01/11/2006
China is on every investor's mind these days, and for good reason. The economic boom that is taking place there right now is simply awesome. 2005 delivered an amazing 9.8% growth to that country while 2004 turned in a 10.4% increase. China is growing at a rate three times that of our own economy. It has already surpassed England in terms of national economies and is nipping at the heels of Germany, Japan and, soon, the United States.
China's economic transformation is the single greatest economic story of our time. Every investor must have a China investment strategy for how they can profit from the China miracle. However, it is extremely important that you invest wisely to profit from China's expansion because it's just different there. China requires a different kind of investing strategy.
The government has its big communist finger in every corporate pie. Even publicly held companies in china are 70% owned by the government. If you invest there, you have no rights. Knowing that, my best way to play China is to buy international ETFs in the countries that are benefiting from China's expansion. There are several countries that have enormous trading relationships with China and also have things that China doesn't have, like free-market economies.
We have been employing just this strategy in our Successful Investing portfolio and it is working like a charm. When you subscribe to Successful Investing, I'll let you know just what those ETFs are.
The beauty of investing in the diversified international ETFs is you don't have to set up a foreign account; you don't have to buy the ADRs; and you don't have to pick an individual stock in a foreign country. That is just too risky and difficult for most investors.
I am not advising anyone to purchase these funds without having a firmly entrenched exit strategy. If you are interested in availing yourself of the many opportunities China's boom has created, but you're uncertain about how to plot your exit strategy, a subscription to Successful Investing is the best investment you can make.
http://www.fabianssuccessfulinvesting.com/order.php?offer=12
Big news hit the major stock indices this week as the Dow Jones Industrial Average not only reached, but held onto, 11,000. Tuesday's trading found the markets digesting broad-based consolidation, but they were still able to stay above that crucial psychological barrier they have not seen since 2001.
The Dow Jones, S&P 500 and Nasdaq indexes have all made bigger gains in the first full week of trading for 2006 than they delivered for the entire year of 2005. So far this year, the Dow, S&P and Nasdaq are already up 2.7%, 3.4% and 5.1%, respectively, for the year. Even a 16% year-over-year loss from material giant Alcoa was not enough to knock the markets off their newfound pedestals.
Big news from Apple and Intel continue to fuel technology's ascent, and energy is extending its gains with that sector showing an impressive 6.1% return since a week ago yesterday. Large caps may be emerging from the doldrums as run-ups in both the Dow and the S&P 500 give buyers some reason to believe that this may be the start of the real thing.
Is it? All technical signs say yes. There seems to be some fundamental strength allowing the market to hold onto gains in the wake of disappointing news. I am very optimistic about this market and as I feel the momentum firmly at my back, I have instructed my Successful Investing subscribers to commit 100% of their investing dollars to this market. We have been amply rewarded for our efforts. Remember, that's the beauty of being a trend-follower, you can follow the gains as long as they last and then step out of the markets when they begin to break down.
The short-term strength we are seeing has given us some wonderful gains. Just six weeks ago, I issued buy recommendations to my subscribers to deploy 25% of their portfolios to the diversified ETFs of both Japan and South Korea. The results have been intoxicating. We are up 17% in each of those funds. I have just issued a third buy recommendation to that arena, which brings our international allocation to a profit-seeking 37.5%. By the way, the fund I recommended just last Friday was up over 1.5% in the first day we owned it!
If you want to get in on that kind of profit action and protect your nest egg while you're doing it, try Successful Investing. Want a peek at what we're doing right now? Check it out:
http://www.fabianssuccessfulinvesting.com/order.php?offer=12
There are some nice, tidy profits in today's markets. However, I urge my readers to not become complacent about the current rally. Risk has a tendency to rear its ugly head when you are least expecting it. I am fully invested and loving every minute of it because I know that I have a plan in place to exit this market if and when it turns south so I can protect profits. Make sure you have your exit strategy firmly in place and then you can just enjoy the ride.
After a five-year bull run, we now know that the housing market peaked last spring and there are indisputable signs of decline. For three straight months, sales contracts for homes have fallen, so much so that in last month alone there were nearly 3% fewer contracts than in the previous month. And fresh numbers show that mortgage applications have dropped a whopping 21% since June, 2005. Ouch!
With over a year of interest rate increases, affordability has become elusive and inventories are now increasing to the point where there is an oversupply of available homes on the market. Such an abundance will force sellers to drop their prices.
As home values erode, so too will the risky loan programs that have fueled the explosion that has doubled home values in just 5 years. Interest-only loans, home equity lines of credit, piggyback loans, option ARMs, negative amortization loans, and ARMs with a short fixed period are fraught with risk in a declining market.
As long as home values continued to rocket skyward, lenders pushed the edge of the envelope to develop "creative"—their own word—loan programs for wannabe buyers. It wasn't just new homebuyers who opted for these programs, either. Many existing homeowners refinanced, 75% of the time taking cash out, abandoned their traditional fixed loan programs just to shave a few bucks off their monthly payments.
The once-benevolent lending institutions who threw money at anyone with a heartbeat are pulling in the reins on the money flow. Credit standards are tightening as lenders get extremely nervous about the amount of cash they have collateralized in assets that are poised to drop in value. And they are seriously clamping down on underwriting guidelines for certain loan programs as they begin to require much higher credit scores for qualification.
This is just the tip of the iceberg. Home values haven't even started to decline yet, and lenders are already getting twitchy. Wait until they actually have foreclosures on their books and unsuspecting homeowners try to re-finance.
Anyone with an adjustable rate loan, a negative amortization loan, a home equity line of credit, an interest-only loan and a no-down loan must get a mortgage risk assessment right now. If you have an adjustable rate mortgage, it is imperative that you understand the following:
The terms of your existing loan
Which index your loan is tied to
The duration of the fixed period
When it adjusts up and by what increments
How high can the payments go?
I urge every one of you with such a loan to call Josh Lewis right now for a free assessment. Josh has graciously offered to help you plot the very best course of action to protect your home. Josh's dedication to his profession combined with his more than 10 years as an industry leader will give you the edge you must have to navigate through the shift that is now taking place in the housing market. Give Josh a call at 800-218-9217.
My dear friends, if you encapsulate everything I have said today, it all comes down to one thing: action. You have to get in the game and you have to play it as best you can for as long as you can. That's what makes life prosperous and worthwhile. And remember this:
"Action may not always bring happiness, but there is no happiness without action."
--Benjamin Disraeli