Wednesday, August 12, 2009

ALERT 08/12/09: A "Grand" Line in the Sand

Doug Fabian's
Making Money Alert | Wednesday, August 12, 2009
In This Issue:

» NEW! Video Alert
» A "Grand" Line in the Sand
» Oils Well That Ends Well?
» ETF Talk: The Song of Singapore
» Are You Ready for the "Presidential Bubble"?
» The Math of Money
By: Doug Fabian | Editor, Successful Investing | President, Fabian Wealth Strategies
A "Grand" Line in the Sand

The S&P 500, as of this writing, is trading just above the 1,000 level. I think this breaching of the "grand" mark could turn out to be the new line in the sand for the index. If we manage to continue building on the recent rally, the 1,000 level could be the new floor for equities going forward. If, however, we fail to remain above 1,000 here, the mark could be viewed as a ceiling for this rally.

As you can see by the chart above of the S&P 500 Index, we now are firmly above both the short- and long-term moving averages. But to me, the more interesting aspect of the current flux in stocks is the dramatic shift we've seen in sentiment. In June, we saw the market sell off sharply, and I heard the loud chorus from many market observers that the March rally was toast.

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Then in July, the sentiment reversed itself, and now all you hear is how the bull is back on Wall Street. I think both of these extreme camps are wrong. As is so often the case in life, the truth is somewhere in the middle.

But regardless of which way things go from here, one thing you must not do is to let the gains you have accumulated recently evaporate into the market ether. I strongly recommend that you place stop losses on all of your invested positions. Doing so will make sure you don't lose what you've gained as a result of this year's rally.

Right now, subscribers to my Successful Investing , High Monthly Income and ETF Trader advisory services have stop losses on all of their invested positions. If you don't have stops in place to protect your hard-earned wealth, then you need to do so. If you want to find out how to protect your money while also watching it grow, then I invite you to explore each of these services.

Oils Well That Ends Well?

There's been a lot of flux in the price of crude oil lately, a clear sign that the economy is trying to figure out which way the wind is going to blow next. Will the economy turn south, or will it be oils well that ends well for this recession?

The answer, my friends, is blowing in the wind (apologies to Bob Dylan). But seriously, watching the machinations in oil is a good way to give us a sense of where the economy is headed next.

Take a look at the chart below of West Texas Crude Oil ($WTIC).

Here, we see that the price of crude has jumped from $60 in early July to $70 in early August. In fact, oil now is trading above both its 50-day and 200-day moving averages.

Fueling oil's rise Wednesday was a government report that Americans were regaining their appetite for imported goods. Oil prices rose immediately following news that the U.S. trade deficit increased slightly in June. The Commerce Department's report that imports rose for the first time in 11 months certainly was read by oil traders as a sign that the recession may be fading.

Of course, the flipside to this coin is that oil prices have risen too far, too fast. We'll soon see which side of the coin turns up, but one thing that we can say for certain is that watching the flux in oil prices is a great way to monitor the winds of change in the economy.

ETF Talk: The Song of Singapore

Singapore's economic outlook is not as rosy as a number of other Asian countries that are starting to see a recovery. However, the region's budding rebound sooner or later could help to pull Singapore's economy along for the ride.

Singapore's economy is heavily reliant on manufacturing. With demand for manufactured products generally down during the recession, the country's economy understandably has been weak. The opportunity for investors interested in Singapore will be to pick just the right time to invest there.

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Plenty of reason exists for caution. The International Monetary Fund (IMF) estimates a 10% decline in Singapore's GDP this year that could cause the country to end up as the worst performer in Asia. Singapore's economy contracted 16.4% in the fourth quarter of 2008, compared to the same period in the previous year. The economy shrunk 19.7% in the first quarter of this year, versus the same quarter of 2008.

Certain economies in the Asia-Pacific region are being downgraded by the IMF partly because of their reliance on manufacturing industries. Indeed, Singapore's manufacturing sector is the backbone of its trade-driven economy that depends on exports. An 11-month slump in Singapore's exports has led to increased unemployment, which spurred the country's government to cut taxes and subsidize jobs.

Independent observers have described the country's current recession as its deepest in 44 years. The good news for investors is that Singapore's economy may be close to bottoming out. If so, it could be a good time to become familiar with iShares MSCI Singapore Index (EWS), an exchange-traded fund (ETF) that is designed to provide investment results that correspond to the price and yield performance of publicly traded securities in the Singaporean markets.

EWS is advancing ahead of Singapore's economic turnaround. The fund is up 28.87% year-to-date through Aug. 10, and much of this success can be attributed to growth in several key pillars of the manufacturing industry. These pillars include the following sectors:
  • Electronic: The electronic index increased over the previous month, indicating higher levels of new orders from both domestic and foreign markets
  • Aerospace: Singapore is Asia's major aerospace maintenance, repair, and overhaul provider. Aerospace engine manufacturer Rolls Royce recently showed confidence in Singapore by relocating its supply chain into the country.
  • Clean energy: The government has identified this area as a key one for growth, especially in solar energy. The government has made a significant investment in the sector to increase research and development.
  • Biomedical: This sector grew 120.4% year-over-year in May, mostly because of a jump in pharmaceutical output.
  • Oil: Shell invested in a new $3 billion petrochemical cracker complex that is scheduled to start at the end of 2009. This refinery will be Shell's largest in the world.
  • Water: Domestic businesses recently won billion-dollar contracts from the government to build desalination plants, pumping systems, and pipe networks

Whether the boost for manufacturing will lead to a resurgence of Singapore's economy and buoy the performance of iShares MSCI Singapore Index further is uncertain. But EWS could be worth considering for future investment if you think this Asian nation's prospects are on the rise.

For those of you who want specific advice about which ETFs to buy and sell, check out my ETF Trader service by clicking here. As usual, I am happy to answer any of your questions about ETFs. To send your questions to me, please click here. You may see your question addressed in a future ETF Talk.

Are You Ready for the "Presidential Bubble"?

President Obama has been in office now for nearly seven months, and so far his undeniably ambitious agenda has me very concerned. Regardless of which side of the political aisle you sit, there's no denying that the president's goals entail increased government involvement in the economy.

This increased involvement includes more stimulus spending, more deficit financing, more environmental regulation, more involvement in the health-care industry, more financial market regulation and, of course, higher taxes -- particularly on the so-called "rich."

If you're a Democrat, you may think that the Obama agenda is a good thing. If you're a Republican, you likely think the president is on the wrong track. But regardless of which side you come down on, there's no denying the fact that the president's plans will have a profound effect on the economy, the financial markets and your money.

In my humble opinion, the policies and legislation being thrust upon us by the president and a sympathetic Congress are not conducive to the economy, and they will not fundamentally help right our economic ship.

In fact, it is my opinion that the unprecedented intrusion in economic affairs proposed by the president likely will do much more harm than good in the years ahead, and that is why you, the well-informed investor, must prepare now for what I call the "presidential bubble."

But what, precisely, can you do to protect yourself from this presidential bubble?

The answers to these questions can be found in my FREE audio special report, appropriately titled, The Obama Impact on Your Money. This one-hour audio presentation includes a complimentary work sheet to help you follow the key points presented.

I strongly encourage you to check out this FREE audio special report today by clicking here.

NOTE: Fabian Wealth Strategies is an SEC registered investment adviser, and is not affiliated with Eagle Publishing.

The Math of Money

"Smart 2 = Money 3"

--TC Luoma, Atomic Dog

According to fitness writer and humorist TC Luoma, being smart "gives an individual the distinctly valuable trait of being able to conjure money out of thin air." And while this is an oversimplification, TC's point is that intelligence usually translates into wealth. If you want to be rich, then make yourself smart by reading, studying and putting your mind to work at the task of gaining knowledge. Doing so will give you a leg up on life, and it will allow you to translate your smarts into wealth.

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 Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars or anything else. Click here to Ask Doug.

On the Radio:
Making Money with Doug Fabian Doug Fabian's Wealth Strategies airs live Saturday morning 10 a.m. Pacific Time on KRLA News Talk 870 AM, and in Phoenix, AZ, at 11:00 a.m. Mountain Time on KFNN 1510 AM. During these times you can listen to the show live from anywhere in the world and you can listen to archived shows at any time.

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