseh recommends, and never let the fear of failure or adverse consequences enter your heart.
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.