Courtesy of Daniel Sckolnik of ETF Periscope
“And it’s interesting, when you look at the predictions made during the peak of the boom in the 1990s, about e-commerce, or internet traffic, or broadband adoption, or internet advertising, they were all right – they were just wrong in time.” ~ Chris Anderson
“I figure lots of predictions is best. People will forget the ones I get wrong and marvel over the rest.” ~ Alan Cox
“Never make predictions, especially about the future.” ~ Casey Stengel
The end is near. The end of 2010, that is.
Which means, of course, that yet another New Year is about to be rung in, with all the accompanying hoot and hoopla. The perfect time to dust off the crystal ball, arrange the tea leaves, spread out the Tarot deck, or pull out your divination tool of choice in an effort to foresee the future of the markets. It is in this spirit of fearless forecasting that ETF Periscope will now turn its gaze to the far horizon, and play oracle for this week’s commentary, feeling secure in the knowledge that even a coin-flip will yield a fifty percent chance of landing on the called side for any given turn.
The markets have generally been in a strong uptrend since September, with both the Dow Jones Industrial Average (DJIA) and the benchmark S&P 500 Index (SPX) hitting two-year highs right before Christmas. Gold, of course, has been on a serious tear since August, and though it has backed off from its high point just above $1,400, it seems as if it’s going through a momentary consolidation as opposed to any real correction. Crude oil? Hovering around the $90 dollar per barrel mark, a level higher than many observers expected to find it this year. Taken together, the year is certainly going out with a strong Bullish wind to its back.
Can it last? Most indicators seem to lean towards the affirmative, at least for the short term. Long term? Maybe not so much. Here are some of the things that pop out in considering the future.
China.
Not a bad place to look if you’re trying to get some kind of read on the future. It is arguably the single most influential player on the world financial stage right now. Its economy has been on fire the last few years, and it may be beyond its government’s ability to reign it back in. Inflation is certainly a big fear here, with the consumer price index up a staggering 5.1% in November. That’s faster than it has grown in over two years, and it’s certainly sounding alarms in Beijing, where tightening measures are being put into effect in ever increasing degrees. It just might be a bubble that is ready to pop this coming year, and if you agree, you can play it to the downside, using an ETF such as FXI (iShares FTSE/Xinhua China 25 Index Fund). This ETF tracks the FTSE/Xinhua China 25 Index, which measures the performance of the largest companies in the China equity market.
How about those PIIGS?
The European Union has a sovereign debt problem, and it justifiably can be classified as systemic. While some of its members are on firm footing, notably Germany and to a lesser degree, France, there are enough bad apples in the bunch, economically speaking, to bring down the house, and I’m not talking about with applause.
Portugal, Ireland, Italy, Greece and Spain are all suffering, to different degrees, from debt overload, and though some of the PIIGS have been propped up with large bailouts, specifically Greece and Ireland, the problems may increase before they decrease. Last week Greece was warned by Fitch that it could have its credit ratings reduced to the dreaded “non-investment” grade level, depending on how a review goes in the next six weeks.
Ireland is continuing on its own steep downward spiral, as Moody’s brought down the Emerald Isle’s credit rating yet another five levels. And Fitch stated that the European Union is at further risk of having to bail out other euro members. While this may not happen anytime soon, it likely will play out to some extent, and when it does, the euro will likely take a hit.
One way to take advantage of a weakening euro is to bet on a strengthening dollar. One ETF that can fill this bill is UUP (PowerShares DB USD Index), which tracks the Deutsche Bank Long US Dollar Index Futures Index).
Finally, there is gold.
Gold has retained and built on its own momentum throughout the year, and has formed, technically speaking, a double top over the course of the last few months. The oracle says it will retest this level once more, break on through to the $1,500 level, and, at that point, see a substantial correction, with many investors taking substantial gains off the table. It may take a while to get to that point, however, but if you want to play with the shiny metal, the ETF GLD (SPDR Gold Trust) can be used for the purpose. GLD tracks the price of gold bullion.
You’re likely to be able to find your own crystal ball, maybe up in your attic, or at a nearby swap meet. Just make sure you polish it to a sparkle to allow for optimized vision, and remember to always have a healthy dash of salt nearby to add to the mix.
ETF Periscope
Full disclosure: The author does not personally hold any of the ETFs mentioned in this week’s “What the Periscope Sees.”
Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.
“And it’s interesting, when you look at the predictions made during the peak of the boom in the 1990s, about e-commerce, or internet traffic, or broadband adoption, or internet advertising, they were all right – they were just wrong in time.”
~Chris Anderson
“I figure lots of predictions is best. People will forget the ones I get wrong and marvel over the rest.“
~Alan Cox
“Never make predictions, especially about the future.”
~Casey Stengel
The end is near. The end of 2010, that is.
Which means, of course, that yet another New Year is about to be rung in, with all the accompanying hoot and hoopla. The perfect time to dust off the crystal ball, arrange the tea leaves, spread out the Tarot deck, or pull out your divination tool of choice in an effort to foresee the future of the markets. It is in this spirit of fearless forecasting that ETF Periscope will now turn its gaze to the far horizon, and play oracle for this week’s commentary, feeling secure in the knowledge that even a coin-flip will yield a fifty percent chance of landing on the called side for any given turn.
The markets have generally been in a strong uptrend since September, with both the Dow Jones Industrial Average (DJIA) and the benchmark S&P 500 Index (SPX) hitting two-year highs right before Christmas. Gold, of course, has been on a serious tear since August, and though it has backed off from its high point just above $1,400, it seems as if it’s going through a momentary consolidation as opposed to any real correction. Crude oil? Hovering around the $90 dollar per barrel mark, a level higher than many observers expected to find it this year. Taken together, the year is certainly going out with a strong Bullish wind to its back.
Can it last? Most indicators seem to lean towards the affirmative, at least for the short term. Long term? Maybe not so much. Here are some of the things that pop out in considering the future.
China.
Not a bad place to look if you’re trying to get some kind of read on the future. It is arguably the single most influential player on the world financial stage right now. Its economy has been on fire the last few years, and it may be beyond its government’s ability to reign it back in. Inflation is certainly a big fear here, with the consumer price index up a staggering 5.1% in November. That’s faster than it has grown in over two years, and it’s certainly sounding alarms in Beijing, where tightening measures are being put into effect in ever increasing degrees. It just might be a bubble that is ready to pop this coming year, and if you agree, you can play it to the downside, using an ETF such as FXI (iShares FTSE/Xinhua China 25 Index Fund). This ETF tracks the FTSE/Xinhua China 25 Index, which measures the performance of the largest companies in the China equity market.
How about those PIIGS?
The European Union has a sovereign debt problem, and it justifiably can be classified as systemic. While some of its members are on firm footing, notably Germany and to a lesser degree, France, there are enough bad apples in the bunch, economically speaking, to bring down the house, and I’m not talking about with applause. Portugal, Ireland, Italy, Greece and Spain are all suffering, to different degrees, from debt overload, and though some of the PIIGS have been propped up with large bailouts, specifically Greece and Ireland, the problems may increase before they decrease. Last week Greece was warned by Fitch that it could have its credit ratings reduced to the dreaded “non-investment” grade level, depending on how a review goes in the next six weeks. Ireland is continuing on its own steep downward spiral, as Moody’s brought down the Emerald Isle’s credit rating yet another five levels. And Fitch stated that the European Union is at further risk of having to bail out other euro members. While this may not happen anytime soon, it likely will play out to some extent, and when it does, the euro will likely take a hit. One way to take advantage of a weakening euro is to bet on a strengthening dollar. One ETF that can fill this bill is UUP (PowerShares DB USD Index), which tracks the Deutsche Bank Long US Dollar Index Futures Index).
Finally, there is gold.
Gold has retained and built on its own momentum throughout the year, and has formed, technically speaking, a double top over the course of the last few months. The oracle says it will retest this level once more, break on through to the $1,500 level, and, at that point, see a substantial correction, with many investors taking substantial gains off the table. It may take a while to get to that point, however, but if you want to play with the shiny metal, the ETF GLD (SPDR Gold Trust) can be used for the purpose. GLD tracks the price of gold bullion.
You’re likely to be able to find your own crystal ball, maybe up in your attic, or at a nearby swap meet. Just make sure you polish it to a sparkle to allow for optimized vision, and remember to always have a healthy dash of salt nearby to add to the mix.
ETF Periscope
Full disclosure: The author does not personally hold any of the ETFs mentioned in this week’s “What the Periscope Sees.”
Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.
