Making Money Alert: A Holding Pattern and the Ugly Side of the Cliff
A Holding Pattern and the Ugly Side of the Cliff
The markets have been relatively quiet during the past week. So far in 2013, the S&P 500 is up less than 1%, even though stocks shot up in the year’s first trading day. After the initial euphoria about the tax side of the fiscal cliff deal, the market is beginning to worry about the ugly side of the cliff, which is the pending battle about spending cuts and a lifting of the debt ceiling.
Both sides of this debate — the administration and Congress — have vowed to get their way on the spending and debt-ceiling debate. Though we don’t know how the terms of any deal will come out, based on past experience with the tax side of the cliff and last year’s debt ceiling fight, both have the potential to really knock stocks lower during the next 30 days.
For investors, now is not the time to commit new money into domestic equities. You are much better off here waiting for some clarity on the debt and spending deal. The upside between now and then in stocks is, in my opinion, limited. However, the downside you face due to money running for cover in front of what could a nasty political fight is potentially very harmful to your portfolio.
The bottom line here is that patience is definitely what’s needed right now. The market is giving us that indication by virtue of the overall lack of any real movement in stocks. Of course, there will be sectors of the market that sell off — the latest being tech giants and, in particular, Apple (AAPL). And there will be sectors that show signs of gains. A good example here is banks and financial stocks, many of which have seen big buying during the past several trading sessions.
Overall, however, now is the time to wait for the craziness to pass and for you to get your wish list of stocks and sector funds ready for the year’s next big buying opportunity.
Fiscally Fit for the New Year, Part II
In last week’s Making Money Alert, we began a special series on how to become fiscally fit in 2013. The first installment was all about taking an inventory of all of your assets. Here we took a page from corporate CFOs, as they regularly are tasked with determining the precise value of their company’s assets. The result of that inventory should be that you now know how much money you actually have, and in what type of asset class that money resides (equities, bonds, real estate, gold or silver coins, checking account, certificates of deposit, etc.).
This week, we are going into Part II of my "Fiscally Fit for the New Year" series, and that involves doing an asset allocation review. This is the time to dig down deep into precisely where your assets are and, by that, I mean knowing specifically which stocks, bonds, exchange-traded funds (ETFs), mutual funds, variable annuities, etc., you currently own.
You also need to know how much you own of each security. Your goal this week is to take an inventory of all of your securities holdings so that you can see if there are any glaring weaknesses and/or omissions in your asset allocation.
Once you know, in percentage terms, how much of your total investment portfolio is committed to stocks, how much to bonds, commodities, cash, etc., you can make the necessary adjustments to get the desired mix of assets where you want them.
I am of the opinion that equities are going to see a lot more volatility in 2013 than they have in the past, and that means both opportunity and risk for your money in the months ahead. But before you can make intelligent decisions to reallocate your capital, you first need to know where that capital is, and where you need to make alterations.
Next week, we’ll do an inventory of all of the income streams your money is generating. If your primary goal is to capture high yield and dividend income from your existing assets, next week’s lesson is aimed directly at you.
ETF Talk: Energize Your Portfolio
To build upon last week’s ETF Talk theme of sectors that offer steady and consistent growth, albeit generally at a slow pace, this week’s article focuses on the energy sector. People always need to use energy. With the rapid development of countries such as China, worldwide demand for energy should continue to increase. An exchange-traded fund (ETF) that includes a heavy concentration of gasoline companies is PowerShares Dynamic Energy Exploration & Production (PXE).
This non-diversified fund seeks investment results which, before fees and expenses, correspond generally to the price and yield of the Dynamic Energy Exploration & Production IntellidexSM Index. That index is composed of stocks from 30 U.S. companies involved in the exploration and production of natural resources used to produce energy.
PXE had a strong year in 2012, rising 22%, and it’s up almost 2% in just the first few weeks this year. It also offers an annual yield of 2.13%. Thus, PXE gives investors income, as well as the potential of capital appreciation from its rising share price. The demand for energy, including oil, continues to rise both at home and abroad. With that trend intact, look for the steady gains of PXE to continue.
As an energy sector ETF, you would expect PXE to be heavily weighted in that sector. You would be correct: 97.26% of PXE’s holdings in energy, with the balance in the utilities sector. As for specific companies, the ETF’s top ten holdings make up 49.55% of its total assets. The top five companies held, in order, are: Phillips 66 Common Stock, 6.31%; Marathon Petroleum Corporation, 5.82%; Valero Energy Corporation Common, 5.22%; Exxon Mobil Corporation Common, 5.11%; and ConocoPhillips Common Stock, 5.08%.
Although the fund had a slight drop in price last summer, it has more than recovered. In fact, PXE has done very well since the Great Recession just a few years ago. Look for this sector fund to continue its ascent in the coming months.
If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to email me by clicking here. You just may see your question answered in a future ETF Talk.
Opportunities and Risks for Investors in 2013
Do you know about the tremendous opportunities in the right market sectors in 2013?
Do you know how to avoid the pernicious risks populating the markets in 2013?
If you’d like to find out about the opportunities, and perhaps more importantly, the risks you are likely to confront in the year ahead, then we invite you to listen to a replay of the first Fabian Wealth Strategies live teleconference of 2013.
This teleconference, aptly titled "Opportunities and Risks for Investors in 2013," will give you our latest outlook on the equity markets as we embark on another year of uncertainty and unknowns.
During this one-hour interactive presentation, we discussed how to position your portfolio to protect your principal, generate the income you need and achieve your growth objectives.
In 2013, we’re expecting an increase in market volatility, and that situation is likely to provide outstanding opportunities for investors — but only if they are properly prepared.
Here are just some of the topics we covered during the teleconference:
- The impact of new, higher taxes on the U.S. economy from the fiscal cliff deal.
- What to expect from the looming battle over spending cuts and the debt ceiling.
- What strategies you can put in place now to shelter and protect your money from the decisions made in Washington.
- The best opportunities for income investors if interest rates rise in 2013.
- The best opportunities for growth in light of a slowing U.S. economy and the continued recession in Europe.
- Plus much, much more…
As with all of our teleconference events, it’s our objective to help you make good decisions about your portfolios. Now more than ever, making sound decisions with your money is the key to achieving success. Let us help you do that in 2013 — and the first step is our upcoming Fabian Wealth Strategies teleconference.
To listen to this presentation, simply click here.
NOTE: Fabian Wealth Strategies is a SEC registered investment adviser, and is not affiliated with Eagle Publishing.
The Year in ETFs—Get Your 2013 Report Now
The books are closed on 2012, and along with a whole lot of major news events affecting the markets, the year also saw the continued growth of the ETF industry.
When the final results on the industry were tabulated, we saw an increase of more than 11% in the total number of ETFs that came to market. By year’s end, there were 1187 ETFs available to investors, a net increase of 131 funds over last year.
By far the biggest story in the ETF space this year was the PIMCO Total Return ETF (BOND), an ETF version of the popular mutual fund managed by the original bond king, Bill Gross.
This fund captured nearly $3.8 billion in assets from its debut in March through the latest figures as of Nov. 29. That remarkable asset capture helped the fund surge nearly 10% over that time frame.
Other notable funds in the latest ETF report include the Morningstar Multi-Asset Income Fund (IYLD), which is the first multi-strategy, “fund of funds” income product. There’s also the SPDR Barclays Short Term High Yield (SJNK), a new way to play the short-term bond market. Finally, there’s the MarketVectors Unconventional Oil and Gas (FRAK), the first ETF of its kind in the unconventional oil and gas extraction space.
Click here to get the 2012 rundown on every ETF in the market today. Doing so will provide you with your annual scorecard on each fund in each sector. It also will help you generate new investment ideas.
Paine on Wicked Government
"Society is produced by our wants and government by our wickedness."
–Thomas Paine
Perhaps the most innovative thinker of his time, Thomas Paine was the inspiration behind the creation of America. Here, Paine gives his thoughts on the role of government and the reason why she exists. If you ever want to treat yourself intellectually, then read his Common Sense, The Crisis, Rights of Man, and The Age of Reason. Each should be required reading for all sentient humans.
To read my e-letter from last week’s Eagle Daily Investor, please click here. I also invite you to comment about my column in the space provided below my Eagle Daily Investor commentary.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Making Money Alert readers, send it to me, along with any comments, questions and suggestions that you have about my audio podcast, newsletters, seminars or anything else. Click here to ask Doug.
To the best within us,
Doug Fabian
Jim Woods is a 30-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor.
His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. Read more about Jim Woods.
