Dynamic Growth: ETF Portfolio
NEW BUYS:
None
NEW SELLS:
INP: India Total Return Index- .267
SWITCHES:
None
Here are our Top 10 ETF's for the week of March 10th:
1) DBA: Powershares DB Agriculture Fund- .642
2) SLX: Market Vectors Steel Index Fund- .550
3) EWZ: Brazil Index- .567
4) EEB: Claymore ETF BNY BRIC- .502
5) FXF: Currency Shares Swiss Franc Trust- .551
6) ADRE: BLDRS Emerging Markets 50 ADS Index Fund- .406
7) OIH: Oil Services HOLDRS- .373
8) PGJ: PS Golden Dragon China Fund- .315
9) KBE: KBW Bank ETF- Not Rated
10) IYF: iShares Dow Jones US Financial Sector- Not Rated
Honorable Mention:
None
Notes:
In our opinion, Gold, Oil, and select commodities are fast approaching the definition of a bubble. Since the US economy is in our opinion already in a recession, and as the dollar continues to hit new lows, traders and hedge funds are piling into the 3 sectors above as a hedge against inflation. As traders pile into these sectors, don't think for a moment that they are buying at reasonable prices.
The major problem for traders is they cannot find anywhere else to go. I am of the opinion that parking money in low yielding cash accounts makes more sense than buying something at a bubble high.
The Emerging markets have been positive prior to last week, and are now beginning to soften as the MSCI Emerging Markets ETF index fell almost 6% last week.
China's massive growth will slow along with the US economy, but falling from double digit growth to high single digits is better than what is happening here at home.
Here are our Top 10 Fidelity Sector Funds for March 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: Banking
Honorable Mention (Holds):
FSDAX: Defense & Aerospace
Notes:
Last week I mentioned that we were looking to add another contrarian play to our Fidelity Sector Fund portfolio; the Select Home Finance (FSVLX) fund. We are not ready to pull the trigger just yet, but it looks as if a full blown panic is ready to hit the group. We are going to take a wait and see approach before pulling the trigger.
Here are the top 10 stocks in the Select Home Finance Portfolio. If you pull up these stocks individually, you'll see that several of these stocks have been taken to the woodshed.
FANNIE MAE
HUDSON CITY BANCORP INC
ANNALY CAPITAL MGMT INC REIT
FREDDIE MAC
NEW YORK COMMUNITY BANCORP INC
WELLS FARGO & CO
COUNTRYWIDE FINANCIAL CORP
WASHINGTON MUTUAL INC
PEOPLES UNITED FINANCIAL INC
CHIMERA INVESTMENT CORP
The Week in Review:
As the credit crunch continues to worsen, I believe the US Government come to the aid of Fannie Mae (FNM), Freddie Mac (FRE), and millions of homeowners who are on the brink of losing their homes.
Look for some sort of bailout plan by the Federal Housing Administration (FHA) where the US Government will get the ok to buy up to 1 million mortgages to help prevent foreclosures, and more credit losses by banks. In my opinion, the Federal Government has no other choice. This seems to be the logical move to stop the foreclosure crisis in its tracks.
This being said, a bailout of this proportion will still take several weeks. As such, the equity markets will continue their downward spiral until a solution to the crisis appears. We are going to continue our discipline of adding to underweighted portfolios as the market declines. Our future purchases are based on various downside targets on the DJIA.
They are...
% Declines from DJIA High of 14,198:
10%= DJIA 12,749
15%= DJIA 12,041- 1/3rd purchase
20%= DJIA 11,332- 1/3rd purchase
25%= DJIA 10,624- 1/3rd purchase
Last week oil prices hit new highs as the dollar continued to hit new lows. Here is a flashback of the events that took place;
1) The Labor Department reported that the Producer Price Index (PPI), rose 1% in January (a 12% annual rate) Food prices were up 1.7%, the biggest one-month increase since October, 2004. Overall, the PPI is up 7.4% in the past 12 months, the fastest rate since 1981.
2) Energy prices rose 1.5% in January, while gas prices rose even faster at 2.9% (a 41% annual rate).
3) The revised fourth-quarter GDP showed that economic growth decelerated to 0.6%, the slowest pace in five years.
4) Fed Chairman Ben Bernanke suggested that banks should take more write-downs and accept higher delinquent loans.
5) January construction spending fell 1.7% which marks the fourth consecutive monthly drop.
6) The February ISM index fell again to 48.3. Anything below 50 indicates contraction.
7) Friday's non-farm payroll report showed a loss of -63,000 jobs in February, versus the consensus of -5,000.
For the week:
-Gold closed at $974.20/oz -.80 for the week. Last week gold closed at $975.00, and was trading at $947.80 two weeks ago.
-The Commodities CRB Index closed at 411.65, down from 412.69 last week, and up from 398.67 two weeks ago.
-Crude Oil closed at $105.15 /bbl up from $101.84 last week and up from $98.81 two weeks ago.
Oil prices are in a tug of war between a weaker dollar, and the potential for a weaker economy. If oil and commodity prices do not correct substantially, the US economy will be in serious trouble.
-The U.S. Dollar close at 73.04 down from 73.70 last week, and down from 75.52 two weeks ago.
The equity markets are in the process of re-testing the intra-day lows set in January. A successful retest could set the stage for a oversold rally. If the retest does not hold, we will see further lows ahead. As such, 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
