Dynamic Growth: ETF Portfolio
NEW BUYS:
None
NEW SELLS:
None
SWITCHES:
None
Here are our Top 10 ETF's for the week of April 7th:
1) FXF: Currency Shares Swiss Franc Trust- .570
2) DBA: Powershares DB Agriculture Fund- .522
3) SLX: Market Vectors Steel Index Fund- .484
4) EWZ: Brazil Index- .475
5) EEB: Claymore ETF BNY BRIC- .438
6) OIH: Oil Services HOLDRS- .372
7) ADRE: BLDRS Emerging Markets 50 ADS Index Fund- .350
8) PGJ: PS Golden Dragon China Fund- .258
9) KBE: KBW Bank ETF- Not Rated
10) IYF: iShares Dow Jones US Financial Sector- Not Rated
Honorable Mention:
None
Notes:
We are cautiously optimistic since Merrill Lynch has decided to upgrade the financials this morning. I say cautiously because I like to take a contrarian approach to beaten down sectors, and I would feel much better if Merrill continued its negative stance.
In any event, I feel when the negative sentiment for the financials subsides, we will be looking at a multi-year advance for the sector.
I would feel more confident with the financial sector if insiders at Bank of America (BAC) and a few others would buy aggressively with their own cash. I have yet to see this happen.
The Swiss Franc Trust (FXF) has taken over the top spot in our ETF portfolio, and we remain positive on Agriculture, Steel, Brazil, and the BRIC nations as well. China remains in the duldrums, but we believe the Chinese Government will put their best foot (economically & politically) as we go into the 2008 olympics.
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
Notes:
Energy continues to dominate our top 10 holdings in the Fidelity Sector Fund portfolio. It seems that investors are holding out an outside chance that John McCain may be able to compete with any of the two Democratic candidates in November.
With the economy in recession, oil prices remain high due a weak dollar, and the Feds policy of ignoring inflation. One the Fed in finished lowering rates, the dollar will strengthen, and oil prices will probably decline.
Keep in mind that despite a mild correction, oil prices will likely remain firm as we get into the summer driving season, and hurricane season.
The Week in Review:
This morning Merrill Lynch analyst in London, Stuart Graham, upgraded European banks to ``neutral,'' saying credit markets are ``past their worst''. Specifically, he upgraded UBS to ``buy'' from ``neutral.''
Pointing to the rescue of Bear Stearns by JPMorgan Chase, and the UBS write down of $19 billion, Graham showed some courage by identifying these two events as a potential bottom.
Oddly, here in the US, Merrill Lynch downgraded Bank of America last week from "neutral" to "sell", and lowered its 2008 and 2009 earnings estimates.
I guess the right hand is not aware of what the left hand is doing.
I hate to keep pounding on the Wall Street Gang, but they make the job so incredibly easy. The current oversold rally does not necessarily constitute a market bottom.
Last week, the DJIA rallied 393.02 points or 3.22% despite bad news. What comes into question is whether the recent rally marks the bottom, or is the markets new found life an oversold bounce.
My best guess is an late spring, early summer sell-off will lead the way to a major rally heading into the November elections.
On Wednesday, Fed Chairman Bernanke was gloomy on the outlook for the economy saying that recession looked more likely than he'd previously estimated. The ISM service index showed the economy was still contracting, while February Factory Orders declined 1.3%.
The employment picture was equally bleak as the data showed that the economy had lost -80,000 jobs in March-the most in five years. The January and February numbers were revised downward from -17,000 to -76,000 in January and from -63,000 to -76,000 in February. The unemployment rate rose to 5.1%.
More bad news means the Fed may cut interest rates another 0.50% at the April 30th meeting. Once the market senses that the Fed is finished lowering rates, investors will sense the worst is over and rally the markets into the November Presidential election.
Why? An end to the rate cuts may mean an end to a declining dollar. This means oil, commodities, and precious metals will all begin to decline. Lower oil and commodity prices will help bring inflationary pressures down.
For the week:
DJIA: 12,609.42/ +393.02 or 3.22%
SPX: 1,370.40/ +55.18 or 4.20%
NASDAQ: 2,370.98/ +109.80 or 4.86%
-Gold closed at $913.20/oz -23.30 for the week. Last week gold closed at $936.50, and was trading at $920.00975.00 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 395.09, up from 394.54 last week, and up from 388.30 two weeks ago.
The previous weeks sell-off in commodities was one of the largest corrections in the index in over 25 years. Last weeks bounce may prove to be an oversold rally, but longer term commodities looks like a great investment.
-Crude Oil closed at $106.23 /bbl up from $105.62 last week, and up from $101.84 two weeks ago..
I still believe we will see $75-$85/ barrel oil in the weeks ahead. This is why I refuse to overweight oil in the ETF portfolio despite of the current rankings in our system.
If Crude oil and commodity prices do not correct sharply, the US economy will remain in serious trouble.
-The U.S. Dollar closed at 71.97 up from 71.61 last week, but up from 72.75 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.
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
