Remember that markets go down much faster than they go up. We are living through this reality right now, and everyone needs to stay aware of the risks in the markets.
Europe is still struggling with their debt and deficits, and Germany (the largest economy in Europe) seems unwilling to keep bailing out their fellow European Union members. Greece especially is in a great deal of financial trouble, and there is talk of Greece exiting the Euro. No one really knows how that would work, and if it does it will probably cause a lot of unrest in the market.
We think that international investments are not a wise move right now with all this uncertainty, but we are keeping an eye on developments around the world. Smart investors will have some excellent buying opportunities this year, but it’s critical to avoid getting caught in either an uneducated panic or place of comfort.
If you didn’t have time to listen to the teleseminar last week (which you can still download here), here is a “cheat sheet” of the key points from it.
We spent some time talking about the risk in the markets, and reminding everyone of the “European Blind Side“. We also mentioned the three key areas that we are expecting to invest this year, and expect to see grow into wise investments:
With these key strategies, an understanding of the risk in the market and a willingness to be patient and buy wisely when everyone else is panicking in the markets, we think that investors will have a lot of growth opportunities this year.
As always, here at Fabian Wealth Strategies we are available to discuss your portfolio and help you make these decisions in the best way possible. Call us at 800-391-1118 for your free portfolio review.
Note: The information expressed in this seminar is for educational purposes only and should not be construed as a recommendation to buy, sell, or hold any investment security. Doug Fabian is a registered investment advisor representative. The opinions expressed in the seminar are not considered personal investment advice. Consider the risks, fees, and expenses before making any change to your investment portfolio.
We’ve been talking about the European debt crisis for several months now, but we’ve recently coined the phrase “European Blind Side”. You might wonder why we’re so concerned about investors being caught off-guard by developments in Europe, so we thought we’d use an analogy from out here in California.
We see it all the time – it’s a sunny day on the beach, and people have driven in from all over to come to the ocean. Tourists and locals alike are stretched out on blankets in the sand with coolers and umbrellas, ready for a great day. However, it inevitably happens that those who aren’t as familiar with the water, or who just don’t pay attention, will place all of their beach-day accessories too close to the shoreline at low tide. When the tide starts to move in or a big set of waves appears – and they don’t even have time to react – their towels are soaked, their cell phone has gone for a swim and their beach day could very well be ruined.
We think that this is what will happen to many investors who aren’t watching Europe closely. They feel lulled to sleep by the “sunshine” of relative security and up markets here in the U.S., and may very well have their holiday ruined by a big, ugly wave from Europe. Investors who aren’t paying attention to Europe are going to be hit hard and not know what happened or why.
The moral of this little analogy is simple: pay attention and stay educated and aware. Listen to our recent teleseminar for more in-depth analysis of what’s happened in Europe and what is soon to come, and make sure that you are prepared to preserve your capital and keep your towel dry, so to speak.
This is a podcast summary. For more complete details, please listen to the full podcast here.
Lately, Monday mornings have been busy with news, and this week was no different. We are seeing a lot of change in the world right now that could change our investment portfolios, and we do our blogs and podcasts in an effort to help investors stay educated and aware. We think it’s essential to stay on top of the latest happenings and understand how it impacts the markets, so let’s a take a look at the news:
Despite what seems like an onslaught of bad economic news, we believe that growth opportunities are in front of us. We think that investor’s highest priority should be capital preservation, and we are waiting for our buying opportunities to come later this year.
This is a podcast summary. For more complete details, please listen to the full podcast here.
(This is a summary of our exclusive live teleseminar with Doug Fabian on May 8th, 2012. If you’d like to hear the audio recording of the teleseminar, please click here.)
The Global “Big Picture”
If you listen to our podcast and read our blog regularly, you know the market forces that concern us: market volatility, uncertainty in Europe, public debts and deficits, slowing global growth.
Here’s a glimpse at those concerns and the big picture, region by region:
Europe: Belgium, Germany and the Netherlands are the only countries in the EU which are currently trading above their 200-day moving average. Eleven countries in the European Union are in recession, while Greece and Spain are in a depression. We are also seeing other countries start to contract – which means less tax revenue, less growth, more unemployment and more unrest in Europe. Remember that this news is important because the EU represents 24% of the trading of the world.
China: also trading below its 200-day moving average. Slowing economic growth and some news of political change there as well. China is not in serious trouble, but is contracting slightly with global trends.
Japan: also trading below 200-day moving average. Japan had a serious setback last year with the earthquake and tsunami, and they aren’t out of the woods yet. They just shut down all 54 of their nuclear power plants for safety reasons, which is causing an energy shortage, and Japan already has massive public debt to deal with as well. Japan is the third largest economy in the world, (right behind the US and China).
Emerging markets: Also trading below 200-day moving average. Their success is tied to established markets and they are export driven, meaning that contractions in the markets effect them heavily. You may have noticed that oil prices have been falling, and the emerging markets are very focused on commodities – so this global slowdown really impacts the emerging markets.
In all, global growth looks suspect and vulnerable to any shocks. Panic in the markets, bank problems or another crisis in Europe seems like the most likely place we can expect a shock to come from. However, in Europe’s case, it might also be a solution to this global growth problem as well.
If the Germans decide to borrow more money and step up to back the other countries in the European Union, this would be a positive for EU and the rest of the world. In that case, we would expect markets to come back and volatility to ease considerably. However, right now Germany seems set on austerity, and while we are watching closely for any changes, we also have to be knowledgeable and realistic about the current global situation.
In the United States, we are spending $1.40 for every $1 we bring in. This is creating a 9% budget deficit, which is unnaturally high and a bit disconcerting. However, the world doesn’t seem to care about the U.S. debt and deficit and we have been able to finance the debt so far, so its been a safe haven for the rest of the world.
Also in the U.S., the federal stimulus plan is currently in place, keeping the economy growing at about 2.2%. Despite the United States’ safe haven status and relative security, we believe that Investors have been lulled into complacency, which we think will be very dangerous. Risk is still at play in the financial markets, and the slowing global growth will influence the US markets fairly soon.
Because of these factors, we think it’s essential to have a game plan and an exit strategy for your investments. We believe that there’s a 70% chance that we’ve already seen the high in the US stock markets this year. The only caveat is that if Germany decides to fund the EU’s debt crisis, the markets could kick back into gear – which is why Europe and the debt crisis there is so important to watch.
Fiscal cliff: January 2013
There are four laws that are going into effect in January 2013. We are calling this a “fiscal cliff” and we think they will have serious implications for your investments. These can only be changed by an act of Congress and the President’s signature – so they need to be taken seriously – as of right now, this isn’t just political theater.
Bush/Obama tax cuts will expire in January 2013
Employees are not paying social security (payroll tax) which equates to approximately $45/pay period. This will kick back in to play in January 2013
Obamacare taxes on investors January 2013
Automatic spending cuts to discretionary and defense spending in January 2013
Between the November election and January 2013, there’s a very small window to change these laws, and these new taxes, and the political gridlock that may be unable to change them, means that a US recession is a very real possibility.
As we watch the markets – with all of these uncertainties in the US and abroad – remember that we want to invest during a “sale”. We want to get a good deal, and we think that capitalizing on sell-off, panics and sectors that no one else is buying is the way to do so.
Favorite Growth Strategies
Emerging Markets: Observe on the chart that during the 2008 decline, the emerging markets went down significantly. Emerging markets are very susceptible to panics and crisis. The main message to remember is that we need to buy them when everyone else is panicking and they have dropped out of favor. Emerging markets are developing countries – they don’t have entitlement programs, they are embracing technology and they are very likely to grow without all of the weight that developed countries face.
Check our exclusive ETF list for more details on emerging market opportunities.
Energy: Energy is a great long-term theme and it has yet to flourish in the markets this year. Big oil stocks are down, but we believe that natural gas is the big story for the future. New developments in how we discover and access natural gas have brought the price down, and this is presenting an excellent opportunity for investors.
Natural gas in Europe is $15/BTU, in Japan $17/BTU. Here in the U.S., natural gas is $2/BTU. This is actually creating a manufacturing boom in the U.S. and is a great opportunity for job growth and economic stimulation.
Natural gas infrastructure is not well-established in the United States. This will take some development and will also be a great opportunity for investors. Five years from now, we think it will be fairly easy to convert cars to natural gas and this will drive the price higher as more people start to use it. We are now benefiting from low natural gas prices and the infrastructure does not exist yet – so this is going to be a great investment opportunity. IEZ, XOP and FRAK are the three best ETFs for natural gas investment in our opinion. Right now, price trends on natural gas are down – we don’t have these in our portfolios today, but we are watching them for our opportunity.
As we look at energy opportunities, owning traditional oil might be a good move too, if it “goes on sale”. China is still developing and will continue to need oil, so if the economy stabilizes, then oil will probably be a good investment.
Precious metals: Gold is setting up for a nice move to the upside. Why? Because of inflation and deflation.
Deflation: Reduction of the general level of prices in an economy. Deflation is what the banks are worried about, why we borrow money, why we bail out banks, etc. Jobs are lost during deflation and politicians don’t want that.
Inflation: A general increase in prices and fall in the purchasing value of money. Money has less value during inflationary times.
If any kind of crisis occurs, the Federal Reserve will step in and try to stabilize the economy, which means more debt and deficit, and more inflation. The reason gold has risen in value is because people know this, and they are concerned about the value of money and the effects inflation and deflation will have on their investments.
Also, because the United States economy is still struggling in some ways (2.2% growth isn’t exactly stellar, and jobs numbers are still lagging) this is a concern for many people. If we continue to see debt and deficits around the world, gold will continue to be a strong bid.
The other part of the precious metals equation is the emerging markets. In many areas of the world, gold is one of the few stable investments, so there is some competition to bid the price up.
The big story in the precious metals opportunity is in gold stocks. Gold mining ETFs are down, and pairing investments in precious metals as well as gold mining could be a smart move for growth investors. Again, this is not a “buy now” signal, but we are watching these for investment opportunities when gold prices stabilize.
All three of these growth strategies will be great opportunities – perhaps even in the very short term. Our philosophy is to buy when they present great value, when they are depressed in price. We will be talking about these a lot on our podcast and blogs, and you can always call for more information.
Action Items and Questions to Ask Yourself and Your Advisor
Prepare yourself for the next stock market decline. Be prepared for more European crisis, the fiscal cliff in the U.S. in 2013, and educate yourself on how to preserve your capital and survive this market volatility.
How are you going to take advantage of the buying opportunities in the three key areas we mentioned earlier? Are you monitoring these changes closely or do you have someone watching this for you?
What does your portfolio look like, and does it line up with your goals and objectives?
As always, here at Fabian Wealth Strategies we are available to discuss your portfolio and help you make these decisions in the best way possible. Call us at 800-391-1118 for your free portfolio review.
Note: The information expressed in this seminar is for educational purposes only and should not be construed as a recommendation to buy, sell, or hold any investment security. Doug Fabian is a registered investment advisor representative. The opinions expressed in the seminar are not considered personal investment advice. Consider the risks, fees, and expenses before making any change to your investment portfolio.
Over the weekend, we saw France select a new president - Nicolas Sarkozy, the incumbent conservative, lost to Francois Hollande, the socialist candidate. Hollande is pushing for less austerity and more pro-growth policies (a tactic which Germany disapproves of). This is why we saw a sell-off in French markets this week, and we’ll probably continue to see some downturn there as France transistions their government.
Elections also were held in Greece last weekend, in which many fringe political parties gained traction and no clear majority was found. This means that under Greek law, they will have to hold another election. Greece continues to have a lot of unrest and uncertainty about their economic situation, so that’s a section of the world that we still need to pay attention to.
Also, on top of this news from Europe, we believe that global growth is slowing. Europe is in a recession, China is slowing down and oil prices are falling, showing us that the global economy looks to be contracting. Slowdowns and sell-offs will likely create buying opportunities for savvy investors, but as always, be careful in the markets and stay informed about what’s happening domestically and globally.
Here at Fabian Wealth Strategies, we’ve talked a lot lately about the European debt crisis, so you may be wondering why we would call this a “blind side”. Unfortunately, we believe that most American investors have little to no idea what is happening in Europe, and most investors are woefully unprepared for the trouble that is here and what is still to come from that sector of the world.
There are serious implications of the current and coming European economic contraction, and those have not yet been realized in the markets. This should cause concern for investors for obvious reasons: volatility is increasing and time is compressing, as the markets move faster and the swings get wilder.
As we watch the European situation, we continue to stress that investors should keep an eye on their risk exposure and have an exit strategy for their capital. We know that many U.S. investors are concerned about the U.S. debt and deficit, but the European debt and deficit is what is going to have serious implications to your portfolio in the short-term, and, because it is a less well-known problem, it has more opportunity to wreak havoc on your portfolio if you’re not careful.
So far, the European Union’s strategy for dealing with the debt crisis in Europe has been austerity (meaning getting budgets under control and reining in government hand-outs). Most of the economies in Europe are not globally competitive, and as a result, many citizens are reliant on government for many social services and basic needs, making austerity a difficult path to choose.
As a result, this weekend François Hollande won the French election over former president Nicolas Sarkozy, which means that austerity will probably once again take a back seat. Hollande is a socialist and has already promised to raise taxes to up to 75% on the wealthy, borrow more money and continue social programs for French citizens. Hollande wants the austerity strategies dictated by Germany eased in France, meaning that he is going in the opposite direction proposed by Sarkozy and Germany’s prime minister, Angela Merkel. It will be interesting to see if this new tactic works for the markets and how risk is affected by these new strategies in France.
Greece also held an election over the weekend, and the Greek people are struggling with austerity measures as well. There is fear that Greece may default on its bonds, and this is a serious hot-button, short-term issue, that we believe will really affect that markets.
The bottom-line is that even though Europe is far away and seems like something we shouldn’t worry about, the European Union is a huge factor in the global economy and the politics of public debt will make an impact on the markets. Don’t allow your portfolio to be blindsided by European troubles – if you’re not sure how to handle this uneasy market, please call us for a portfolio review at 800-391-1118
This is a podcast summary. For more complete details, please listen to the full podcast here.
Doug Fabian’s next live public speaking event will be in Las Vegas at the Money Show, where we’ll have about six different opportunities to present. Please check out moneyshow.com to register or for more information.
Don’t forget to sign up for our next teleseminar, titled: Strategies for Growth in Uncertain Times, and will be presented by Doug Fabian, on Tuesday May 8th at 1:00 p.m. Pacific (4:00 p.m. Eastern).
While this teleconference is FREE, attendance is limited, so please be sure to register HERE and reserve your spot today.
Listen to Doug talk about the short-term and long-term trends, divergences between the U.S. markets and international markets, AAPL news, the Federal Reserve meeting and policy, European debt crisis, and volatility in the markets.
This week’s video covers a lot of ground, so watch it and remember to keep a close eye on the market for better buying opportunities later this year.
Doug Fabian’s next live public speaking event will be in Las Vegas at the Money Show, where we’ll have about six different opportunities to present, and a special opportunity for our subscribers. Please check out moneyshow.com to register or for more information.
Politics are swinging between left and right as the European Union tries to deal with their debt crisis. Watching this news unfold is important for investors – we think it’s important to know how austerity, deficit spending, taxation and other economic news affects your portfolio.
That said, here’s some of the news we’ve been following about the political and economic climate in the Eurozone:
Just to bring this a bit closer to home, local politics affects our portfolios as well. Here in our home state of California, we have similar deficit, taxation and spending issues to the EU. Here’s a few of those news stories:
Be careful in the markets and stay aware of how politics affects your portfolio – listen to our podcast every week for up-to-date details and analysis, or call us today for a personalized consultation at 1-800-391-1118
