Making Money Alert
VIOLATING THE LINE IN THE SAND
01/09/2008
Selling, selling and then a little more selling -- that's what we've seen so far in this young 2008, and by the looks of it, the selling isn't over yet.
This market is operating under decidedly bearish skies, and we can confidently say that the long-term trend in stocks is now markedly lower. In fact, the line in the sand we drew at 1400 on the S&P 500 has now been egregiously violated to send the odds soaring that we're going to get smacked by a very grumpy bear in 2008.
Right now, approximately 70% of all stocks on the New York Stock Exchange are trading below their 200-day moving average. That kind of downside market breadth is really disturbing, particularly if you are long the major market averages.
For me, the breakdown in the S&P 500 below the 1400 mark (shown in the chart below) is the first real sign that we could be slipping into the grasp of a bear market.
The question for you, the individual investor, is what are you going to do to protect yourself? Are you going to hang on to your investments hoping they'll get back into positive territory sometime down the road or are you going to act in defense of your money the way subscribers to my Successful Investing newsletter have?
Now, if you think the latest round of market selling has been relegated just to U.S. shores, you need to think again. One look at the chart here of the iShares EAFE Index (EFA) tells a tale of woe similar to that of the S&P 500.
It no longer is safe to simply park your money in broad-based international equities. The selling flu that's hit domestic equities has now infected the globe. And although not every market worldwide has seen a decline of late, most large-cap international equity funds have experienced a sharp sell off.
One way to alleviate any pain and suffering your portfolio currently may be experiencing is to make sure you don't lose any money in this market downturn. Preserving and protecting capital should be your primary goal right now, and the only way to do that is to reduce your overall equity exposure.
Reducing equity exposure according to the rules of a proven plan is what Successful Investing subscribers are doing right now. Our subscribers aren't sweating this market decline, and the reason is we've already taken steps to protect ourselves.
Your Mutual Fund's Performance Is Invalid
Yesterday I read through the Los Angeles Times 2007 mutual fund review. The main thrust of the article was the modest gains equity mutual funds logged for the year. Well, during the past six trading days those modest mutual fund gains have largely evaporated.
As of today, the average U.S. stock mutual fund is actually in the red for the past 52 weeks. What a difference a few bleak days make! Simply put, I don't want you to take this current decline lightly.
You may think your mutual fund's performance last year has you in the black, but the reality is that during the past two weeks any gains you may have hooked have now been thrown back into the water.
When assessing your mutual fund, keep the following five things in mind:
Your overall allocation. Many of the portfolios I've looked at lately contain between seven and 12 mutual funds. Unfortunately, having that many funds makes it difficult to know precisely your overall market exposure.
The type of funds and the ticker symbols. It may sound simple, but you'd be surprised at the number of folks who don't know the names or ticker symbols of the funds they own. Knowing this information allows you to easily assess a fund's performance, and this is the key to finding out if you are in the right funds.
Your performance in all market conditions. Your fund may be performing well now, but how did it perform in a bear market? Finding out a fund's performance history over various market conditions is very helpful in determining if you should continue to hold it.
Fees. How much are you paying for the privilege of letting that fund manager use your money? Most mutual funds cost a lot, and most just simply aren't worth it.
Find an ETF alternative. You probably already know what a big fan I am of exchange-traded funds (ETFs), but did you know that there are more than 620 ETFs now available? Most mutual funds have an ETF alternative, and given their transparency and low cost, it just doesn't make sense to load up your portfolio with underperforming mutual funds.
If you want assistance to determine if your mutual funds are working for you, we are here to help. To find out how Fabian Wealth Strategies can aid you in getting a handle on your money, just pop us an e-mail , or call us at 800.391.1118.
Introducing The Annuity Coaching Conference Call 2
Are you confused and frustrated with your annuity assets?
Do you understand all your options when it comes to generating income?
Do you really understand how your annuity works?
During the past few months, I've had many one-on-one conversations with Alert readers about their annuities. I have come away from those discussions with some rather disturbing insights. First, most investors know very little about their annuity investments; and second, they know even less about how their annuity can help generate retirement income.
Given the large-scale confusion out there surrounding annuities, I have decided to take my coaching sessions public. This month I am proud to announce that I will be conducting two annuity coaching conference calls. These calls are open to annuity owners and/or those thinking about purchasing an annuity.
These two annuity coaching conference calls will take place on:
Wednesday, Jan. 23, 3 p.m. EST, and
Saturday, Jan. 26, 3 p.m. EST
In these FREE annuity coaching conference calls, I will help annuity owners better understand their annuity investments and I will explain how annuities can be used to maximize retirement income.
These FREE annuity coaching conference calls will be limited to 50 participants each. If you want to register for one of my FREE annuity coaching conference calls, just click on the link below. There is no cost or obligation associated with this call, and the information in the call is intended for educational purposes only.
What To Watch In 2009
Want to know what you should be looking at in 2008? Of course, we all want to know what the keys to the kingdom will be in the year ahead. But nobody has a crystal ball and nobody can tell you for sure what will be the key developments shaping the year.
What we can say with confidence is that some things are definitely worth keeping very close tabs on right now. Here are five of the trends I think we should all be carefully examining as we dive into 2008.
Home prices, home sales and housing inventory numbers. The housing bear market of 2007 isn't going anywhere in 2008. In fact, I think that we are headed for a lot more trouble on the home front during the next 12 months and even beyond. That said, there will come a time when the next great real estate buying opportunity hits, and that is when you've got to be prepared to take action.
Mortgage rates. The real estate bear will continue to be fueled by the lack of available mortgage money in 2008. I've always said that someday mortgage money will be hard to come by, and that day is definitely here. If you need a jumbo loan (a loan valued at more than $417,000), you also are going to have to pay a jumbo rate. And, if you have even the slightest blemish on your credit you can forget about getting that home loan. If mortgage money continues to be scarce, look for more housing woes ahead.
Interest rates. There is a big decoupling going on right now between Treasury bond rates, corporate bond rates and consumer credit card and auto loan interest rates. The spread between AAA credit ratings and everything else is becoming greater and greater, and this situation is something that must be watched closely in 2008. We know the Federal Reserve is tracking this phenomenon, but despite what many people think, the Fed doesn't control market rates like Treasury and corporate bond rates. These rates are determined by investors. If the value of money becomes distorted, the situation could spell trouble for the economy at large.
The falling U.S. dollar. What can you say about the fate of the greenback in 2007 other than ouch? The dollar traded below its long-term moving average for the entirety of 2007, and the outlook for the once-mighty currency remains bleak. If we see the dollar continue its big slide, inflation will get worse and limit the Fed's flexibility to modulate the cost of capital.
The 200-day moving average of all your investments. We just saw how the U.S. dollar traded below its 200-day moving average all of last year, but do you know where your investments stand in relation to their 200-day moving averages? If you don't, then this situation is something you will definitely want to watch in 2008. Knowing where your investments are in relation to their long-term trend line is crucial in helping you decide whether you should stick with or release one or more of your current holdings. To determine where your stocks, mutual funds or exchange-traded funds are in relation to their 200-day moving averages, I recommend this Web site. Follow the easy instructions on the site and you can obtain all of the technical information you could ever want about any publicly traded investment that you own.
New Services For A New Year 2
It's a new year, and that makes this the perfect time to announce the launch of two new Fabian Web sites focused on the delivery of financial education and wealth management information. These sites have been built from the ground up to deliver the latest multimedia audio streaming, video presentations, special reports, financial insight and more.
Here is a preview of what you can find at each site:
www.DougFabian.com
The radio Web site has been the anchor of our nationally syndicated radio talk show, Doug Fabian's Wealth Strategies, for several years now, but never has it been easier to keep in touch with my team of experts and me.
Audio and Video Archives make it easy to stay up to date on the market's latest moves.
Doug's Blog gives you the chance to read and listen to my latest comments on the market and all things related to investing.
Our Live Events page keeps you current on seminars we are conducting in your area.
It's also now extremely easy to stay in touch with our team of experts, including:
www.FabianWealth.com
We also are proud to introduce the launch of the new asset management Web site from Fabian Wealth Strategies.
Fabian Wealth Strategies, a registered investment advisor, is managed by my son David and me. With our combined experience of more than 30 years, we have set out to develop a unique company within the financial services industry. Our combination of asset management, financial consulting, and investor education provides a holistic approach to wealth management.
Fabian Wealth Strategies provides personalized investment management services for individuals with accounts of $250,000 and above.
To get the retirement lifestyle you want -- we believe that it's all about knowing your most important goals and then designing a detailed plan to meet them.
Other innovations in the Fabian bag of tricks include the recent launch of my new radio program, airing in the Phoenix, Ariz., market every Monday morning from 8-9 a.m. PST.
The Monday show can be heard on AM 1510 KFNN in Phoenix and adjacent markets. If you don't live in the area, you still can listen live or get a podcast of the show.
And finally, if you want to know how your mutual funds are performing, we've got you covered. We just launched the new Fabian Lemon List, which is a complete rundown of America's worst-performing mutual funds.
To find out more about the Lemon List, and to get our free special report, Turning Lemons Into Lemonade. The report and the Lemon List are both free, so get yours today!
As you can see, when it comes to innovation, constant improvement, and a never-ending commitment to help you build your wealth, the Fabian squad will continue to be on the job and there for you in 2008, and for many more decades to come.
Blogs Away: A Fabian Aural & Visual Fixation 10
Want to hear my latest rant on the state of the financial markets? Well, now listening, and even watching, is as easy as a mouse click.
To listen to the audio blog, simply click here.
Not satisfied by just listening? Would you rather watch me on YouTube?
Well, now you can. It's the latest addition to the Fabian bag of tricks, our brand new video blog.
We invite all Alert readers to check it. We assure you it's worth it.
Just click here for your Fabian aural -- and now visual fixation.
The Wisdom Of Repetition
"A baseball swing is a very finely tuned instrument. It is repetition, and more repetition, then a little more after that."
—Reggie Jackson
We've all heard the saying "practice makes perfect." This is particularly true in the world of sports, as expressed in the above quote by baseball great Reggie Jackson. This pedestrian, yet profound notion, also applies to managing your money. You can't get really good at something unless you practice, practice, practice. When it comes to your finances, you should always be practicing ways to increase savings, reduce expenses and manage risk. Take it from Reggie, repetition followed by a little more after that often is the secret to success.