Do you remember the famous Disney animated feature "The Rescuers"? Well, they're back, but this time in real life.
The Disney movie "The Rescuers" is about a society of mice, called the Rescue Aid Society, headquartered in New York and shadowing the United Nations, who go about doing good deeds in the world.
It looks as if the society of mice are a real society after all.
On Sunday, the U.S. government announced it was taking over Fannie Mae and Freddie Mac. Debated will rage on about the timing of the rescue, but it was inevitable wasn't it? I've been saying it since the beginning of the year, potential solutions to the current crisis were aggressively being worked on. This is why I came up with the slogan;
"Throughout our history, the track record is clear. Solutions to major problems always appear".
Clearly, politicians are in a panic to stop the current economic decline before the November elections, so we knew the Calvary would be called in the help save the day.
By all means the credit crisis and real estate problems still need some work. But cures to shore up the Structured Investment Vehicle (SIV- or is it-Self-Inflicted Violence?) issue is aggressively being worked on. Sure, taxpayers will foot the bill, but don't they always?
Here are our Top 10 ETF's for the week of September 8th:
1) DBA: Powershares DB Agriculture Fund- .216
2) EWZ: Brazil Index- .203
3) SLX: Market Vectors Steel Index Fund- .165
4) FXF: Currency Shares Swiss Franc Trust- .110
5) EEB: Claymore ETF BNY BRIC- .135
6) DDM: Ultra Dow 30 Proshares ETF- Not Rated
7) KBE: KBW Bank ETF- Not Rated
8) IYF: iShares Dow Jones US Financial Sector- Not Rated
9) PGJ: PS Golden Dragon China Fund- Not Rated
10)
NEW SELL:
We sold out our (DUG) Ultrashort Oil & Gas Proshares position on Friday at a price of $41.30, for a gain of 48.2%. Let's keep the proceeds in cash for the time being.
At first glace, it looks as if the commodity and BRIC nation trades have dissipated. For the meantime they have. But, the highest ranked ETF's in our universe remain T-Bills, short term bonds, crude oil which are falling in strength too. Our current position in DDM, KBE, and the IYF balance out the weakness of our commodity and BRIC holdings. Once we get closer to the election, and the magic ends, we will be adding more commodity and oil related positions.
Here are our Top 10 Fidelity Sector Funds for September 2008
1) FSCHX: Chemicals
2) FSMEX: Medical Equipment
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSPTX: Technology Portfolio
6) FSCSX: Computers & Software
7) FSCPX: Consumer Discretionary
8) FWRLX- Wireless
9) FSRBX: Banking
10) FSVLX: Home Finance
NEW BUYS:
None
NEW SELLS:
None
Honorable Mention (Holds):
None
The Week in Review:
September got off to a rough start as stocks got pounded on Thursday. Former Morgan Stanley perma-bear, Barton Biggs, turned bullish saying he believed stocks were "pretty close to a bottom."
Wall Street's bearish tone was set by the disappointing employment numbers. The August payrolls report showed a declined 84,000 jobs, but the 58,000 net downward revision of the prior two months put a damper on investor sentiment.
Oddly, as the numbers were released, the sector showing the most promise were the financials. In fact, right after Goldman Sach placed Merrill Lynch on their “conviction sell” list, buy orders entered the market for the sector.
Obviously, we are not out of the woods yet, but bargains in the market do not occur when everything is fine. Bargains occur during periods of crisis.
We still believe oil prices will continue to decline into the election. As a result many high-flying commodity stocks are taking it on the chin. The current sell-off in commodities is setting us up for a major buying opportunity, and a buy signal could be triggered if, and when, crude prices reach the $85-$90/ bbl area.
As long as the volatility in commodity stocks remains high, momentum funds will be quick to reduce positions creating an opening to buy. I believe the bull market for commodities still has some room to run. Right now though, money continues to be sucked out of commodities and oil stocks, and is being redistributed into the financials (banks) and consumer discretionary sectors.
For the Week:
INDU :11,220.96/ -323.00
SPX : 1,242.31/ -40.52
COMP: 2,255.88/ -111.64
-Gold closed at $802.80/oz -32.40 for the week. Last week gold closed at $835.20, and was trading at $833.50 two weeks ago.
-The Commodities CRB Index closed at 367.70, down from 391.71 last week, and down from 394.80 two weeks ago.
-Crude Oil closed at $106.23/bbl down from $115.46 last week, and down from $114.59 two weeks ago..
We need to see $75-$85/ barrel oil in the weeks ahead to get the economy back on track. Oil has remained above $100 for twenty consecutive weeks.
The "Pickens Plan" seems to be working. The more T. Boone spends on advertising, the lower oil prices go. The oil cartel is scared that Mr. Pickens is educating too many of the common folks.
-The U.S. Dollar closed at 78.94 up from 77.31 last week, and up from 77.15 two weeks ago.
August was the best monthly gain for the U.S. Dollar Index since 1999. Some believe the rate cuts have come to an end, adding to the dollar's rally. A strong rally in the dollar will help drive energy prices lower.
We raised our allocations last week by 5% across the board when the DJIA dropped below our 11,300 target. Going forward, the next 5% increase will come at DJIA 10,600 for Aggressive, and Moderately Aggressive portfolios, but Moderate, Moderately Conservative, and Conservative investors are not advised to get fully invested unless the DJIA breaks below the 10,000 mark.
Our current asset allocation is as follows;
75% Equities: (Normally 95%) Aggressive
65% Equities: (Normally 80%) Moderately Aggressive
55% Equities: (Normally 60%) Moderate
35% Equities: (Normally 40%) Moderately Conservative
15% Equities: (Normally 20%) Conservative
