John Mugarian's Dynamic Growth

Dynamic Growth: Fidelity Select Sector Fund Portfolio

Here are our Top 10 Fidelity Sector Funds for December:

1) FSESX- Energy Services
2) FWRLX: Natural Gas
3) FNARX: Natural Resources
4) FWRLX- Wireless
5) FDCPX: Computers
6) FSDAX: Defense & Aerospace
7) FSCHX: Chemicals
8) FSPTX: Technology
9) FSENX- Energy
10) FSDPX: Materials

Honorable Mention (Holds):

FDFAX: Consumer Staples

Notes:

We do not have any changes this month for our top 10 funds. I have been impressed how our energy sector funds have held up despite a $10 dollar drop in the price of crude. Energy and commodities are in a long term bull market. Sure, there will be pullbacks along the way, but as the price of crude pulled back, many energy stocks have rebounded.

The U.S. seems to be in a global battle for new and abundant sources of energy. Clearly, China and Russia are in this battle too.

We keep hearing how good or bad another nation is based on how their energy policies conform with our corporate and national interests. As an example, Russia who was favorably looked upon by the U.S. a few short months ago is now seen as a threat. It's amazing to watch how people act when there is money and oil involved.

Just when the American people thought the Cold War was over, the battle for Middle East, and maybe Venezuelan oil is heating up.

As long as the U.S., Russia, Venezuela, and China remain in conflict over oil, we will remain bullish on the energy sector.

Dynamic Growth: ETF Portfolio

NEW BUYS:

JXI: iShares Global Utilities Fund

NEW SELLS:

To Honorable Mention:

EWM: MSCI Malaysia (Free) Index- .470

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) JXI: iShares Global Utilities Fund- .524
9) EWZ: iShares MSCI Brazil Index- .523
10) ADRE: BLDRS Emerging Markets 50 ADS Index Fund- .481

Charts of our Top 10 ETF's

Honorable Mentions:

PPA- PS Aerospace & Defense- .455
IHI- DJ Medical Devices- .412
EWS: iShares MSCI Singapore (Free) Index Fund-.381
OIH: Oil Services HOLDRS- .386
EWM: MSCI Malaysia (Free) Index- .470

Notes:

Our only change this week to the ETF portfolio is the purchase of the iShares Global Utilities Fund (JXI), and the downgrade of the MSCI Malaysia (Free) Index Fund (EWM) from buy to hold.

With a relative strength number of .470, the EWM still ranks very high. By all means don't sell this fund just yet. The reason the fund was bumped from the top 10 is we now have a portfolio with 9 funds sporting a RS reading of .500 or better. Not too shabby!

After last weeks short covering rally investors are taking a timeout as they awaited next week's Federal Reserve announcement.

The basic nuts and bolts of this meeting are as follows. If the market gets anything other than a .50 basis point cut by the Fed, stocks will sell-off. Investors are being held hostage by the program traders and button pushers who move the markets.

Now, you don’t really believe that the small investor, mutual funds, and pension funds are the ones responsible for the big up or down moves in the market, do you?

We have said this before, but it is worth repeating, if you believe that mutual funds and pension funds are responsible for large sell-offs or large gains in the market, then why were the returns of these funds down big after the 1987 crash, and after the 2000-2002 bear market?

I’ll let you think about that one for a while, and use it for a topic for discussion after the next major sell-off.

Yesterday, stocks sold off for the second straight day as concerns over subprime and the economy took center stage.

This morning the ADP Employment numbers for November showed the economy created 189,000 jobs while the October number was revised up by 13,000. The November was higher than the 50,000 that most economists had anticipated.

Today, in light of the ADP number, investors will begin to debate what the Fed’s next move will be. A .50 basis point cut will be seen as a bailout for banks, a 25 basis point cut will keep the market from caving in, and no cut will… create a good buying opportunity?

Crude oil prices dropped more than a dollar per barrel yesterday on speculation that OPEC would discuss a production increase. After a $10/barrel + sell-off, did anyone really believe they were going to raise production?

Well, and this should have come as no surprise, OPEC left production quotas unchanged, and crude prices are rising.

Much of the rise in crude is the risk premium associated with tensions over Iran’s nuclear program. Yesterday, an American intelligence agency said that Iran halted its nuclear weapons program in 2003.

Director of National Intelligence Report

ABC News Article

Now that these immediate fears have been dispelled, maybe oil can begin trading on fundamentals rather than risk speculation. Do you think this will be allowed to happen? I hope so.

One of the keys to making money is having the ability to step back, and gain some perspective from all that is going on around us. Let's face it, you are constantly bombarded with information, some true, some false.

I am a firm believer that the quality of the life we live is often dictated by the quality of the choices we make.

For example, the Christmas season is my favorite time of year. From Thanksgiving to Christmas we see constant reminders that the human spirit is kind, gentle, and basically good.

To get that good ole Christmas feeling again, tune into the Hallmark Channel or watch re-runs of "It's a Wonderful Life". By all means, don't watch the mainstream networks.

The wonderful motivational guru, Zig Ziglar, author of "See You at the Top", has been a blessing to millions of once not so successful people worldwide. One is Zig's famous quotes is;

"You are where you are because of what's gone into your mind. You can change who you are, you can change where you are, by changing what goes into your mind".

Are there reasons why the masses make so many mistakes when it comes to money? Sure. Are there reason’s why so many people make mistakes when it comes to their lives? Sure.

I believe people are products of their environment. Our environments are often a result of the choices we make.

Remember, you make money in the stock market based on what people do. A stock rises or falls based on what people buy or don’t buy. The spending habits, work ethic, and education of people determine our economic future. Our professions often define us as who we are, our morals determine what we are.

Dynamic Growth: ETF Portfolio

NEW BUYS:

VWO: Vanguard ETF Emerging Markets- .461
FVL: First Trust Value Line (R) 100 Fund- .425
UTH: Utilities HOLDRs Trust- .421
PZD: PowerShares Cleantech Portfolio- .417
FEZ: EURO STOXX 50 Fund- .395

NEW SELLS:

FXI- iShares FTSE/Xinhua China 25
IXP: Telecommunications Sector Index Fund
ITA- iShares DJ Aerospace & Defense
EWZ: iShares MSCI Brazil Index
IHI- DJ Medical Devices
EWM: MSCI Malaysia (Free) Index
EWS: iShares MSCI Singapore (Free) Index Fund

Charts of our recent Sells: As you can see we are taking advantage of the markets recent strength to take profits at great prices.

SWITCHES:

To Top 10 from HM:

PPA- PS Aerospace & Defense- .487

Here are our Top 10 ETF's for the week of December 10th:

1) EEB: Claymore ETF BNY BRIC- .584
2) PGJ: PS Golden Dragon China Fund- .561
3) SLX: Market Vectors Steel Index Fund- .560
4) ADRE: BLDRS Emerging Markets 50 ADS Index Fund- .496
5) PPA- PS Aerospace & Defense- .487
6) VWO: Vanguard ETF Emerging Markets- .461
7) FVL: First Trust Value Line (R) 100 Fund- .425
8) UTH: Utilities HOLDRs Trust- .421
9) PZD: PowerShares Cleantech Portfolio- .417
10) FEZ: EURO STOXX 50 Fund- .395

Charts of our Top 10

Honorable Mentions:

JXI: iShares Global Utilities Fund- N/A
OIH: Oil Services HOLDRS- .386
KXI: Global Staples Sector Index- N/A

Notes:

Wall Street used some bland trading sessions last week to shift some money around, as such we have made several changes to the Dynamic Growth ETF Portfolio.

Four of our top ten holdings went from buys to sells, and one dropped to the HM list. Here is what may be going on.

1) Countries like China, and outsourcing nations like Singapore, Malaysia, and Brazil may be ready for a large correction.

2) As the US economy slows, goods imported from these nations will be in less demand.

3) Utilities and Clean Energy are gaining strength.

4) As the economy slows, the stock market is becoming increasingly narrow.

All eyes are on the Fed. Will they cut? How much? Hurry and tell us. All the little people want to know.

Warren Buffett's Take: "Even if the Fed whispered in my ear what they were going to do", it wouldn't make "any difference whatsoever" in his investment decisions. "The Fed has nothing to do with investing in good companies."

I guess this is the difference between the really rich, and the wannabe rich.

Is the worst over? Or...

UBS announced it would write down $10 billion in losses on subprime lending, but received a $12 billion cash infusion from two investors. Oddly, the shares rose, as did many stocks in the housing, banks, brokers, and REIT sectors.

Is the worst over? Or, is this an oversold rally?

Expect the markets trading to be dull ahead of today's 2:15 Fed announcement. Is the current rally a "classic buy on the rumor, sell on the news" set up?

People Watch

The actions of the public can be a leading or lagging indicator on the economy, the stock market, and give you a heads up on future trends.

McDonald's (MCD):

I went to two different McDonald's last weekend to try the "premium" coffee that is supposedly competing with Starbucks (SBUX). Jim Cramer has been saying that McDonald's coffees were eating into Starbucks business.

I didn't find this to be the case.

I asked workers behind the counter at McDonald's to explain their different types of premium coffees. I was told that they have "regular" and "decaf". Once again I asked to explain the different types of "premium" coffees. They said there was no difference, and that they had "regular" and "decaf" and just called it "premium".

In my opinion, the Starbuck's problem is an inflationary one, and can be solved by simply raising prices. The McDonald's news is nothing but hype.

Dynamic Growth: ETF Portfolio

NEW SELLS:

JXI: iShares Global Utilities Fund- N/A
KXI: Global Staples Sector Index- N/A

SWITCHES:

Here are our Top 10 ETF's for the week of December 17th:

1) EEB: Claymore ETF BNY BRIC- .542
2) SLX: Market Vectors Steel Index Fund- .541
3) PGJ: PS Golden Dragon China Fund- .514
4) ADRE: BLDRS Emerging Markets 50 ADS Index Fund- .454
5) PZD: PowerShares Cleantech Portfolio- .454
6) PPA- PS Aerospace & Defense- .427
7) VWO: Vanguard ETF Emerging Markets- .420
8) FVL: First Trust Value Line (R) 100 Fund- .411
9) UTH: Utilities HOLDRs Trust- .402
10) FEZ: EURO STOXX 50 Fund- .348

Honorable Mentions:

OIH: Oil Services HOLDRS- .348

Notes:

The stock market is very nervous and very jumpy. The seasonably strong season has been a disappointment, and I would use any rally in the markets to sell any over weighted positions.

Our current asset allocation models are more conservative than most, but when markets behave erratically, there seems to be more bad news on the horizon.

If 2008 turns out to be the year of the bear, you should begin to take action now to build larger than normal cash positions.

The Week in Review:

Momentum in the stock market has clearly slowed. While many are still waiting for phase two of the year-end rally, we may get an oversold bounce, but not a rip-roaring rally that carries the market indexes back to their previous highs. In reality, the news (economic & geopolitical), and the current cycle are nothing to get excited about.

Despite the actions of the Federal Reserve, I don't think much can be done to escape the fact that consumers are running out of cash (credit) and inflation is hurting everyone. To correct the situation, the economy must recede (recession), and as a result, the markets will too.

Dynamic Growth: ETF Portfolio

From HM to Top 10:

OIH: Oil Services HOLDRS- .415

To HM from Top 10:

FEZ: EURO STOXX 50 Fund- .315

Here are our Top 10 ETF's for the week of December 26th:

1) SLX: Market Vectors Steel Index Fund- .530
2) EEB: Claymore ETF BNY BRIC- .497
3) PGJ: PS Golden Dragon China Fund- .469
4) PZD: PowerShares Cleantech Portfolio- .454
5) OIH: Oil Services HOLDRS- .415
6) ADRE: BLDRS Emerging Markets 50 ADS Index Fund- .413
7) FVL: First Trust Value Line (R) 100 Fund- .396
8) PPA- PS Aerospace & Defense- .391
9) VWO: Vanguard ETF Emerging Markets- .366
10) UTH: Utilities HOLDRs Trust- .365

Charts of our Top 10

Honorable Mentions:

FEZ: EURO STOXX 50 Fund- .315

Notes:

We didn't have any major changes to the ETF portfolio this week, so I decide to spend some extra time with my family during the holiday season.

The stock market is becoming increasingly narrow. The top 50 ETF's in the Navellier screening process is being dominated by "stuff". By "stuff" I mean oil, oil & gas exploration, natural resources, water, clean energy, commodities, and metals. These are not the sectors that lead to rip roaring bull markets.

I am not interested in buying the "stuff" ETF's until we get a substantial pullback. I am convinced the bull market that started in 2002 has come to an end. The stock market looks very heavy, and very sick. Be alert for one more rally that could carry the major market indexes near their 2007 highs.

I would be very careful with the healthcare sector. It will become a hot button issue during the 2008 election campaign. I am confident that our politicians will heavily criticize the healthcare industry, but as usual, do nothing about the problem. In any event, I would stay away from this sector since I believe it will be a hot button issue for quite some time.

The Week in Review:

What more can be said? Every 5 years investors must be prepared for correction or a period of consolidation in the equity markets. This is a natural occurrence, and is a painful time for investors who do not allocate their assets properly. It can also be a very rewarding time for value investors who wait for the 5 year cycle to end, and begin re-loading their portfolios with bargain basement stocks.

Bear markets often frustrate speculators and traders since every sell-off results in lower lows while rallies result in lower highs. This has been the markets pattern throughout history, and we anticipate that this time will be no different.

Here are our Top 10 Fidelity Sector Funds for January 2008:

1) FSESX- Energy Services
2) FNARX: Natural Resources
3) FSENX- Energy
4) FWRLX: Natural Gas
5) FSDPX: Materials
6) FSCHX: Chemicals
7) FWRLX- Wireless
8) FSCGX: Industrial Equipment
9) FSCSX: Software & Computers
10) FSUTX: Utilities

Honorable Mention (Holds):

FSDAX: Defense & Aerospace
FSPTX: Technology
FDFAX: Consumer Staples

New Buys:

FSCGX: Industrial Equipment
FSCSX: Software & Computers
FSUTX: Utilities

New Sells:

FDCPX: Computers

Year to Date Sector Performance

Energy: 32.8%
Materials: 21.6%
Utilities: 16.6%
Information Technology: 16.5%
Consumer Staples: 12.2%
Telecommunication Services: 10.8%
Industrials: 10%
Health Care: 6.3%
Consumer Discretionary: -14.4%
Financials: -21.6%

One Month Sector Performance

Energy and Basic Materials continue to be strong as weakness the in the US Dollar continues. While there will be periods of consolidation along the way, consistent profits exist in these two sectors.

Healthcare continues to be pumped on the financial channels as one of the best places to invest new money. As I stated earlier this week, I would be very careful with the healthcare sector. It will become a hot button issue during the 2008 election campaign.

Energy: 10.5%
Materials: 3.1%
Utilities: 1.2%
Information Technology: 2.0%
Consumer Staples: 0.3%
Telecommunication Services: 7.0%
Industrials: -0.2%
Health Care: -1.6%
Consumer Discretionary: -3.7%
Financials: -4.4%

Dynamic Growth: ETF Portfolio

NEW SELLS:

FEZ: EURO STOXX 50 Fund

SWITCHES:

None

Here are our Top 10 ETF's for the week of December 31st:

1) SLX: Market Vectors Steel Index Fund- .557
2) EEB: Claymore ETF BNY BRIC- .494
3) PZD: PowerShares Cleantech Portfolio- .492
4) OIH: Oil Services HOLDRS- .472
5) PGJ: PS Golden Dragon China Fund- .460
6) FVL: First Trust Value Line (R) 100 Fund- .421
7) ADRE: BLDRS Emerging Markets 50 ADS Index Fund- .417
8) VWO: Vanguard ETF Emerging Markets- .385
9) PPA- PS Aerospace & Defense- .381
10) UTH: Utilities HOLDRs Trust- .377

Charts of our Top 10 ETF's

The Week in Review:

Many influential Wall Street traders were on vacation last week, and the market acted like a bunch of rookies were manning the trading posts.

The stock market continues to look very heavy, and very sick. The 5 year bull cycle is coming to an end, and investors must be prepared for painful corrections, or a bear market in the months ahead.