12/28/2005
Here comes the New Year! Is your financial investment strategy ready? Now is the time to assess your investments and consider your strategy for moving forward. Are you sitting on some profits for this year? If you have gains in the sectors that have been red-hot in 2005, it might be time to take some chips off the table and get ready for the sector rotation.
That’s why you need to have your financial investment strategy in place. Your plan should include:
• Your Watch List: Which sectors are you monitoring for the next possible established trend?
• Your Buy Strategy: At what time will you potentially purchase the investments on your Watch List?
• Your Exit Strategy: At what point would you exit your positions to lock in gains?
Every aspect of this financial investment strategy should be operating at all times. For example, you should always be adding to your watch list, even when you are fully invested. It will help you stick to your sell discipline. Timing is important as it directly relates to volatility and risk.
http://www.fabianssuccessfulinvesting.com/order.php?offer=12
An inversion in the yield curve sent the markets south in yesterday’s post-holiday trading session. The trading started out fairly positive in weak volume as investors seemed pleased with the prospect of strong holiday sales. However, the mood turned instantly negative as the yield on short-term bonds outpaced those of the long-term bonds. The inversion of the yield curve rings an alarm for investors to pay attention to the markets and how they can quickly reverse course.
The inversion of the yield curve sent a shiver through Wall Street because the last four U.S. economic recessions have been preceded by just such an inversion.
In addition to the yield curve inverting and then flattening, a decline in the demand for natural gas drove that sector down an impressive 23% in just three days. The energy sector continues to lend volatility to this market and I encourage my readers to carefully plot their course going forward.
A strong consumer confidence number delivered some stability to the markets in today’s early trading as well as some encouraging news from the jobs sector for the employment outlook for 2006. So we remain vigilant as we digest the current news and developments. Please stay tuned to the radio show for daily updates. Details are at my website, http://www.dougfabian.com
While we trend followers don’t speculate as to what the next trend will be, our careful monitoring leaves us with a very short list on what the next sector to rotate to the forefront will be. In doing so, you can get into the sector at the earliest possible moment so you can score the biggest gains.
The best of timing is accomplished by putting together a “Watch List.” Your watch list should be comprised of investments that you have reason to believe are poised to reverse trend and you are ready to jump on them when they do so. The watch list also helps you establish the emotional distance you need to be able to sell a position because you have your eyes fixed on your future profits as opposed to clinging to past glory.
That’s exactly how we strategize at Successful Investing. We have our financial investment strategy, we have our sell discipline, and we have our watch list. Those three simple components enable us to jump on trends early for maximum gain and execute a well-timed exit strategy to lock in those gains to protect profits and principle.
The past year delivered gains to investors of natural resources, gold, energy, biotech and transportation. Should you be holding those investments into the New Year? Doubtful. When trends have been firmly in place, they end. What’s your plan? Are you banking profits and putting together your watch list? You should be. I’ve got my watch list. I’m looking at pharmaceuticals, healthcare and large cap growth stocks to step into the limelight this year.
Speaking of ETFs, my Successful Investing subscribers are receiving a special weekly ETF report delivered straight to their inboxes. This report lists every single ETF and how it has performed for the week. Talk about trend-following—it’s all laid out right there in front of you, every week—just for being a Successful Investing subscriber. The weekly ETF report alone is worth the price of an SI subscription. And you still get in on my buys and sells risk-free for up to 6 whole months. Get your subscription for the New Year and you have until Memorial Day to decide if you’re going to keep it and still get every penny of your money back. Just order right here:
http://www.fabianssuccessfulinvesting.com/order.php?offer=12
Getting in at the beginning of the trend is the safest way to capture the biggest gains. Your financial investment strategy is the key to your investing success because it will tell you when the time is right to get in and to get out. If you do not have such a plan, then you simply should stay out of the markets because your risk of loss is just too great and your potential for gain is unclear, at best. Successful Investing will give you just such a plan.
http://www.fabianssuccessfulinvesting.com/order.php?offer=12
As a host of a national radio show, I get a lot of calls and emails from investors who ask me specific questions about their investments. Just the other day, I received a call from a listener that so reflects the mentality of investors. Here it is:
The caller told me that he had bought a natural gas stock at $50 a share. The stock is now sitting at $44 and he is resistant to sell it because winter is coming and he’s convinced that demand will go up. He’s down 11% on his original investment and natural gas has lost 23% in just three days. He got in at the high after natural gas had already gained some 50% and the stock was priced for nothing less than perfection and a colder than already expected winter. This guy was onto a good investment, but he made a bad buy. And it all has to do with timing.
Timing is crucial for trend followers. When a trend is firmly in place, you have to look at those investments and ask yourself how long the word has been out and how much more play could be left in the investment. Investments that have been long in the trend get far more risky to the downside as time goes by. That is why it is imperative to have both a financial investment strategy and a strong sell discipline firmly in place. When a trend presents or reverses itself, you will lose money if you hesitate in the buy or the sell. Emotional attachment to an investment will lose you money every time.
When the yield curve inverted, frenzy burst out on Wall Street. You are going to hear a lot about the fact that the U.S. is on “recession watch.” I encourage you to stay tuned to my radio show by listening live to the broadcast or going to the archives at my website http://www.dougfabian.com. As always, I will continue to provide you with the most up to the minute financial news that impacts your investments.
Will we slip into recession? Possibly. The inversion has occurred prior to the last four recessions. However, it could be some kind of anomaly. However, we are talking about your money here, and job number one is to protect it. So let’s discuss how you can prepare your investments for a possible recession.
A recession is a contraction in the economy. The U.S. economy has been growing at the rate of roughly 3% a year for the last few years. In a true recession you have no growth, but rather a decline. Companies make less money; they lay off employees who, in turn, can’t make their housing payments; houses go up on foreclosure and the whole system just suffers as it all spirals downward. Based on such a scenario, the stock market becomes a challenging environment. Companies with slowing growth have fewer profits leaving investors with confused about where to put their money for safety and profits. Should the economic climate remain soft, the Federal Reserve would step up with their monetary machete and start whacking at interest rates. Such a move would make treasury funds an appealing prospect, the stock market weaker and corporate bonds challenging. Do you have a financial investment strategyfor managing your money in such an environment? Most people do not have such a plan and, as a result, their money gets neglected and bear market losses ensue. Don’t let that happen to you and your money.
The bottom line is that your money needs to be actively managed with a plan for growth and protection of capital. Whether you manage your money yourself, or of you have someone else do it for you, make sure your money is managed proactively with a financial investment strategy in place for both an up market and a declining market. The inversion of the yield curve is a red flag that begs the question of the state of your plan. Most people do not have a financial investment strategy in place to manage their investments during a recession. That’s where we are different. We have a plan that will protect your nest egg against major losses that occur in a turbulent market.
I know a lot of people who are simply too busy to manage their own money. I know others who just don’t have the interest, inclination or discipline to proactively manage their assets. They know they need to invest in the equity markets to grow their assets for their futures and their families, but they just never find the time. I recommend such individuals speak with Ed Foster, President of Fabian Financial, or with me about how Fabian Financial can assist you with the daily proactive management of your nest egg. Fabian Financial is a fee-only investment service that implements the Fabian Plan. Give us a call. You can reach Ed and me toll-free at (866) 432-2426.
The New Year brings new hope, new dreams, and new aspirations. Make this year one in which you fulfill your goals by getting a fresh start. Look to the future, get your plan laid out and get ready to make 2006 the year you bring your dreams to reality.
HAPPY NEW YEAR!
Doug