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.
(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.
We have seen better economic numbers lately, and investors are feeling good about the market, which is causing some higher market numbers than we would have expected under the current unstable economic circumstances.
However, we want to continue to remind you that the global economy is a significant factor in this market, even if it’s currently being largely ignored. Please read our recent blogs about the Triple Threat and the European debt crisis for more information on our views of global economic growth and what that means to your investments.
We encourage you to keep watching Gold stocks, as we mentioned a few weeks ago. We’re not going to give a “buy” signal here on the blog or on the radio podcast – we don’t want to take away from the services our paying clients expect – however, if you are interested in hearing our specific advice on what to buy and when, please call our offices at 800-391-1118
(Also, if you read this blog and enjoyed it, listen to Doug’s podcast this week for even more details on these topics, and please share this information with others who might benefit from our perspective.)
In case you’ve misread our continued warnings on this topic, we are not worried about Europe. By that we mean: we are aware of the problems there, but we feel we are prepared for the continued recession in the EU and the economic problems it may cause.
However, these are three things we think every investor should be aware of:
The economic situation in Europe – be prepared!
Emerging markets opportunities and risks (as a side note, this year, 90% of every dollar in ETFs has been in emerging markets)
We discussed gold and the buying opportunities to come in the teleseminar in January.
We think that gold mining stocks are going to be a good investment later this year, as there seems to be a disconnect between the price of gold bullion and gold stocks. Gold bullion prices are up, but gold miners appear to be under-performing so far this year. We think that gold stocks are vulnerable to a sell-off with the overall market if conditions begin to deteriorate.
We advise you to continue to exercise caution, but to keep gold on your investment radar, as it may soon become a great buying opportunity.
Here are three action items for every investor:
The widely-held perception is that risk is low in the market, which we obviously disagree with. However, you should pay attention to the market sentiment and don’t be lulled into this false perception.
If you own risk assets (those which are going up so far in 2012), have a plan to exit those positions if we start to see a pull back in stocks.
We are advising caution. If you need more clarification on what makes this specific environment so volatile, please check out our blog from yesterday on the fundamentals of the market.
Also, please check out our special report for more information on how to invest wisely. If you have questions about your personal portfolio, give us a call at 888-300-3684
(Also, if you read this blog and enjoyed it, listen to Doug’s podcast this week for even more details on these topics, and please share this information with others who might benefit from our perspective.)
This text is a summary of Doug Fabian’s first quarter teleconference recorded on January 10, 2012. For more in-depth coverage and details, we encourage you to listen to the entire teleconference here. You can also check out more podcasts and resources here.
What does success look like in 2012?
We believe that success in 2012 will be characterized primarily by capital preservation. Protect your assets, look out carefully for risk, and be aware of the potential pitfalls in a tumultuous year. No matter what your goals are, we need to embrace active capital management in a world of often extreme events.
Speaking of extreme events, in 2012, we’ll likely experience some upheaval around the world and in the global financial markets. We’ll see what happens with government intervention in the marketplace, with potential country defaults and a changing American political landscape. I believe this is going to be a volatile, risky year for the global markets.
In 2012, we’ll also get a chance to see how much debt matters. There’s obviously been a lot of talk on this topic, and this year we’ll get to see how much borrowing (in Europe, Japan and here in the U.S.) will affect us.
As we look at the current state of things, it’s interesting to note that the third year of a President’s term typically averages 15% growth in the stock market, but we ended 2011 flat – a big under-performance.
However, we often go through decades where stocks under-perform. From 1928 to 1950, stocks significantly underperformed, and from 1966 to 1980 was a similar cycle. From 1990 to now, we’re in another volatile period of time.
Over the next three years, focus on making sure that your mental psyche and your portfolio are intact and ready for anything. The next three years will be turbulent, but they will also be the buying opportunity of a lifetime for those who are prepared for it, much like September 1982. When going through long-term bear markets, your goal is survival, but as soon as the bear market is over, there are amazing opportunities to be had.
The Big Picture
The challenges facing Europe are immense. Unfortunately, it seems that the main-stream media is not interested in publishing this news and this is going to be a problem for investors. For example, the Greek government has been lying about their finances and they are trying to fix a debt situation with more debt, which, in our opinion, will not work. Even “austerity” measures are not working as planned and we suspect that by March 2012 Greece will default on their bonds, soon followed by other countries in the Euro Zone. A recession is likely coming to Europe rather soon, and it will affect the earnings of U.S. stocks.
Another part of the world that might also hit a rough spot in 2012 is China. China launched the largest stimulus package in the world in 2008 by investing in property and infrastructure. However, real estate prices are starting to fall, and a recession in Europe is going to hit them very hard because of their trade relations. China will likely not go into a recession, but its economy will probably continue to contract and be part of a global economic slowdown that continues into 2012.
The U.S. stock market, in the face of these challenges, is sitting on a ledge and I believe a price correction is almost inevitable. As Europe and China both slow down, the U.S. stock market cannot continue at inflated values. That doesn’t mean that stocks can’t go up, but remember that weakness in other places of the world will affect U.S. stocks and might result in a U.S. market sell-off.
At some point, central banks will try to come to the rescue of Europe. Inflation is the politician’s friend, and deflation is their worst nightmare. Politicians will be asked by their constituents to “fix” the situation when Europe’s problems become critical, and they will likely do so using inflation. This will be a buying opportunity for the smart investor.
Some key areas that you will be wise to watch are gold/precious metals, emerging markets, and U.S. equities. These sectors should the equivalent of an amazing sale and, like any smart shopper, we should take advantage of it when the time is right. Oil is an example of a commodity that I believe is very over-valued right now, and might take a steep plunge in the near future if a slow down in the global economy starts to take hold.
Opportunities for Income Investors
We advise avoiding high yield in the first quarter of 2012. For clients who desire a consistent income from their investments, we are avoiding dividend-paying equities, and investing in safe, reasonable yield fixed-income. We especially like actively managed, fixed-income mutual funds that can’t be replicated by an exchange traded fund (ETF).
We also like intermediate-term duration, fixed-income ETFs. We strongly advise keeping a high percentage of cash on hand, because of the risk in the market and the buying opportunities that we think are coming soon.
Opportunities for Growth Investors
Investment opportunity #1 – Gold. We are going to look to buy gold and gold stocks on weakness. Gold is trading like stocks right now, which means that it is likely to react to a sell-off much as a stock would. If the central banks continue to inflate currencies, gold will continue to rise. Demand for gold out of China and India is waning because of weak economies, and a lot of speculation (and on its heels, panic selling) may soon be coming in gold and gold stocks.
Investment opportunity #2 – Emerging Markets. Timing is going to be key on this, and we plan to buy this market segment when others sell them.
Investment opportunity #3 – U.S. Equities. Technology will likely be a very cheap sector, accompanied by oil services and banking. We are keeping a close eye on all industries for our clients, but these are the key ones on our watch list.
Action Items
Many times investors collect individual investments and vehicles that are outside of their comfort zone and that don’t make sense for their goals. In order for you to reach your goals, you must align your portfolio with your investment realities.
Step 1: Assess your portfolio’s exposure to the European crisis. How vulnerable are you to the problems in Europe and how defensive can you be? You need to be sure that you can protect your capital.
Step 2: Avert the European crisis and implement defensive strategies. Remember that we are focusing on protecting our capital and being cautious in 2012.
Step 3: Secure your income streams and position assets to ensure that your capital is producing low volatility income. We advise not to take excessive risk in the first half of 2012.
Step 4: Be prepared for buying opportunities that are almost sure to come in 2012. Reassess the markets often and be on guard for the opportunities that will be on their way this year.
Remember that this teleconference summary is merely an overview and investment opinions are subject to change with market conditions. We encourage you to listen to my weekly podcast to stay up-to-speed on these issues and read our blog for more information. If you would like more in-depth analysis of what your financial options are, please call our offices at 800-391-1118 so that we can take a look at your portfolio and help you with personalized investment choices that fit your needs.
Sincerely,
Doug Fabian
President, Fabian Wealth Strategies
Fabian Wealth Strategies, Inc. is a registered investment advisor with the U.S. Securities and Exchange Commission. Doug Fabian is a registered investment advisor representative. 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 specific security. Consider the risks, fees, and expenses before making any change to your investment portfolio. Please note these investment opinions are subject to change with market conditions.
With the exchange traded fund universe now boasting over 1,000 funds there is an asset class which always seems to peak everyone’s attention and that is Precious Metals.
Precious metals like stocks and bonds are an asset class which represents a great deal of risk and reward challenges. One of the biggest challenges that seem to define gold is the potential for volatility irrespective of other factors which may drive the stock market.
Join Doug Fabian for his first investment conference of the New Year. On Saturday January 9, 2010 at 12:00 pm (noon) Pacific, Doug will be discussing the investment landscape for 2010.
Doug has been writing on the subject of stocks, interest rates, commodities, and currencies for decades and he is presenting a unique opportunity to learn from his expertise. He believes that 2010 will present an entirely new list of winners and losers in the investment markets, but you must be on the call to act on Doug’s advice.
This one hour tele-seminar will be held exclusively for the first 800 registrants. Early registration is your best way to ensure you will have a seat for Doug’s thoughts on the the investment markets.
Five important keys you’ll learn:
His opinion on the direction of stocks in the New Year.
What sectors Doug believes show the most potential for profits.
What you can do to hedge your portfolio against rising interest rates.
His thoughts on Gold for 2010.
Which commodity ETFs deserve your attention right now.
The live teleconference will reach capacity because we’ve built an enormous following for this learning series. We urge you to take advantage of this opportunity and reserve your spot today.
Last week we talked about what I think will be a big investment theme for 2010, rising interest rates. This week we take a look at the second installment in our series on the top 10 investment themes for 2010—currency upheaval.
Now when I say currency upheaval, I am talking largely about the fortunes of the U.S. dollar. To be certain, the dollar has had a lot of upheaval in 2009.
After starting the year with a stout surge, the dollar’s fortunes turned tail in March. And with a few brief periods of sideways movement, the greenback plunged to record lows in late November.
Interestingly, the dollar has been on a sharp run higher since the first week of December. In fact, the dollar recently broke above its short-term, 50-day moving average (blue line), and now appears on route to break above its long-term, 200-day moving average (red line). If the greenback can breach this technical barrier, it could be the start or a protracted bull in the U.S. dollar vs. rival foreign currencies.
This is the kind of currency upheaval I expect will take place in 2010. As more and more countries try to keep the value of their currency low to help stimulate exports, we are likely to see more money move into dollars. Also, the rise in the dollar could mean a pullback in the price of gold.
The price of gold, as represented by the streetTRACKS Gold Trust (GLD), has been on a tear for most of the year. However, since the dollar’s December resurgence, the value of gold has declined precipitously.
I think that the currency upheaval we’re likely to see with the dollar—and with other currencies around the globe—in 2010 will mean opportunities on both sides of the gold trade. It will also mean opportunities on both sides of the international equity market trade, and on both sides of the domestic market trade.
Just about any way you look at it, currency upheaval in 2010 will cause both dislocation and opportunity for investment capital. The trick, of course, is to know which is which, and to be on the right side of the trade.
David Fabian, Vice President of Fabian Wealth Strategies, was recently quoted in Investors Business Daily on the bullish case for commodity ETFs during one of the worst bear markets in recent history. Click here to read the full story.
