Wednesday, September 9, 2009

ALERT 09/09/09: In These Golden Years

Doug Fabian's
Making Money Alert | Wednesday, September 09, 2009
In This Issue:

» NEW! Video Alert
» In These Golden Years
» The Stock/Bond/Gold Divergence
» ETF Talk: A Return to Bargain Buying
» Seven Secrets of Success for ETF Investors
» Four ETF Strategies for a Dollar Crisis
» On Overcoming Weakness
By: Doug Fabian | Editor, Successful Investing | President, Fabian Wealth Strategies
In These Golden Years

I'll stick with you baby for a thousand years
Nothing's gonna touch you in these golden years

--David Bowie, "Golden Years"

The price of gold is in full glitter. Shares of the SPDR Gold Shares (GLD), an exchange-traded fund (ETF) that reflects the price of gold bullion, just hit a new 52-week high. Everyone seems to be on gold's bandwagon these days, and the reasons include fear of a falling U.S. dollar and a flight to hard assets in the face of global economic uncertainty. But perhaps the biggest driver causing the price of gold to go higher is the fear on the part of investors that they are going to miss out on the gold rush.

I've seen this bubble-like phenomenon many times in my three decades of market watching. It seems like what's driving gold prices higher is buyers wanting to make the same kind of profits in gold that they've heard others are making.

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Well, if you don't own gold now, I suggest you steer clear. This is not the right time to be establishing a gold position. And, if you have gold here, you might want to think about paring down your holdings and taking profits.

Big runs like we've seen in gold don't tend to last very long, so whatever you do, if you are wading in the gold pool, do so with extreme caution.

The Stock/Bond/Gold Divergence

There's a big divergence between stocks, bonds and gold. Stocks are pricing in a strong recovery, the "V" shaped stuff of previous recoveries. The bond market is pricing in weakness, while, as we've already seen, gold prices are hitting record highs.

This stock/bond/gold divergence makes it difficult for investors to think two or three chess moves ahead. So, with all of this uncertainty about what lies ahead, perhaps the best way to play the game here is to refrain from trying to predict what is going to happen, and just be ready to react when whatever happens, happens.

As we can see here in the chart below of the S&P 500, stocks have rallied more than 50% off of their March lows.

In contrast, long-term Treasury bonds (see chart below) have fallen more than 21% since hitting their December 2008 highs.

If you have allocations to stocks here, then my best advice is to make sure that you have stop losses on all of your positions. The last thing you want to do is to give back a significant percentage of the ground that you've made up during the past several red-hot months in the market.

If you want help finding out how to invest using stop-loss orders, and if you want a plan to grow your wealth regardless of market conditions, then my Successful Investing advisory service is for you. To find out if Successful Investing fits your wealth-building goals, click here.

ETF Talk: A Return to Bargain Buying

We've been hearing news that the worst of the recession may be over. This optimistic view was fueled by a push in the S&P 500 above the psychologically significant 1,000 mark, and by reports from economists who say that the housing market may have reached the bottom. The recovery in stock prices has restored some sense of financial security to consumers, but it remains to be seen whether Americans are ready to spend money with confidence. But even if they do start spending, they likely will be watching their pennies a lot closer. What this means is that bargain retailers could be ready to ring the register.

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Board the Bullet Train to Financial Freedom Today

One exchange-traded fund (ETF) that I've had my eye on to profit from a change in buying habits is the SPDR S&P Retail (XRT). The investment seeks to replicate as closely as possible the performance of an index derived from the retail segment of a U.S. total market composite index. The fund is designed to track the total return performance of the S&P Retail Select Industry index.

The table below shows XRT's top 10 holdings. As you can see, the fund is heavily weighted toward discount-oriented stores:

XRT Fund's Top Holdings
(As of 09/02/2009)
Wal-Mart Stores
CVS Caremark
Walgreen Co.
Costco Wholesale
Best Buy

As shoppers look for bargain prices during the recession, discount retailers such as those in XRT's portfolio have seen relatively strong sales.

TJX Cos., which operates T.J. Maxx, HomeGoods and other discount formats, is seeing its same-store sales rise as consumers look for value. The company said its same-store sales rose 4% in July, beating Wall Street's forecast for a 2.3% increase from July of last year.

For the second month in a row, Kohl's Corp., an operator of mid-priced department stores, posted increased sales at stores open at least a year. It reported an increase in sales of 0.2%, topping the 1.7% decline that analysts forecasted.

Retailers, including Costco Wholesale Corp., reported that more shoppers visited their stores last month than a year ago. Target Corp., which announced a 2.9% sales decline -- much narrower than analysts forecasted -- has started to emphasize competitive prices in its newspaper ads and store signs.

By concentrating on stores that offer quality items at a reduced price, XRT's share price has been climbing. The chart below shows a clear uptrend in XRT since late March.

Marketers are aware that consumers are steering clear of luxury-goods sellers like Saks Inc. and Nordstrom Inc., which both posted weak sales recently. What is clear is that consumers are looking for value.

With worries about the rising unemployment rate and with 2008's market drop a not-too-distant memory, consumers not only seem to be spending cautiously, but boosting savings and reducing borrowing. A March study of consumer habits showed that savings as a percentage of income among Americans is expected to climb to 14.3% next year from 0.6% in 2006. This diversion of dollars from spending to saving has a great impact on retailers.

It may not surprise you that the recent recession has caused a shift in the way that consumers spend their money. Bargain hunting and budgeting have become a necessity for most households during the past year. When it comes to shopping, value-conscious consumers are more willing to shop around for deals or do without. Even high-income shoppers are budgeting more carefully. On the whole, people value their money more than ever.

And there is evidence that these frugal spending habits may be hard to break. Americans borrowed less for the sixth consecutive month in July, according to the Federal Reserve. Total borrowing, consisting of consumer loans other than mortgages, decreased at a 10.4% seasonally adjusted annual rate in July 2009 to hit $2.47 trillion. July's $21.6 billion drop from June 2009 was a record decline, with total credit falling at a 7.4% annual rate in June. Retailers and marketers should beware: the cost-conscious consumer is here to stay.

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 pleased to answer any of your questions about ETFs. To send your questions to me, please click here. You may see your question answered in a future ETF Talk.

Seven Secrets of Success for ETF Investors

I just returned home from a fantastic trip to San Francisco, where I gave several presentations to attendees of the Money Show. I must say that this year's show was not only well attended, but most of the attendees I spoke with were brimming with enthusiasm and optimism about the opportunities in the market going forward. The upbeat climate was very refreshing, and it was a far cry from the climate at some of the Money Shows I went to in 2008, when it seemed like everyone was scrambling to protect themselves from financial ruin.

One of the seminars I gave during the weekend was titled, "The Seven Secrets of Success for ETF Investors." Here's a quick sample of those seven secrets, taken directly from my Money Show presentation:

1) Transparency: Look Before You Buy

2) Volume Matters

3) Exposure Is Key

4) Gauge the Risk

5) Selecting the Number of Funds

6) Know When to Sell

7) Monitor Your Portfolio

I know these seven secrets require a little more elaboration, and I'm happy to do so. In fact, all you have to do to get my complete PowerPoint presentation is click here.

Finally, I'd like to take this opportunity to thank all of you who came to my presentations in San Francisco. This was one of the best Money Shows I've been to, and it's all because of you. I hope to see you all next year in the city by the Bay.

Four ETF Strategies for a Dollar Crisis

I've never been the kind of guy who responds well to scare tactics. In fact, it takes a lot for me to start climbing the wall of worry. So when I tell you that I am worried about what I think is a looming, and very dangerous, currency crisis, well, let's just say that I highly recommend you take it to heart.

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Right now, we are sitting at the crossroads of what could be a transformative turn in the history of our beloved currency. Now is the time to prepare for what I believe may be a currency catastrophe.

Ask yourself the following:
  • How would a currency crisis affect my wealth?
  • How would my investments react to a decimation of the dollar's value?
  • What steps can I take to shelter my money from the fallout of a dollar debacle?
The answers to these questions, and many more, will be the topic of my next one-hour teleconference. This teleconference is scheduled for Tuesday, Sept. 15, at 11 a.m. Pacific time, 2 p.m. Eastern time.

To sign up for this FREE one-hour conference call, simply click here.

In addition to answering the above concerns, I'll be sharing with you four strategies using my favorite investment tool, exchange-traded funds (ETFs), that you can use to actually profit from a dollar decline. Remember, one of the greatest freedoms we still enjoy in this country is our freedom to act independently of what the government wants us to do.

Well, the time to act is now, and doing so is just a click away.

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

On Overcoming Weakness

"Weak points come from not doing the things you suck at doing. The difference between a successful athlete and a crappy one is they always do the things they have to do, not what they want to do."

--Dave Tate, fitness writer

The willingness to address weak points doesn't just apply to athletes. It can apply to investing, personal finance, marketable skills, etc. In just about every area of our lives, we have weak points. The difference between those who really prevail in life and those who just get by is the willingness to do what you have to do to overcome those weak points.

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.

Now you can view Doug's daily market update, guest interviews and excerpts of his radio show at our new Video Archive.

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You were added to the system August 3, 2009.

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