A World Of Potential Conflicts

As I elaborated in yesterday’s post, many readers seem to focus on future events trying to evaluate now as to what the best course of action for their portfolios might be, should this event actually come to pass. Here’s what reader Jerry had to say:

The threat of Israel striking Iran nuclear facilities seems greater as the elections are upon us. If Obama is elected, I believe Israel will strike Iran before year’s end, since he has said in the end he will support the Muslims.

How do I position my portfolio to take advantage of this event? Which oil ETF do I buy options for? What other ETFs would benefit from this also? I would appreciate your thoughts on this scenario.

The problem with Jerry’s scenario is that it is strictly based on predictions. Whether this will happen or not is a totally unknown at this point. I am not a believer in using these types of projections, as realistic as they may seem, as a basis for investment decisions. Why? Because you can be dead wrong in your assumption or the anticipated outcome.

This reminds me of what happened in January 1991 when Iran invaded Saudi Arabia. The world was in shock, speculation ran rampant and the outcome was exactly opposite of what was expected. The domestic markets staged a 1-1/2 year long rally, which still stands as the best return on record we ever had with a Buy cycle for our Trend Tracking methodology.

Sure, times may be different now, but I still believe that the best course of action is to wait for trends to develop first before taking any positions. Going this route will let you confirm that indeed the momentum swings your way, which will enhance your chances of making a better investment decision.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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