Dynamic Growth: ETF Portfolio
NEW BUYS:
KBE: KBW Bank ETF
NEW SELLS:
PZD: PowerShares Cleantech Portfolio- .287
SWITCHES:
To Honorable Mention
PGJ: PS Golden Dragon China Fund- .276
Back to Top 10:
OIH: Oil Services HOLDRS- .315
Here are our Top 10 ETF's for the week of February 11th:
1) DBA: Powershares DB Agriculture Fund- .640
2) SLX: Market Vectors Steel Index Fund- .492
3) EWZ: Brazil Index- .471
4) EEB: Claymore ETF BNY BRIC- .437
5) FXF: Currency Shares Swiss Franc Trust- .425
6) ADRE: BLDRS Emerging Markets 50 ADS Index Fund- .343
7) OIH: Oil Services HOLDRS- .315
8) INP: India Total Return Index- .300
9) KBE: KBW Bank ETF- Not Rated
10) IYF: iShares Dow Jones US Financial Sector- Not Rated
Honorable Mention:
PGJ: PS Golden Dragon China Fund- .276
Notes:
In yet another contrarian move, I am adding the KBW Bank ETF (KBE) to the Dynamic Growth ETF Portfolio. KBE sports a 5.7% dividend, is paying more than Government bonds, and almost twice what short term CD's are yielding. I think over the next two years, we will be handsomely rewarded.
Fidelity Sector Fund Portfolio
We are making some changes to our Fidelity Sector Fund Portfolio now instead of waiting until the end of the month. I strongly believe that the Banking sector will rebound sharply in 2008-2009, and I don't want to wait any longer before getting our foot in the door.
New Buys:
FSRBX: Fidelity Banking Portfolio
New Sells:
FSCSX: Software & Computers
FSRGX: Natural Gas
Here are our Top 10 Fidelity Sector Funds for February 2008:
1) FSESX- Energy Services
2) FNARX: Natural Resources
3) FDFAX: Consumer Staples
4) FSENX- Energy
5) FSCHX: Chemicals
6) FSMEX: Medical Equipment
7) FSCGX: Industrial Equipment
8) FSDPX: Materials
9) FWRLX- Wireless
10) FSRBX: Fidelity Banking Portfolio
Honorable Mention (Holds):
FSDAX: Defense & Aerospace
Notes:
Energy related funds continue to dominate the top spots in our Fidelity Sector Fund Portfolio.
Despite all of the talk about energy prices declining in a recessionary environment, prices continue to hold strong. As long as an energy friendly administration exists in Washington, prices will not decline until we get a month or two away from an election.
In addition, Crude traded higher after four oil ministry officials from OPEC said they would trim output if prices slip to $80/bbl.
Over the next month or so, refiners will be switching from the less-expensive winter fuel blends, to the more expensive summertime blends. This happens every year. After this, we will begin to hear about the potential dangers of the upcoming hurricane season. See, it never ends.
I will not get pessimistic about energy until we get closer to the Presidential election.
The Week in Review:
(Re) testing, (Re) testing. The DJIA is beginning its re-test of the lows made on January 22rd. So far, the re-test has been rather orderly. Once earnings season is over, the market will have very little news to focus on, so I am expecting the volatility to begin picking up again.
If the January 22nd intraday low of 11,634 (DJIA) does not hold, a panic bottom could carry the major market index to 10.600 which would put the sell-off -25% from the 2007 highs.
A sell-off on the Dow below 12,000 will be a good time to begin increasing equity positions for investors that are underweighted in the stock market. Sometimes you have to grit your teeth and buy, and this will be one of those times.
Please keep in mind to that dollar cost averaging is the best way to increase your exposure. Since we are down over 1800 points from the highs, my worst case scenario on the downside is another 1600-1800 points. I don't know if we will get to 10,600 on the DJIA, so I am sticking to my plan to dollar cost average in at these levels;
10%= DJIA 12,749
15%= DJIA 12,041
20%= DJIA 11,332
25%= DJIA 10,624
Important stock market bottoms are reached when capitulation occurs in the stock market. Look for the signs of panic which are normally plastered on the front pages of newspapers or magazines.
To gain a historical perspective, the chart below says a lot. Dollar cost averaging in now makes sense based on these numbers;
On Tuesday, volatility gradually picked up after the Institute for Supply Management (ISM) released its non-manufacturing index for January. The ISM's reading of 44.6 was the indexes first fall in almost five years. Any number above 50 represents growth in the sector while below 50 signals contraction. The DJIA average fell 370 points after the ISM report.
Pending home sales for December dropped 1.5%, which was worse than the 1% decline expected. In addition, November sales were also revised down 0.4%. I am beginning to think the homebuilders have bottomed. Here is the proof;
After the close on Wednesday, Cisco (CSCO, 23.08) warned that orders would come up less than most analysts had expected. It may be a tad early to buy technology. Wait until July, and if it looks like a Democrat will takeover the Whitehouse in 2009, buy, buy, buy.
On Thursday, San Francisco Federal Reserve President Janet Yellen said recession can't be ruled out, but by the end of the day the major market indexes managed to close higher. This tells me that bargain hunters are getting an early start.
Overall, earnings for the S&P 500 are down 20.5%for the quarter. One of the reasons I like the financials going forward is the comparisons in 2008-2009 will be easy to beat. If we excluded earnings for the financials this quarter, the S&P's earnings would have rose by about 11%.
For the week:
-Gold closed at $922.30/oz +8.80 for the week. Last week gold closed at $913.50, and was trading at $910.70 two weeks ago.
Gold shot up again as the U.S. dollar dropped after the Feds .75 basis point rate cut.
-The Commodities CRB Index closed at 375.67, up from 364.34 last week, and up from 361.64 two weeks ago. Three weeks ago the CRB hit a new high of 366.22. The previous high was on November the 7th at 359.05.
-Crude Oil closed at $91.77 /bbl up from $88.96 last week and up from $90.71 two weeks ago.
Oil prices are in a tug of war between a weaker dollar, and the potential for a weaker economy.
Like I had said last week, I wouldn’t be surprised to see an adjusted trading range of $75-$85/ barrel. This is why I refuse to overweight oil in the ETF portfolio despite of the current rankings in our system.
Adjusted for inflation, oil traded at $100/bbl a few weeks ago for the first time in history. This includes the highs set in the 1970s.
-The U.S. Dollar close at 76.62 up from 75.48 last week, and up from 75.99 two weeks ago.
Our current asset allocation are as follows;
65% Equities: (Normally 95%) Aggressive
55% Equities: (Normally 80%) Moderately Aggressive
45% Equities: (Normally 60%) Moderate
25% Equities: (Normally 40%) Moderately Conservative
10% Equities: (Normally 20%) Conservative
