Dynamic Growth: ETF Portfolio
NEW BUYS:
None
NEW SELLS:
None
SWITCHES:
None
Here are our Top 10 ETF's for the week of February 25th:
1) DBA: Powershares DB Agriculture Fund- .645
2) SLX: Market Vectors Steel Index Fund- .521
3) EWZ: Brazil Index- .527
4) EEB: Claymore ETF BNY BRIC- .478
5) FXF: Currency Shares Swiss Franc Trust- .418
6) ADRE: BLDRS Emerging Markets 50 ADS Index Fund- .378
7) OIH: Oil Services HOLDRS- .368
8) PGJ: PS Golden Dragon China Fund- .330
9) KBE: KBW Bank ETF- Not Rated
10) IYF: iShares Dow Jones US Financial Sector- Not Rated
Honorable Mention:
INP: India Total Return Index- .300
Notes:
As evidenced by our top 5 ETF's, the Commodity asset class continues to dominate when compared to all other asset classes.
With Gold prices above $900 per ounce, and oil prices above $95/bbl, we are reluctant to chase these sectors. One of the reasons we are hesitant is the underlying stocks (Oil & Gold) have stalled while the individual commodities remain near their highs.
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:
There were no changes to the ETF portfolio this week, and we will receive new data next week on the Fidelity Sector Fund portfolio.
The Week in Review:
The stock market was pretty dull last week. Despite increased evidence that the US economy was edging nearer to an "official" recession, the markets were locked in a fairly tight trading range.
While I am finding the stock market more attractive now than a year ago, the economy continues to deteriorate. This tells me that despite the reasonable valuations, greater values may be in the offering down the road.
Two areas that are very attractive in my opinion are the Financials, and the select Consumer Discretionary sectors. Since we are not “Fund Managers”, we can afford to buy value and wait 12-24 months for 50-100% returns. Fund managers must perform weekly, monthly, or quarterly or they will get fired. Here is where I believe we have a huge advantage over the momentum crowd.
It seems to me that the major banks should be repairing their balance sheets as we speak. With the Fed funds rate at 3.0%, and the U.S. prime bank rate at 6.00%, banks should be making a ton of money off of the spread.
Investors severely underweighted in the stock market may want to begin slowly adding to their portfolios slowly while keeping some powder dry for better buying opportunities down the road. We must have the courage to dollar cost average into the face of increasingly bad news because we never know when a major solution to the current credit crisis may appear.
I find it odd that the stock market rally occurred late Friday after a rumors circulated that banks may be close to finalizing a plan to bail out bond insurer Ambac Financial (ABK).
The Dow after trading down as much as -129 points rallied to close up +96 in the last 30 minutes of trading. This massive short covering rally tells me that behind the scenes some of our nation’s most powerful people are working on a solution to the credit crisis.
The Federal Open Market Committee (FOMC) released the minutes from the January 29-30 meeting on Wednesday. In those minutes the Fed lowered their 2008 GDP forecast from 2% down to 1.3%, and revised their core inflation estimates up to 2.0%-2.2%.
On Tuesday, crude oil closed above $100 for the first time ever after Venezuelan President Hugo Chavez said he would be cutting off his country’s oil exports to Exxon-Mobil (XOM).
Like I have said before, there is always an excuse to explain why you and I have to pay more for gasoline. If it isn't Hugo Chavez, it will be something else. Here are a few excuses;
The Summer Driving Season
Hurricane Season
China & India
An Explosion at a Refinery
Here's something that makes more sense to me. In his book, "The Price of Loyalty", former Secretary of the Treasury, Paul O'Neill provided documentation that showed the Bush administration officials knew oil prices would soar, and the economy would decline if the US invaded Iraq.
Since I do not wish to elaborate on the subject I'll let you make up your own mind after reading this memo from Assistant Secretary for Economic Policy, Richard Clarida to Treasury Secretary O'Neill.
After reading the memo for myself, I am willing to assume that Crude Oil prices would have been $25-40 lower if we had not invaded Iraq.
Despite the feelings that we have a “free press” in the US, I want to know why issues like the one above aren’t being debated daily in the news.
For the week:
-Gold closed at $947.80/oz +41.70 for the week. Last week gold closed at $906.10, and was trading at $922.30 two weeks ago.
-The Commodities CRB Index closed at 398.67, up from 384.23 last week, and up from 375.67 two weeks ago.
-Crude Oil closed at $98.81 /bbl up from $95.45 last week and up from $91.77 two weeks ago.
Oil prices are in a tug of war between a weaker dollar, and the potential for a weaker economy.
I still believe we will 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.
-The U.S. Dollar close at 75.52 down from 76.04 last week, and down from 76.62 two weeks ago.
This Week's Reports
Monday: January Existing Home Sales (previous -2.2%).
Tuesday: January Producer Price Index (previous -0.1%) ,PPI, ex-Food & energy (previous 0.2%).
Wednesday: January Durable Goods Orders (previous 5.2%), January New Home Sales (previous -4.7%).
Thursday: Preliminary Q4-GDP (previous 0.6%).
Friday: January Personal Income (previous 0.5%), January Personal Spending (previous 0.2%), February Chicago PMI (previous 51.5).
Last week we are raised our exposure to the market by 5%. 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
10% Equities: (Normally 20%) Conservative
