Making Money Alert
The Fireworks Show Starts at 950
07/01/2009
It's nearly the Fourth of July weekend, but the real fireworks in the market could still be a week or so away. When I look at a chart of the S&P 500 (see below), I see a market that wants to make its way above 950.
If we can breach the highs of the year, namely the 950 market on the S&P 500, then I think we'll see a market explosion that could send us straight up to the 1,000 mark.
On the other hand, if we see the S&P 500 flame out here, i.e., we see stocks fall below the 890 mark on the index, I think we could be in for a serious crash and burn.
My take here is that stocks will see fireworks, and that we will see a surge to 950 and beyond. Of course, nobody knows for certain, but I suspect that this summer will be a very happy one for stocks.
What this means is that if you have positions in the market right now, then you should be in good shape going forward. But if I am wrong, and if the market experiences a blue summer, then you'll want to make sure and have a sell discipline in place to protect your hard-earned assets from adversity.
My Top 3 Themes for the Individual Investor 3
On Saturday, June 20, I had the pleasure of making a presentation to a local chapter of the American Association of Individual Investors, or AAII. I always like speaking to this group, as their enthusiasm and intelligent questions help me get a real sense of what investors are most concerned with. My presentation to the group covered my top three investment themes for the individual investor. The first of my themes was the current bull raging in the emerging markets. Now, those of you who subscribe to my Successful Investing advisory service know that I've been recommending one ETF designed to move higher along with the emerging markets. I think there is real economic growth going on in the world, but unfortunately that growth isn't taking place here at home. It is, however, taking place in countries like China, India and other emerging markets. For investors, this economic growth means your gain -- if you know where to invest.
The second of my themes is the rising cost of commodities. Because the aforementioned emerging markets have such a strong appetite for agricultural products, we are likely to see a rise in commodity prices going forward. Fortunately, taking advantage of this trend is easy, as subscribers to my ETF Trader advisory service can attest.
Finally, my third strategy for individual investors revolves around new and innovative ways to generate income in their portfolios. Thanks to the burgeoning ETF market, income investors have more ways than ever to gain exposure to dividend-paying equities, bonds and other income-generating assets. Subscribers to my High Monthly Income advisory service know firsthand about many of these funds, but I want all of my Alert readers to know about them, too.
If you'd like to get a copy of my AAII presentation, all you have to do is to send us an email. I will email you back a copy of my presentation, which includes a discussion of the specific ETFs that can help you achieve your financial goals.
To get your copy of the presentation, click here
The Worst of all Possible Worlds
The literati out there will likely remember the famous refrain, "The best of all possible worlds," from Voltaire's master work, Candide. In the novel, Voltaire set out to expose what he considered a fallacious line of thinking proffered by the philosopher Gottfried Wilhelm Leibniz. According to Leibniz, because God is both good and omnipotent, and since He chose this world out of all possibilities, this world must, in fact, be the best of all possible worlds.
Now, fast-forward some 250 years since the publication of Candide, and let's put a little twist on the theme of the best of all possible worlds. You see, when it comes to the very real economic fears of both inflation and deflation, what we could be looking at is the worst of all possible worlds.
On the inflation side of the coin, we are staring at the very real possibility of higher commodity prices as world demand for agriculture, metals, oil and other necessities of industrial civilization continue growing. Plus, with the Federal Reserve and the Obama Administration intent on printing and spending our way out of the financial crisis, the value of the U.S. dollar vs. rival foreign currencies is bound to be headed south. Taken together, these two factors mean commodity price inflation.
On the flipside of the coin, we also are staring at the very real possibility of wage deflation in the United States. Because of the huge supply of willing and capable labor around the globe, corporations are finding it advantageous to outsource much of their labor needs. And because of the lack of an intense regulatory and unionized environment such as we have here in the United States, companies increasingly are opting to go with cheaper foreign labor.
I call this a "wage arbitrage," which simply means that companies are going to outsource more and more of their labor and production costs to countries where that cost is much lower than it otherwise would be in the United States. This could cause a lack of demand in the already beaten-up U.S. employment market, and that reduced demand likely will cause wage deflation here in the United States. Think about it this way; why would a company want to employ a U.S. worker for the equivalent of $20 per hour when it can get the same job done outside of the United States for the equivalent of $2 per hour?
With commodity price inflation due to burgeoning world demand, and wage deflation in the United States due to an increased supply of unemployed and underemployed workers, this is indeed the worst of all possible worlds.
Let's just hope the political class recognizes this ugly possibility before its too late.
7 Dirty Little Secrets of Asset Management 2
If it looks like a duck, swims like a duck and quacks like a duck -- then it's probably a duck.
We've all heard this little, common-sense gem, yet when it comes to investing, many people have a hard time telling the ducks from the swans. Nowhere is this case of mistaken identity more pronounced than when it comes to recognizing what most so-called "active" investment advisors are doing with their clients' money.
The way I see it, most investment advisors claiming to be "active" managers are just buy-and-hold sheep in Armani clothing.
What do I mean by this? Well, I explain it all in detail in my new special report, The 7 Dirty Little Secrets of Asset Management.
This report shows you why so many common investment strategies that purport to be active management are basically just different twists on the same old worn out and -- thanks to the recent bear market -- now thoroughly discredited investment philosophy.
If you want to find out if your portfolio is being put in jeopardy by buy-and-hold pretenders, click here.
The Mike Huckabee Interview 3
It's not often that you get to interview a former governor, past presidential candidate and radio and TV talk show host all at the same time, but that's just what I had the privilege of doing recently when I interviewed Mike Huckabee for my radio show.
Gov. Huckabee is a gracious gentleman who also is an extremely well-informed, well-spoken and, I must say, a very entertaining guest.
In our interview, we discussed such topics as the mounting U.S. debt and what it means for the economy going forward. We also discussed the current national zeitgeist toward bigger and more invasive government, and what -- if anything -- can be done about it. Of particular interest to California residents will be Huckabee's insights on the state's budget mess,now thoroughly discredited investment philosophy.
and more importantly, how we can fix the current fiscal fiasco.
I highly recommend that you spend a little of your free time and listen to my interview with Mike Huckabee. Afterward, I think you'll agree it was time well spent.
To listen, click here.
The Wisdom of Aerials
Aerials, in the sky
When you lose small mind
You free your life
Aerials, so up high
When you free your eyes
Eternal prize
--System of a Down, "Aerials"
The rock band System of a Down hit on an important bit of wisdom in the group's song, "Aerials." You see, in order to be a well-rounded, complete and ultimately happier person, you must always open your mind to new experiences and new ideas. Now, that's not to say you should fall for any huckster peddling a half-baked theory. Rather, it means that you should constantly be looking at the evidence, evaluating your beliefs and adjusting your attitudes so that they comport with reality. That's the essence of the scientific method, and it's the only true path to knowledge.
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.