We are highlighting the “Fabian Five” because we think it’s very important for investors to monitor these five indices every week, and ask yourselves, are they changing for or against your portfolio? Here are the five indices that we are watching and that we encourage you to monitor as you make investing decisions:
We think that one of the best ticker symbols to watch for global stocks is VT, the Vanguard Total World Stock Market ETF. It comprises almost all stocks in the world and gives a complete picture of the whole world, not just emerging markets or the U.S. We think it’s a very interesting ETF to pay attention to. It has 3,880 stocks in the index, and gives a great, balanced, global macro view.
VT is made up of 50% North America (U.S., Canada and Mexico), 24% Europe, 12% Pacific countries and 14% Emerging Markets. It gives a nice broad view of the world stock market, although it is still dominated by the United States, at 48%.
We really encourage you to take a look at VT and consider its implications to your portfolio. As always, if you have questions or concerns about the role of global stocks in your investing, please email askdoug(at)dougfabian(dot)com.
(If you read this blog and enjoyed it, listen to Doug’s podcast this week for even more details on this topic, and please share this information with others who might benefit from our perspective.)
Summer is a time of vacations and this means that the number of shares traded on the stock market are down from normal. Europe is even slower than the United States since they tend to have longer vacations then we do, so don’t expect real trading to begin until after Labor Day in the United States.
Even though things are slow right now, the debt crisis in Europe continues. There are still significant problems in Greece, Italy, and Spain while the global economy remains in a slow down pattern.
In the United States, the political season is in full swing with the selection of the Republican VP candidate, Representative Paul Ryan. We think that the stock market is something of a barometer for who will win the election. If the market holds up until the election that would favor Obama, if something upsets it, that would favor Romney.
We have started something new on out Monday Market Update podcast: we’ve started a series providing investment and wealth management advice based on age, since there are different rules and priorities for each age group. We began this new segment this week focusing on those in their eighties, and we’ll continue for several weeks, taking a new decade each time.
No matter what your age, it is of the utmost importance that you have your financial life in order, so check out this week’s broadcast for more details. As always if you have any additional questions, please email at askdoug(at)dougfabian(dot)com.
This is a podcast summary. For more complete details, please listen to the full podcast here.
We saw this fascinating statistic today: Yesterday was the eighth Monday in a row that the Dow has been down. Internationally, we are seeing decoupling from the U.S. and the rest of the world. There’s a big difference between the two, and the question is, is the U.S. going to slow to match the rest of the world, or will the rest of the world catch up to the U.S.?
In Europe, Spain and Italy are both struggling this week. Cities are running out of cash in Italy, and we also saw the headline recently that there will be no more aid for Greece, which is on the verge of default.
Debt needs income to service it. In Spain, for example, they don’t have a growing economy (their economy is shrinking) and so they don’t have the income to meet their debt obligations. Debt needs growth to combat it, and in Europe, the economies are not growing and so the debt is not being serviced, and this is creating more debt problems.
Stateside, when we’re less than 5% above 200-day moving average, we call that an alert mode, (meaning keep a close eye on short-term market action). When markets pierce the 200-day average, we tend to see follow-through selling, and also, that’s a signal of a potential bear market emerging. In good domestic news, the bond market is still a bull market and is still doing well.
Announcements:
If you’d like a great educational experience and to see Doug present live, we will be at the San Francisco Money Show on August 24 – 26, 2012. Doug will be offering four presentations, and we encourage investors to consider attending, as it is a great experience.
Also, if you missed the teleconference last week, we are making it available for you. Please check out our complete recap and recording, here.
There has been a coordinated effort by central banks to address the slowing economy – according to the Wall St. Journal:
Central banks in China, the euro zone, the U.K. and other countries took new steps to bolster growth amid mounting worries about the global economy, but the moves didn’t appear to reassure investors.
We encourage you to read the full article, but here is the key issue: central banks hope that cheaper credit will induce businesses and households to borrow and spend. However, most people are increasing savings and paying down debt, because they see uncertainty in the markets and the economy and want to prepare. Saving and paying down debt are both great strategies for your personal finance, but not for economic growth, which is why you hear so many politicians and central bankers calling for more borrowing and spending. We don’t fault people for being conservative, however, especially when you get economic news like our latest jobs report and you see the kind of global uncertainty we’re seeing now.
Also, as you know, Fabian Wealth Strategies is located in California, and we have several cities in our great state that are in deep financial trouble: Victorville, Stockton, Vallejo and Mammoth Lakes. Unfortunately, these kinds of money problems for cities (and states, and countries, unfortunately) are not uncommon and we think they will continue to bubble up. There is not enough economic growth or tax revenue to service the debt all over the world, which is why we see major problems in Greece and other parts of Europe. Domestically, it’s not an urgent problem for investors right now, but we do think that this is an important issue to be aware of.
Another factor in the debt discussion is this: bad or subprime borrowers pay a lot more in interest then prime borrowers do, and economic activity grinds to a halt when there is high interest rates. (Hence the central bank action we talked about in the beginning of this post.) Confidence is also a big factor in economic, as many people see this uncertain economic news as a reason to stay put and not invest, hire, borrow or spend.
These are all things to be aware of as we manage our portfolios and investment strategies. These are unusual circumstances, but with good education, advice and sound principles, we think that investors will have great investment opportunities later this year. If you have questions about your current portfolio positions or want to be sure you’re prepared for the risks and opportunities to come, give us a call at (800) 391-1118. Our initial conversation will cover your goals, your objectives and your current invested positions. It will also cover what Fabian Wealth Strategies can do for you.
To wrap up, here are a few reminders:
Our next live teleconference will be Tuesday, July 17. Stay tuned for sign-up information and more details.
Doug will be presenting at the San Francisco Money Show on August 24 – 26, 2012. He will be offering four presentations, and we encourage investors to consider attending, as it is a great experience.
Have questions or comments for us? Send an email to Doug: askdoug(at)dougfabian(dot)com
This is a podcast summary. For more complete details, please listen to the full podcast here.
Even though everything seems fine, from the rallying S&P 500 to the situation in Europe, nothing could be further from the truth.
The U.S. stock market is only rallying in anticipation of the Federal Reserve providing some sort of stimulus to help the economy. Nothing is fixed in Europe either. Greece will need another bailout, Spain is still a mess, and Germany does not want to play the hero to other countries. Meanwhile both the United States and China are slowing.
Even with the future expectation of the Federal Reserve coming to the rescue, the United States remains in a precarious financial situation, as does the rest of the world. We believe that a crisis is afoot, which could lead to a sharp drop in the stock market in the coming months. It is important we, as investors, keep our wits about us and minimize the risk in our portfolios.
We welcome your questions and comments – please send them to askdoug@dougfabian.com and stay up to date with our blog and podcasts.
Don’t become complacent about the strength of the dollar and the market. We believe that risk is still a powerful factor.
Greece is still causing problems, and may exit the Euro. We’ll see what happens, but again, don’t get complacent – the economic troubles in Europe are not going away anytime soon.
Bond market is still strong, and we consider this the place to invest for right now.
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.
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.
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.
