NEW YORK (
) -- Don Dion posts his current insights on the stock, bond, commodity and currency markets in his
blog, anticipating which ETFs will be in play next.
Here are three of his blogs from the past week.
How to Avoid Triage
Published 5/26/2010 4:16 PM EDT
Today's market teetered on the upside as investors speculated as to whether the U.S. recovery could weather Europe's debt problems. "Rebounded", "moved to the upside", whatever you'd like to call it.
In the past year, we've heard almost every adjective imaginable used in conjunction with the word "market". Forget "bull" and "bear" -- two perfectly good animals appropriated by economists. Consider the "soaring", "sinking" and "crashing" that the market's managed to do in such a short period. Every journalist's thesaurus has been exhausted.
It's no wonder that people are wound tight. With things described in such extreme terms, investors feel the need to react. Whether it's going all in, or all to cash, all these adjectives have us doing the trading equivalent of sports-team suicides.
Before you wear yourself out thinking about tomorrow, there is another way. A well-balanced portfolio won't outpace a "soaring" market, but it also won't send you diving for cover every time "Europe" comes across the AP tape. Or
That's why I like ETFs, in general, and funds like
iShares Dow Jones Select Dividend Index
iShares Barclays TIPs
SPDR Gold Shares
, in particular. Instead of taking the edge off today's trading with a cocktail, try mixing a few of these together to get the right combination for your risk tolerance.
Being a money manager can be a bit like being an ER doc. Portfolios come in banged up and beat, and a screaming individual often follows behind. If all goes well, you can rebalance the portfolio and recommend therapy for the individual.
I've seen a lot of banged-up portfolios in the past year, and I'm sad to say that ETFs have caused some of the problems, not always solved them. That's why I always advocate a well-balanced combination. If you take care of your portfolio in the first place, there's less of a chance you'll be trailing it on a gurney.
Investors across America are rushing to see what's new in Europe, looking at aerial shots of the spill and trying to figure out the next turn the market will make. They will be "elated", "crushed" and, inevitably, "exhausted".
I'm here to tell you there's another way.
At the time of publication, Dion Money Management was long DVY, QQQQ and TIP.
Financial ETFs for Angry Times
Published 5/24/2010 9:35 AM EDT
Though we may be distracted by Spanish banks, German austerity plans and the euro hangover, we should expect a refreshed attack on U.S. banks.
With all the craziness going on in Europe, it's easy to forget that just weeks ago,
and the unfortunate Fabrice Tourre were defending the trading of complex financial instruments.
While I'm a firm believer that economic recovery is well under way, and that Europe has been a mere bump in the road, I still believe that Wall Street rage hasn't quite played out yet. In my May 12 blog, "
" I urged investors to trade carefully during this period of increased scrutiny in the banking industry.
As attention shifts back from Greece, investors may see the media on the attack once more. Just this morning, I've seen headlines that suggest that the new financial bill will take it easy on big banks and that the U.S. has abandoned its case against
. These types of headlines could cause Americans to once again channel their anger against Wall Street, which many still blame for job losses and economic distress. Even though banks such as Goldman,
Bank of America
are profiting, the average American is still not feeling the effects of the economic recovery.
While I am bullish on the financial sector over the long term, I believe we will see choppy activity in the big banks and in ETFs such as
SPDR Select Financials
in the near term as anger rises against Wall Street. During this time, I suggest gaining exposure to the financial sector through a regional banking ETF such as the
KBW Regional Banking ETF
. With top holdings that include
, this fund avoids many of the Wall Street titans that are the target for anger.
For the longer term, I still like the
SPDR KBW Bank ETF
, which has mixed exposure to Wall Street giants and "super regionals." While the portfolio includes names such as
and Bank of America, it also includes
Fifth Third Bancorp
Trading in the financial sector is going to be tricky in the months ahead as our government puts forth, adjusts and puts forth again numerous versions of financial reform. Rather than trying to pick names that will survive or thrive, try some of these financial ETFs for the short and medium term.
At the time of publication, Dion Money Management had no holdings in stocks mentioned.
Buy Hedged Japan at Bargain Prices
Published 5/27/2010 7:52 AM EDT
With Japan's Nikkei Index hitting six-month lows and Japan funds faring similarly, investors should consider picking up ETF exposure to the country at a bargain.
As I mentioned in an
article on May 21, the fundamentals of the economy look strong, but, as in other countries right now, Japan's markets have not been immune to the concerns coming out of Europe.
A report stating that China, a major trading partner for Japan, was reviewing its Eurozone bond holdings did not help the situation and has pushed the Japanese markets down to six-month lows. Still, for the past six months,
iShares MSCI Japan Index
has outperformed the S&P500.
An investment in Japan at this time, however, is complicated by the fact that the Japanese yen has gained in strength against the dollar and is currently at levels it has had difficulty holding in recent months.
This means that investors buying into Japan right now might be wise to choose
WisdomTree Japan Hedged Equity
over the better-known EWJ. DXJ shields investors from exposure to currency fluctuations, while providing similar exposure to the Japanese markets.
Recently, the yen's strength has helped to hold up EWJ, but DXJ has continued to fall, making it more of a value investment at the moment, in my view. And, right now, Japan is looking oversold, despite some positive signs about the economy.
Interestingly, much of the selling in Japanese markets is being done by overseas investors. The net amount sold by foreigners last week exceeded the low seen in the third week of March 2009.
I'd consider shrugging off the panic, though, and taking this opportunity to add exposure to Japan via DXJ, underpinning the international part of your portfolio at value.
At the time of publication, Dion Money Management was long EWJ.
Don Dion is president and founder of
, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.
Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.