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

Prepping Your ETF Portfolio for the Fed's 'Work in Progress'

NEW YORK ( ETF Expert) -- In a recent column about central banks rescuing struggling economies, Joe Calhoun at Real Clear Markets discussed the crippling effects of ceaseless monetary stimulus. Indeed, the activity is frequently correlated with sub-par economic growth and an erosion of purchasing power (a la inflation).

However, Calhoun takes his condemnation of interventions by central banks (U.S. Federal Reserve, People's Bank of China, European Central Bank, etc.) one step further. He laments the circumstances as being horrific for the long-term valuation of corporate stock assets because "weak growth limits the top line and inflation ultimately erodes the bottom line."

Here's where I depart from Calhoun's simplistic assessment. First of all, stock valuations don't mean a hill of pinto beans when irrational exuberance (e.g., 1996-2000) or walking-dead pessimism (e.g., 2009-2012) are in play. In both instances, analysts justified overvaluation and undervaluation arguments based upon different P/E varietals; in both instances, regardless of P/E assessments, stocks appreciated dramatically.

Should investors not have sought to profit from the late 1990s "New Economy" hype because it was irrational... or should they have rode the wave with a sensible and highly liquid exit strategy ?

Unequivocally, it is the latter. Should investors have walked away from central bank reflation of stock assets that has seen the Dow Jones Industrial Average double in value since 2009... or should they have participated in stock price gains with an exit approach? Investors have to be able to take advantage of stock uptrends if they wish to achieve their financial goals... period.

Secondly, P/Es are often meaningless when major benchmarks fall below and stay below significant moving averages like the 200-day. You can try to catch a falling knife and talk yourself into a deep discount value methodology, yet history has been kindest to those who managed risk by taking profits or small losses.

Anyone who understands bear market math recognizes the immensely positive outcome of a small loss relative to a big one. For that matter, anyone who has ever needed to use a catastrophic insurance policy (e.g., health, auto, homeowner, property, professional liability, etc.) recognizes that a small premium can often be the best money one ever spends.
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 $93.24 0.00%
FB $117.81 0.00%
GOOG $701.43 0.00%
TSLA $211.53 0.00%
YHOO $36.94 0.00%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs