Making Money Alert
Slippin' and Slidin' On an Oil Slick
05/21/2008
Stocks have fallen back below their long-term, 200-day moving averages following a heavy, two-day sell off caused in large part by one thing: surging oil prices.
Just last week all three of the major market indexes -- the Dow, S&P 500 and NASDAQ Composite -- moved above their respective 200-day averages. But with oil now trading above $130 a barrel, I guess a sell off wasn't all that surprising.
Last week, we saw some good news that the economy was stabilizing. There was a bevy of solid earnings reports, stable inflation data and some solid trading volume to the upside suggesting that Wall Street had possibly turned a bullish corner.
Unfortunately, while turning the corner many investors slipped and fell on an oil slick.
The key question now is will this market be able to fight its way back up after this two-day oil slide? I think the answer to that question is a qualified yes. You see, the markets have lived with high oil prices for some time now, and The Street has largely adjusted to this new reality that oil prices will remain high for some time.
That said, there is nothing like the prospect of higher inflation spurred on by higher energy costs to scare the wits out of Wall Street. And while many investors out there are acting out of fear, I prefer to act from an objective, emotion-free perspective?
If you are looking to avoid the trap of selling out of fear and buying on pure hope, then my Successful Investing advisory service could be just what you're after.
You see, in my Successful Investing service, we use objective criteria to help us get in the market when the going is good. More importantly, we use those same objective criteria to help keep us away from dangerous market slides.
Will The Oil Spike Continue?
"Oil prices hit a new record high today…"
How many times have you seen a headline resembling the one above during the past several months? Indeed, it seems like with every passing day there's a new all-time high for crude oil prices.
Just look at the chart below of the United States Oil Fund (USO).
As you can see, there's been an unabated rise in the price of oil during the past year. The question now is how long is this rise in prices going to last? How much higher can we go, and how will rising oil prices impact the global economy?
Answers to these questions aren't easy, and nobody really knows for sure what the outcome in the oil patch will be. Yet there are some very smart people around whose opinions on this issue I respect and trust. One of those persons is my good friend, and investment advisor extraordinaire Keith Fitz-Gerald.
Keith is predicting $200 oil within the next couple of years.
Yes, I know that's somewhat scary for all of us, but if you listen to Keith's reasoning behind his thesis, your fears might just subside. You see, rather than lament the situation; Keith explains how individual investors can make a bundle of money investing in sectors that will actually go up as the price of oil goes up.
I highly recommend that you to listen to my fascinating conversation with Keith by clicking here.
Preaching The ETF Gospel 2
You've probably heard that old saying, "To know me is to love me." Well, I am in no way vain enough to say that about myself, but I will change that old saying in a way that does apply to me. That new saying goes, "To know me is to know I love ETFs."
That's right, I am a self-admitted preacher of the exchange-traded fund (ETF) gospel, and my pulpit last week was the Las Vegas Money Show. This year's Money Show gathering was extremely well attended, and many of the people I spoke with there asked me why I love ETFs so much.
I wasted no time in answering these questions with a burst of praise for the 1) low cost of ownership, 2) transparency, 3) objective management and 4) ease of ownership you get when you invest with ETFs. I can't tell you how good I feel about being an ETF advocate. These products are the greatest investment tools Wall Street has come up with in years, and I want everyone to know it.
If you want to find out just how many ETFs are out there, and how each one has performed over the short- and long-term, you're in luck. Every week, I post a new ETF Report at DougFabian.com.
This FREE report is a great way to help you get familiar with the various ETFs out there. You'll also be able to see which ETFs are red hot, and which ones have been left out in the cold.
I encourage you to download your FREE copy of the ETF Report by clicking here.
ETF Talk: Dialing For Dollars With Currency ETFs
Anybody who's ever invested money in the financial markets has probably received an unsolicited call from a stockbroker trying to get him or her to open up an account with that broker's firm. This common practice of making unsolicited calls to prospective clients is known in the industry as "dialing for dollars."
But now that the value of the U.S. dollar versus rival foreign currencies seemingly has become a one-way ticket to Palookaville, investment firms are dialing for dollars in a whole different way.
To take advantage of the dollar's decline -- and the widespread interest it has engendered with investors looking to speculate in the currency markets -- many exchange-traded fund (ETF) issuers have come out with new ETFs designed to help investors dial-up profits from the direction of the dollar and its rival foreign currencies.
Just last week, the first five WisdomTree Dreyfus Currency Income ETFs began trading on the NYSE. These ETFs caught my eye because they are aimed at earning current income intended to equal money market rates available to U.S. investors in the specific country or region that is the focus of each fund.
The four new WisdomTree Dreyfus ETFs are classified by the SEC as "actively managed" funds that seek to provide exposure to changes in the value of a designated non-U.S. currency, compared to what has been a devaluing U.S. dollar. To my knowledge, these currency funds have the distinction of becoming the first actively managed funds in this sector. This active portfolio management should allow for heightened investment flexibility.
Each fund will invest in short-term, investment grade financial instruments but none of these new ETFs should be considered money market funds. Nor will the funds maintain a constant share price, so risk of losing principal certainly is a concern.
With the U.S. dollar showing no signs of strengthening and remaining under pressure to weaken from further U.S. interest rate cuts, now is a good time for you to become familiar with these WisdomTree Dreyfus offerings. Three of the funds are aimed at riding currency appreciation in the fast-growing economies of Brazil, China and India, respectively. The fourth is a bet on the Euro, while the fifth is a play on Japan's Yen.
WisdomTree Dreyfus Chinese Yuan Fund CYB
WisdomTree Dreyfus Indian Rupee Fund ICN
WisdomTree Dreyfus Brazilian Real Fund BZF
WisdomTree Dreyfus Euro Fund EU
WisdomTree Dreyfus Japanese Yen Fund JYF
These funds may be of particular interest to investors looking for portfolio diversification. With stock markets around the world generally rising and falling somewhat together, currency investments are a way to provide a bit of balance and to avoid overexposure to equities.
For many of you, currency investing may be a little outside of your comfort zone. Stocks and bonds likely are most familiar to you. I also recognize that investing in U.S. dollar-denominated money market funds may be easier for you to understand than currency ETFs. But if you are seeking alternatives to the low yields and the depreciating purchasing power that have occurred with the U.S. dollar in recent months, you may want to consider currency funds.
However, there are some unique risks to currency investing that I want to bring to your attention. The potential loss of principal definitely is a risk. Another risk is currency fluctuation. Although the U.S. dollar has been weakening, it may recover either short term or long term. Political and economic risks also are considerations with currency investments. Events and developments in specific regions and countries are magnified when you hold assets in funds that invest in those places. Other risks with currency investments include credit risk, interest rate fluctuations, and derivative investment risk.
If these risks seem too daunting, stay clear of currency ETFs. But if you want the diversification currency ETFs offer, you may want to take the plunge. I personally am not recommending any of the currency ETFs right now, but I do like the income-generating component of the WisdomTree Dreyfus funds.
Income Investors: Pick Up Your Phones NOW! 2
On Saturday, May 10, I presented part II of my three-part Retirement Income Conference Call series. If you are in retirement, approaching retirement or are in charge of the financial assets of parents or grandparents, I invite you pick up the phone right now and listen to the replay of this call.
In our first call we covered the basics of retirement income investing such as: getting organized; understanding your income streams; essential and discretionary expenses; the threats to your income, and how to create new lifetime income streams. Now we have moved into a new discussion about two very important topics for retirees.
The first is income investing, and just how it is done. We discussed what vehicles you should use, and where the best opportunities are today for income investors. Second, I spoke in much greater detail about the new living benefits within today's variable annuities. There is a new breed of no-load annuity available that allows you to receive income without annuitization -- and while still maintaining control of your assets.
This type of annuity could be a great choice for a portion of your 401(k) or IRA. We covered all this and much more in this dynamic and informative conference call.
If you didn't have the chance to call in, then now is your chance to listen to the replay at your own convenience. Just click here to listen to part II of my Retirement Income Conference Call.
The War Against Mediocrity
"So then because thou art lukewarm, and neither cold nor hot, I will spue thee out of my mouth."
—Revelation 3:16
Let me translate the above passage into what I think is a great lesson for all investors: Don't settle for mediocrity. If you're feeling only lukewarm about a stock you own, or an advisor you've chosen or a deal you've made, I recommend that you figuratively spit them all out. Our time on earth is finite. With so many great choices to feel excited about, why spend any time at all embracing the mediocre?