What is Going on with This Market?
Wednesday, June 11, 2008 | Teeka TiwariRating:
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- What can be done to boost the US dollar?
- Will we ever again see sub-four dollar gas?
- What's a good portfolio mix between emerging markets and US blue chips?
With our big launch coming this Thursday, I’ve had plenty to keep me busy, so this week's article will be extremely brief.
Economic news matched with some Fed rhetoric is resulting in some pretty serious cross currents for the stock market.
Last week, the general Street consensus was that we would be seeing some type of rate hike in the back half of this year.
That theory was shot to pieces when last Friday's employment report showed a massive spike of unemployment from 5% to 5.5%. Conventional thought then was that a weak employment market would preclude the Fed from raising rates, because higher rates generally lead to a slower economy and more unemployment.
However, once again, all of that was thrown into a cocked hat after Fed chair Bernanke's speech yesterday. In his speech he made it very clear that he was still considering jacking up rates. This is confusing the short term money because there is no real tradeable intermediate or even short term trend.
We also recently saw treasury secretary Paulson attempt to jawbone the US dollar higher, and it would not be a stretch to imagine that the Treasury Secretary's comments and the Fed chair's were not somehow coordinated.
However, it is my opinion that this has more to do with talking down oil than with talking up the dollar.
Of course, one of the fastest ways to bring oil down is to bull the US dollar up. Make no mistake: $139 oil CRUSHES corporate earnings as their profit margins become compressed by higher energy costs. In an effort to shore up margins, companies fire people. It’s happening all around us right now ... the Corp's are scrambling to keep their earnings intact.
This earnings pressure is one of the reasons why we have seen zero new growth in the S&P 500 and the DOW 30 since 2008. Yes, we have had a very nice rally off the 2003 lows, no question, but look at the 2000 highs on the S&P 500 and the Dow 30 relative to where they are now.
It’s a joke!
The reason?
NO REAL EARNINGS GROWTH!!
25 years ago was the last time we faced a crisis like this with “go nowhere” stock prices and skyrocketing commodity prices. Then for twenty years we saw stock prices go sideways. The big money was made in commodities, but for the average person they had no way to participate. The average person could not open a commodity account. Even today, direct ownership in commodities is still far too risky for most investors.
This is why ETFs are such a gift for the smaller investor.
Today’s ETFs allow us to buy gold, oil, copper, wheat, lead, sugar and just about every other commodity you can imagine.
We can buy ETFs using margin for extra leverage, or buy options on ETFs for even more leverage BUT with just a fraction of the risk that straight commodity buying has always entailed.
This Thursday I will be launching the most comprehensive A-Z trading and investing manual for ETFs. I can’t tell you how excited I am about this educational and trading system. So many people have given so much to make this the most understandable and practical course of its kind, and so it’s no exaggeration when I tell you it will change the way you look at investing forever.
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Teeka Tiwari
Chief Investment Officer
ETF Master Trader
