Dynamic Growth: ETF Portfolio
NEW BUYS:
None
NEW SELLS:
None
SWITCHES:
None
Here are our Top 10 ETF's for the week of April 21st:
1) FXF: Currency Shares Swiss Franc Trust- .487
2) DBA: Powershares DB Agriculture Fund- .542
3) SLX: Market Vectors Steel Index Fund- .477
4) EWZ: Brazil Index- .467
5) EEB: Claymore ETF BNY BRIC- .431
6) OIH: Oil Services HOLDRS- .446
7) ADRE: BLDRS Emerging Markets 50 ADS Index Fund- .360
8) PGJ: PS Golden Dragon China Fund- .228
9) KBE: KBW Bank ETF- Not Rated
10) IYF: iShares Dow Jones US Financial Sector- Not Rated
Honorable Mention:
None
Here are our Top 10 Fidelity Sector Funds for April 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
The Week in Review:
Investors holding a large percentage of their assets in bonds with maturities longer than 5 years may want to take some profits. By all means this doesn't mean sell that you should sell all of your bonds, but we feel interest rates will be more attractive 24 months from now than they are today.
I feel the bond market is in the middle of a bubble due to the current credit crisis. Investors have fled everything and anything due the risk associated with CDO's, CMO's and SIV's. Banks have held some of these assets, and various money markets have done the same. Since large investors are dealing with the unknown of just how widespread these risky are, they have piled into Treasury's as a safe haven.
In addition, foreign central banks have diversified away from U.S. government bonds and into other currencies because of the dollars extreme weakness.
Since I believe the next Fed cut in interest rates will be their last, a window of opportunity exists for investors to take profits in bonds.
The next problem the Fed will address will be the weak dollar, and inflation. To ward off the possible effects of stagflation, the Fed will focus on pumping up the dollar to relieve the inflationary pressures investors are feeling in energy, and commodity prices. The only way to do this is to focus on supporting (buying) the US dollar.
More than likely the support for the dollar will start with buying by the Fed, and help from other sources (Bank of Japan, etc.) around the globe.
I am not smart enough to know how long the dollars rally will last, but I feel comfortable with the opinion that a substantial rally is in the works.
When the dollar begins to rally, energy and commodity prices will correct sharply as will precious metal prices. The media's attention has been entirely focused on these three asset classes for such a long time, my contrarian bones are telling me a correct cannot be far behind.
As for the markets new found life, the financial guru's on TV keep touting the end of the bear and the beginning of the bull. Of course I believe they are wrong, and there is more wishing and hoping going on than cold hard reason.
There is no way a new bull market can begin while the consumer is running for cover and banks continue to slash their dividends out of desperation in hopes raising capital. Energy prices have put the breaks on consumer spending, and soon this lack of spending will show up in the earnings of every consumer related company.
There is no "glass half full" argument that can be won while gas prices remain above $2.50/gal.
For the week:
INDU: 12,849.36, +523.94 or 4.25%
SPX: 1,390.33, +57.50 or 4.31%
COMPX: 2,402.97, +112.73 or 4.92%
Stocks traded at their highest levels since mid-January. Investors are hoping that the worst is over for earnings, housing, and the credit crunch, but I feel this hope will die in the weeks ahead.
Last week crude continued to hit new high's, JP Morgan's earnings were bad but in line, Intel forecasted a healthy demand for its chips, Google beat expectations, and Citigroup reported a $5.1 billion loss and wrote off another $13 billion.
Earnings
According to Bloomberg, first-quarter results for the S&P 500 thus far fell an average -37% from a year earlier. If the estimates are accurate, Q1-08 earnings are forecast to fall -13.7%.
In terms of the economic reports, I will not insult you by discussing the inflation numbers reported in the CPI or PPI. These numbers are misleading, and do not accurately portray the true inflation picture.
-Gold closed at $915.20/oz -11.80 for the week. Last week gold closed at $927.00, and was trading at $913.20 two weeks ago.
I have said that Gold at $1000/oz looked much overbought. Once central bankers stop money pumping into the economy, I think a substantial correction in Gold will occur.
-The Commodities CRB Index closed at 419.36, up from 407.45 last week, and up from 395.09 two weeks ago.
-Crude Oil closed at $116.16 /bbl up from $110.14 last week, and up from $106.23 two weeks ago..
We need to see $75-$85/ barrel oil in the weeks ahead to get the economy back on track. Since I believe a correction is in the works, I will not overweight oil in the ETF portfolio at this time. Oil has remained above $100 for the eighth consecutive week.
If Crude oil and commodity prices do not correct sharply, the US economy will remain in serious trouble.
-The U.S. Dollar closed at 71.98 up from 71.78 last week, and up from 71.97 two weeks ago.
The dollar has dropped to new all-time lows because of large account deficits, and rate cuts by the Fed. Once the rate cuts come to an end, I am looking for a decent rally in the dollar. The dollar may also get some help soon from the G-7.
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
