ETF/No Load Fund Tracker StatSheet
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Market Commentary
Friday, November 4, 2011
BACK TO THE DOWNSIDE, BUT SOMEWHAT FLAT – WHAT’S NEXT FOR ETFs?
For the second straight Friday, markets were relatively flat although erring to the downside as the S&P 500 finished down 0.63%. Commodities marginally fluctuated and the dollar remained stuck at $1.38/Euro. Meanwhile, the VIX dipped a mere 1.11%. Volatility might be slightly down, but we still above the 30 level, so I’d be hard pressed to say we’re in risk off mode. Europe’s problems are far from over and the Greek situation has reached new heights of absurdity that I am highly cautious about in regards to how I maintain equity exposure.
Undoubtedly, the primary focus right now remains on Greece. The level of political gridlock is simply appalling and if Papandreou steps aside and the new government can’t muster the will to accept the EU’s bailout package, the extent of contagion emanating from a default could be disastrous. Greece might be the first domino to fall and this would put considerable stress on Italy and Spain to remain standing financially, especially as its bond yields reach record highs.
Furthermore, the funding plan for the EFSF is still not in place with $1.4 trillion as the target. World leaders once again reiterated that Europe needs to handle its debt issues on its own before it gets outside help via the IMF and making aid deals with countries such as China. This tension could spill over into next week, and I wouldn’t be surprised if, like this week, the beginning of the next week is fraught by a large market drop.
On the domestic front, today’s jobs report failed to inspire any confidence that the U.S. economy has made any gains. Although the unemployment rate slipped to 9.0% from 9.1%, only 80,000 new jobs were created. The bottom line is that the U.S. faces structural unemployment deficiencies that must be at least partially resolved for the economy to improve on a long-term basis.
While our Domestic TTI is still in positive territory by +3.19%, giving cause for us to pursue specific equity ETF opportunities, the international picture hasn’t brightened up as the International TTI is still negative by -5.93%. In this regard, things haven’t changed much with respect to trends.
With the G20 meetings wrapping up and continued Greek uncertainty, I can confidently say that our majority bond ETF and cash position looks increasingly attractive. The name of the game right now is prevent yourself from getting burned if volatility spikes up again and large losses ensue.
Have a great week.
Ulli…
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READER Q & A FOR THE WEEK
All Reader Q & A’s are listed at our web site!
Check it out at:
http://www.successful-investment.com/q&a.php
A note from reader Marty:
Q: Ulli: Now that you have instituted Domestic “Buy” signal as of 10/25/11, are you buying back into Permanent Portfolio?
Unfortunately, I sold all my positions October 3rd in PP, so if I buy back into the fund now, it will be on a much higher cost basis. Let me know your strategy on this one.
A: Marty: Yes, buying in at a higher price is what keeps us in tune with upward momentum. I purchased some PRPFX last week for a variety of clients.
The key here is to move back in when the long term trend line has been crossed to the upside, which just happened a few days ago. Be sure to track your trailing sell stop in case the markets head south again.
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