Dynamic Growth ETF Portfolio
NEW BUYS:
SLX: Market Vectors Steel Index Fund- .557
KXI: Global Staples Sector Index- .560
NEW SELLS:
IAH- Internet Architecture HOLDRs Trust- .286
SWITCHES:
To Honorable Mention:
PPA- PS Aerospace & Defense- .455
IHI- DJ Medical Devices- .372
Here are our Top 10 ETF's for the week of November 26th:
1) KXI: Global Staples Sector Index- .560
2) SLX: Market Vectors Steel Index Fund- .557
3) EEB: Claymore ETF BNY BRIC- .559
4) FXI- iShares FTSE/Xinhua China 25- .544
5) IXP: Telecommunications Sector Index Fund- .534
6) ITA- iShares DJ Aerospace & Defense-.532
7) PGJ: PS Golden Dragon China Fund- .528
8) EWZ: iShares MSCI Brazil Index- .523
9) ADRE: BLDRS Emerging Markets 50 ADS Index Fund- .481
10) EWM: MSCI Malaysia (Free) Index- .470
Honorable Mentions:
PPA- PS Aerospace & Defense- .455
IHI- DJ Medical Devices- .372
EWS: iShares MSCI Singapore (Free) Index Fund-.375
OIH: Oil Services HOLDRS- .386
Notes:
We added two new ETF's to the Top 10; KXI: Global Staples Sector Index, and the SLX: Market Vectors Steel Index Fund.
If the Fed continues to lower rates, the dollar will remain weak, and commodity prices will do well.
If all goes according to plan, we will get a nice rally into December, and possibly into January before the news gets bad. What news are we talking about, how about disappointing retail sales, corporate layoffs, and yes, a recession?
Adding to our conviction that a (year-end??) rally is building we highlighted four stocks that we thought traders could jump on as a trade. The four stocks I highlighted two weeks age were; Google (GOOG), Research in Motion (RIMM), Garmin (GRMN) and Apple (AAPL).
All four have rallied sharply from their lows, and Garmin jumped 18 points in one day. I wouldn't be surprised to see all these stocks re-test their 52 week highs.
Oh, by the way, once we get the newsletter up and running for subscribers, I will be adding a Top 10-15 stock portfolio to go along with our top 10 Fidelity Sector Fund, and ETF portfolios. Sorry it has taken so long, but the behind the scene technicians have been very slow in making the transition.
Week In Review:
The official definition of a recession is two or more successive quarters of negative GDP growth. What we have witnessed thus far is a decline in economic activity in real estate, lending, and now retail sales. After the first of the year, the layoffs will begin, and I think Detroit will begin to announce news of layoffs in the auto industry.
Think about it for a moment. Is there anyway to avoid a recession given all the economic calamities that have taken place over the past 12 months? I don't think so.
My job is not to be diplomatic, put lipstick on a pig, or tell you everything is fine when it isn't. My job is to call'em as I see'em.
This morning the "Black Friday" retail sales spin began. I think I heard something like "foot traffic was up, but sales were slightly lower than last year." I knew something like this was going to happen. All I have to say is I hope the spin is good because the moods of consumers are not.
On Sunday, my wife and I went to a large outlet mall in Foley, Alabama. This is a very popular shopping destination for middle income consumers, and I was shocked that so few people were out shopping.
Maybe it was the hangover depression over the outcome of the Alabama-Auburn game, or is the economy a lot worse than what we are being told.
There are Bargains to be Had
While bonds yields are plummeting and interest on savings are disappearing, semi-brave investors should look very closely at the beaten up banking sector. The news in 2008 isn't going to be pretty, but dollar cost averaging into high quality bank stocks will prove to be a wise move 24 months from now.
The credit crunch has a ways to go, and 2008 will be a miserable year. Weaker banks will eventually be forced to cut their dividends, home prices will continue to fall, and consumers will continue to suffer.
Dollar cost averaging is a wise strategy that helps investors reduce risk by purchasing shares of a stock in intervals rather than going for broke with a single large purchase. In periods of economic weakness, doing the manly thing has its risks. It is better for your wallet if you can control your testosterone levels during weak economic times. So, in short, spread your purchase over a period of months, not days, hours, or minutes.
What Looks Good?
My favorite financial right now is Wachovia Bank (WB). Wachovia insiders have been relentlessly buying their company stock despite the turmoil in the real estate and credit markets.
Wachovia will probably remain weak as investors will punish the good along with the bad. Being guilty by association always tends to uncover bargains for patient, savvy investors. But...You have to be patient.
I find the recent purchases by Wachovia insiders very impressive. In particular, Wachovia CEO Ken Thompson bought 100,000 shares on 11-16-2007. The eye popping purchase was by William Goodwin, Jr., who bought 500,000 shares on 11-21-07. A pessimist may say that Mr. Goodwin has more guts that brains, but I think they will eventually find that he has both.
In addition, for those of you who pay attention to the Sector Rotation Model, you'll see that the best time to buy the financials is during a early recession/ bear market.
Economic News
This Week's US Economic Calendar
- China's central bank took steps to slow its economy by ordering commercial banks to raise the key reserve requirement a half a point to 13.5 percent by November 26.
- The recent release of the Fed minutes revealed that they have reduced their GDP forecast for 2008. They also raised their unemployment forecast.
- Housing starts rose 3.0% in October, but housing permits fell by 6.6%.
- Oil prices hit a record $99 a barrel as traders manipulated prices just before the Thanksgiving holiday weekend.
Last week:
-Gold closed at $824.70/oz up from $786.46 last week and down from $834.60 two weeks ago.
-The Commodities CRB Index closed at 354.29, up from 349.43 last week, and 354.54 two weeks ago. The index hit a high of 359.05 on November the 7th.
-Crude Oil closed at $98.18/bbl up from $93.84 last week and $95.30 two weeks ago.
-The U.S. Dollar close at 75.04 down from 75.86 last week and 75.39 two weeks ago.
This summer we raised our allocation to the stock market by 5% when the Dow dropped below the 13,000-12,800 mark, and the SPX fell below 1400.
We are altering our sell strategy a bit to prepare for a tough year in 2008. At Dow 14,000, or S&P 1525, we will reduce our allocations by 5-10%
Our current asset allocation is as follows;
70% Equities: (Normally 95%) Aggressive
60% Equities: (Normally 80%) Moderately Aggressive
50% Equities: (Normally 60%) Moderate
30% Equities: (Normally 40%) Moderately Conservative
15% Equities: (Normally 20%) Conservative
At Dow 12, 500, or 1400, we will raise our allocation to the stock market by 5% to;
75% Equities: (Normally 95%) Aggressive
65% Equities: (Normally 80%) Moderately Aggressive
50% Equities: (Normally 60%) Moderate
30% Equities: (Normally 40%) Moderately Conservative
15% Equities: (Normally 20%) Conservative
At Dow 14,000, S&P 1525, we will reduce our allocation models by 5-10% to;
55% Equities: (Normally 95%) Aggressive
45% Equities: (Normally 80%) Moderately Aggressive
35% Equities: (Normally 60%) Moderate
15% Equities: (Normally 40%) Moderately Conservative
10% Equities: (Normally 20%) Conservative
