ETFs on the Mind + Your Reasons for Reading!
Monday, April 2, 2007 | Ben SchottWhat’s REALLY On My Mind?
Exchange Traded Funds.
If you missed Teeka’s article last Friday, it’s very important that you check it out now.
In a nutshell, Teeka announced that on April 16th, he’ll be sharing the secret to making real money trading ETFs … the kind of money that could — quite literally and without overstating things — help you turn a $10,000 trading account into more than $2 million.
Over the past year, ETFs have taken on a life of their own. They’re as popular (if not more) than mutual funds were when they were first catching on.
As a result, more and more individual investors are starting to trade them.
Unfortunately, they’re going to lose … and lose big. Especially if they follow some of the shoddy advice that’s being put out there by a few so-called “experts” to make a quick buck off of people like you.
So Teeka — who has been trading ETFs professionally since the very beginning — decided to find out exactly what kind of advice is available to individual investors.
Teeka even went so far as to subscribe to an ETF service from one of the most popular financial publishers … and was SHOCKED at how utterly misleading and costly the service turned out to be.
At the end of the day, it became clear to him that if nobody else was either qualified or willing to share the secret to profitable ETF trading with you, it just plain and simply had to be him.
A Special Message from Teeka Tiwari …
Teeka called me up this weekend and asked for a favor.
He wanted me to take the opportunity in my article today to share his excitement with all of you who’ve added yourselves to the “Inner Circle” VIP waiting list for his upcoming ETF program.
In fact, he sent me an audio clip that he put together … so he could speak to you personally.
Click Here to Listen to Teeka’s Message >>
Three very important notes:
- If you still haven’t added yourself to Teeka’s “Inner Circle” list, you should consider doing so sooner than later. Remember … we’re only allowing the first 5,000 Tycoon Report readers onto the list. When Teeka presses “Send” for his email on April 16th, the only people who are going to get his secret to making serious money with ETFs are those on the “Inner Circle” list.
- Also for those of you who aren’t on the list yet: Feel free to listen to Teeka’s message as well. We’ve included the signup form right there on the same page.
- We’ve gotten a lot of email over the past few days from people concerned about the cost of joining the “Inner Circle” waiting list. I just want to put that idea to bed right now: Joining the list doesn’t cost a thing, and it doesn’t obligate you to a thing.
Click Here to Listen to Teeka’s Message >>
A Quick Follow-Up from My Previous Article …
Last week, as you’ll recall, I asked this question:
Why Do YOU Read The Tycoon Report?
Before I go any further, I just want to thank all of you who took the time to write in.
Speaking for myself and for everyone else who shares their investing experience with you in this little letter, thank you for reminding us of why we do this.
I also promised to share some of the more interesting responses in today’s column, so here are a few:
I like the fact that you pay a lot of attention to educating your readers before you make your buying/selling suggestions. Keep up the good work.
- Duncan D.
I've been reading Tycoon for about a year now, and my father bought me a subscription to Point and Profit for my 19th birthday. I've learned more about trading and investing from Tycoon than from any other source. At St. Johns University, where I'm studying finance, my college buddies call me the options master. The funny part is, I learned EVERY BIT of what I know about options from Chris Rowe. I wonder what they would say if they met him. As a matter of fact, I believe so much in Tycoon's principles that I push your research on message boards like a con-artist pushes penny stocks.
- Ahmed G.
I am a 26 plus years veteran Financial Advisor with a major firm. I am a voracious reader of financial news, commentary and research. I find a major amount of what I absorb is somewhat firm-friendly with a decidedly directed bent. I find independent commentary to be an excellent counter-balance to that which is oft-times offered. Tycoon sheds a different light on Wall Street. It is carefully composed, filled with useful information and immediately on point. I always learn something from your publication. Keep up the wonderful information flow. It assists more people to achieve the knowledge needed to compete on a somewhat level playing field when they invest.
- David H.
I read your newsletter to improve my knowledge of the market. I'm 68 & retired. The market is sort of a hobby with me & I would like to make a few extra $$ so we could travel more.
- Jan S.
I am soon to be 65 and my wife and I are living off our modest nest egg. We need to preserve its size while it produces excess enough to live (well). Many voices and e-mail stock "experts" … Most seem to be marketers of their stuff more than offer genuine wisdom re-the stock market. I like the simple, candid, and logical material you present.
- George S.
I am 67 and cannot afford to retire. My pensions and Social Security will provide about 90% of the money needed to meet the minimum cost of a spartan lifestyle. The company 401K will fill the holes for a little while. Continuing to work and investing additionally in a taxable account, if the end result is good, can make the coming years much more comfortable for a lot longer time. I am interested in options and understand the general concept but so far all that I have read about them in practical nuts-and-bolts use just makes my head swim. In any case, the advice and commentary in Tycoon Report is a significant positive factor in my self-help project.
- Wayne M.
This year, I retired and my first "assignment" to myself was to learn about investing. I made my first individual stock purchases on Feb 22 (great timing, huh?) and, instead of being a passive victim of market swings as in the past, I got out in a timely manner, got back in judiciously. I'm already whole but the best part is that I'm IN CONTROL. Now where does Tycoon Report fit in? I LOVE you guys! Chris Rowe, Teeka, the Jovines. My goal is to hit $1M in the next few years and that means I have to learn as much as I can as fast as I can - and you SUPPORT that every single day. I am grateful for your straight and timely advice and thrilled that, instead of just "taking the money" you can earn for yourselves, you are sharing your experience and insight to help us individual investors.
- Judy T.
I read the Tycoon Report because I have money invested. When I invest I like to have as much information as possible. Knowledge is power and non-sale advice is better than a stock push.
- Mark H.
Hi. I wouldn't normally respond to such a request, however you truly are the absolute best newsletter that I have followed in the 2 1/2 yrs since I decided to learn how to trade options. I believe I have had every sales pitch out there sent to my inbox and most are just terrible. If you read them long enough you realize they never change. It was a lucky day when I decided to open yours. It is by far the most honest and refreshing reading of any out there. … I know that learning to trade properly will be life changing. Everything I read in your newsletters is very helpful and I now feel I can count on it and trust the information. I will count you as a contributor to my family having a chance at our dreams.
- Brenda S.
My brother is one of those know-it-all, gloom-and-doomers that never makes any money in the market. I bet him that I (a total novice) could make more money in the market in the next year than he could. If I win he can't spout off his outrageous claims for an entire year!!!! Everyone in the family will be happy. I have until Jan 31, 2008 and I'm counting on your help.
- Stephanie C.
I’ve made an effort to respond personally to every one of you who took the time to write in. It’s been great getting to know several of you over the course of the week. If you missed last week’s issue, and want to share your reasons for reading The Tycoon Report, it’s better late than never. Feel free to email me.
What’s On Tap for Next Monday …
Since we started talking about ETFs on Friday, we’ve received a ton of email from readers with questions about the product … and exactly what they can expect to see on April 16th.
Yes, to a certain extent we’re being intentionally vague about some of the details. After all, we are talking about a secret to making $2.7 million with ETFs, and you know we love the drama.
That being said, we don’t want anyone to be confused. If you have any concerns or questions that you’d like for me to address next week, send them to me at Editor@TycoonResearch.com. I’ll try to respond to you before then, and I’ll also post some of the most common questions or concerns in my article next week.
Rate his article here »
Ben Schott
Editor in Chief
The Tycoon Report
Mark Your Economic Calendar: What's ahead for the week of April 2, 2007
Monday, April 2
10:00 - ISM Index: Consensus 51.0
Big Picture: Weakened business confidence slowed capital investment as the effects from the struggling auto and housing sectors left the ISM index below a neutral 50 in November and to a lower level in January. February rose to a five-month high, but the actual data on orders and production are less encouraging. Some inventory draw down is leaving weak production as underlying capital investment demand remains weak. Business investment has some supportive fundamentals -- cash loaded balance sheets and high capacity utilization rates urging continued labor saving investment -- which suggest a return to stronger manufacturing demand in 2007. We expect manufacturing activity to return to stronger growth as capital investment rebuilds and the effects from
autos and housing lighten. The obvious risk is that businesses remain cautious about the outlook and continue to hold back on capital investment.
Implications: The ISM is one of the first comprehensive economic releases of the month, typically preceding the employment report. Though it covers only the manufacturing sector, it can often provide accurate hints regarding the tone of subsequent releases. During periods of inflation concerns, the prices paid and vendor deliveries indexes often determine the bond market's reaction to the report.
Tuesday, April 3
17:00 - Auto Sales: Consensus 5.1M, Truck Sales: Consensus 7.6M
Big Picture: Buying incentives have provided a bouncy path for vehicle sales over the last few years, and drive the monthly pace of domestic sales. High gasoline prices provide the advantage to fuel efficient imports and domestic autos, but SUV sales have not shown a strong decline given the larger discounts awarded, and domestic preferences. Reduced discounting softened the pace of 2006 sales to a 12.8 mln average pace from 13.4 mln in 2005. With a 25% weight in retail sales, autos provide the monthly swing to consumer spending.
Implications: Auto and Truck Sales measure the monthly sales of all domestically produced vehicles. They are considered an important indicator of consumer demand, accounting for roughly 25% of total retail sales. Demand for big ticket items such as autos and trucks tends to be interest rate sensitive, making the motor vehicle sector a leading indicator of business cycles. Vehicle sales figures rarely grab the attention of the market probably for two reasons. First, though the specifics of the data are not terribly difficult to understand, their implications are a little hard to trace. Second, unlike many economic releases, vehicle sales are not released all at once and at the same time every month. This makes it difficult for the market to quickly interpret what the numbers mean for the overall consumption picture and to react accordingly.
Wednesday, April 4
10:00 - Factory Orders: Consensus 2.0%
Big Picture: Factory orders are volatile, but the recent weakness is more than just the struggling auto and housing sectors and the resulting spillover to related industries. A drop in business confidence has slowed capital investment -- the driver for manufacturing orders and production. Some of the weaker production is due to the drawing down of unwanted inventories but orders provide the forward view for manufacturing activity and is in decline. The weakness is consistent with the Nov/Jan contraction in the ISM manufacturing index and the weakness in industrial production despite the underlying fundamentals of flush corporate balance sheets and high capacity use which helps support capital investment. A lift is expected once the economy picks up which may have to wait for the turn in housing. The manufacturing downturn may be well advanced by then.
Implications: Factory orders consist of the earlier announced durable goods report plus non-durable goods orders. The report is very predictable with nondurables the only new component. Nondurables consist of such items as food and tobacco products which grow at a fairly consistent monthly rate, so that market forecasts for this report are far more accurate than for the durable orders report. In addition to seeing nondurables for the first time, the market also watches for revisions to the durable orders data, which can be significant. At present, durable goods orders sum to about 54% of total orders.
Thursday, April 5
8:30 - Initial Claims: Consensus NA
Big Picture: Initial claims are back down below 310K but tracking a gradual rise as the boost in February faded just as the January dip did. The levels suggest some slight loosening in the labor markets as the 4-week average reached a 16 month high in early March. Continued claims are on an upswing as well with the weekly level at a 14 month high the same week. Provides a nearly real time read on the labor market as the low 4.5% unemployment reflects the broader measure of net hiring.
Implications: Initial jobless claims measure the number of filings for state jobless benefits. This report provides a timely, but often misleading, indicator of the direction of the economy, with increases (decreases) in claims potential signalling slowing (accelerating) job growth. On a week-to-week basis, claims are quite volatile, and many analysts therefore track a four week moving average to get a better sense of the underlying trend. It typically takes a sustained move of at least 30K in claims to signal a meaningful change in job growth.
Friday, April 6
8:30 - Nonfarm Payrolls: Consensus 120k, Unemployment Rate: Consensus 4.6%
Big Picture: Payroll revisions have added 933K to the counts since March 2005. 754K were in the year ending in March 2006 as another 179K were added from April through year-end 2006. February's 97K rise is the weakest in over two years. However, the unemployment rate reached a cyclical low of 4.4% in October and hasn't shown much lift at just 4.5% in February. The relatively low labor participation rate continues to leave lean worker availability and a tight labor market. Employment trends lag the economy as final demand -- in excess of labor productivity -- feeds in to labor demand. Hourly earnings (for production workers) stand at 4.1% yoy after reaching a six year high in December. The stable workweek fell to a year and a half low in February -- suggestive of lesser immediate labor demand. Signs of a strong labor market despite the historically moderate growth in payrolls.
Implications: The unemployment rate demands little explanation, though it is worth noting that the rate can occasionally sees significant monthly changes which are due to flukes in the data. The rate is simply the result of dividing the number of people unemployed (labor force less employed) by the number of people in the labor force. Without question, the single most important piece of data contained in the employment report generally and the establishment survey specifically is nonfarm payrolls. As the name implies, nonfarm payrolls measure the number of people on the payrolls of all non-agricultural businesses. The monthly changes in payrolls can be quite volatile, occasionally varying by better than 200K from one month to the next. Even with this volatility and the possibility of large revisions to past data, the payrolls figures offer the most timely and comprehensive snapshot of the economy.
8:30 - Hourly Earnings: Consensus 0.3%
Big Picture: The average hourly earnings indicator is important for two reasons. Alongside total manhours, the average earnings figure gives us a good indication of personal income growth during the month. Second, the earnings figures are closely watched during periods of strong economic growth for evidence of increasing wage pressures. Such has certainly been the case over the past year, as the market's reaction to the employment data has often turned on the change in hourly earnings and its implications for the inflation outlook.
8:30 - Average Workweek: Consensus 33.8
Big Picture: The workweek, also referred to as hours worked, is an often underrated indicator in the establishment survey. The average number of hours worked by employees on nonfarm payrolls is an important determinant of both industrial production and personal income in any given month. The workweek typically sees changes of a tenth or two each month, but can see much larger swings, such as the four tenth decline reported for October. To understand the importance of these changes in the workweek, note that a one tenth decline in the average workweek of 120 mln workers (roughly the current level of employment) results in 12 mln fewer hours worked. To create a similar decline in manhours through a change in employment, payrolls would have to fall 340K.
For the purposes of production and income calculations, a one tenth of an hour change in the workweek is equivalent to a 340K change in employment. Needless to say, the workweek data are therefore critical in judging the overall strength or weakness of the employment report.
10:00 - Wholesale Inventories: Consensus 0.4%
Big Picture: Wholesale inventories growth of 9% yoy exceeds the 6% yoy growth in sales. The inventory to sales ratio bottomed at 1.12 months in June with a return expected in 2007 from January's 1.16 month. Longer term trends reflect some comfort at those I/S lows as technology allows for continued improvement in just-in-time inventory management. The smaller inventory swings from rebuilding and draw downs leaves a steadier pace of domestic growth.
Implications: The wholesale trade report includes sales and inventory statistics from the second stage of the manufacturing process. The sales figures say close to nothing about personal consumption and therefore do not move the market. Wholesale inventories sometimes swing enough to change the aggregate inventory profile (aggregate inventory is the sum of inventory at the manufacturing, wholesale, and retail levels), which may affect the GDP outlook. In that event, they can elicit a small market reaction. More often than not, however, this release goes unnoticed except by market economists.
15:00 - Consumer Credit: Consensus $5.0B
Big Picture: Tax cuts and cash out mortgage refinancing provided consumer funding in past years as 5% yoy income growth and equity gains now provide the means outside of credit. Credit cards (revolving credit) make up 36% of total consumer credit, which stands at $2.4 trillion. Nonrevolving credit helps finance auto purchases, tuition (including Sallie Mae), vacations and other forms of consumer spending. Annual growth of 4.6% is at the low end of the 3% - 13% yoy growth range over the last 10 years. Consumer credit includes household non-mortgage loans.
Implications: This monthly measure of consumer debt is volatile and subject to massive revisions. It is also released well after every other consumer spending indicator, including weekly chain store sales, auto sales, consumer confidence, retail sales, and personal consumption. For these reasons, the market almost never reacts to the consumer credit report.
