This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Metals & Mining ETF: XME to Benefit From Fed

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( ETF Expert) -- What if the employment report for February is much weaker-than-anticipated? What if Israel drops much bigger hints about a pre-emptive strike on Iran? What if gasoline prices surge another 20% over the next two months as we head into the summer? Or what if core inflation increases so rapidly that the Fed finds itself hinting at rate hikes sooner than 2014?

For the time being, even the boldest bulls realize that stock prices may cool off after the best two-month performance since 1991. That means "long" investors have few choices but to wait before putting new money to work.

Feel like you absolutely, positively have to get into something? Consider SPDR Metals and Mining (XME).

XME has set higher highs in every consecutive month since November. Yet, the ETF is more than -10% off an October peak and more than -30% off an early 2011 pinnacle. If you believe that central bank QE bond purchasing by the Fed and ECB will create significant commodity price inflation , XME is a potential beneficiary.

It's nearly impossible to sift through commentary on the Web without coming across a colorful headline or statement. In this instance, I found myself "LOL-ing" at a Fast Money producer's proclamation that "stock prices are rising on growing expectations he [Obama] will be re-elected this November."

How did Mr. Producer validate this assertion? He offered up stats that currently show Obama's chances of victory up from 50% at the start of the year to 60%-plus today.

The commentator plots the rise of President Obama's re-election probability against the rise in stock prices, and concludes that the former is the reason for the latter. This violates one of the most basic tenets of statistics; that is, correlation does not imply causation.

Naturally, it's easy to demonstrate the silliness of Mr. Producer's logic. For instance, gasoline via United States Gasoline (UGA) has moved in the same direction as the Dow Industrials 5 out of 6 times over the last three months. Should we conclude that higher futures contract prices for unleaded gasoline are the reason for Dow 13000?
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%
TSLA $240.76 0.00%
YHOO $36.60 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs