We have long expressed the opinion that the U.S. economy will pick up steam and is the best place to invest your money currently. We disagree with the proponents of the printing money theory, the gold buffs theory of currency devaluation, and the rest. Our comments have been expressed in detail in previous blogs, wherein we gave detailed analysis of why we hold these beliefs.
We believe that as the economic cycle is starting its entry into the next phase, the economic circumstances will continue to improve in the U.S.A. The U.S.A. is the safest place to invest, as well as the place with the greatest profit potential. We urge readers to ignore unemployment and employment numbers that have been published. Firstly these numbers are severely skewed because they do not include those persons that supposedly have left the workforce, which is ridiculous, and further any number published is subject to revision the next month. We also point out two basic facts. Firstly, in every recovery, the growth in employment numbers trails dramatically the other economic indicators. Unemployment numbers are a very misleading indicator of economic progress. Secondly, the workforce is dramatically changing because of the internet, social media, independent contractors, the right to work, and so many other factors. The world is changing and giving credence to old and outdated measurement of economic progress leaves one far behind.
The Dow Jones Average
It is said that the stock market leads the economy and knows well in advance what the future holds. While this theory is also flawed, at the moment the stock market is forecasting prosperity. Friday, the DJIA (Dow Jones Industrial Average) broke the 14,000 barrier for the first time in 5 years.
If one charts the index, it has shown a continual increase within a range of ups and downs since mid- 2011. The range is continually pointing up and is remarkably consistent. This technical indicator happens to mirror our beliefs as to the state of the U.S. economy.
As the DJIA chugs upward, the question is how does the investor ride this train. There are many ways to buy securities that mirror the DJIA. We suggest either one of two ways. Firstly, one might buy the IYY ETF. This is the iShares Dow Jones U.S. Index Fund, which corresponds generally to the price and yield of the U.S. equity broad market. It does not exactly track the Dow as fees and expenses are deducted, but these are relatively light and far cheaper than any mutual fund charges. ETFs trade like stocks and can be bought and sold in an identical fashion to stocks.
Another way is to purchase ES which is a futures contract on the CME (Chicago Mercantile Exchange). These have expiry dates and the March contract is coming closer. We suggest the June 2013 contract which currently trades at $1,496.75. This is our preferred way to track the DJIA.
After hitting a new high, the market tends to weaken and gather strength for the next push up. Looking at any chart in any time frame will clearly illustrate this. While we recommend this investment, waiting and watching for a few days would be a conservative way to play this. The current numbers may be a bit strong, so waiting a few days or a week might give a better entry price.
We may or may not have positions in the securities we name under 'What's-Hot-or-Not'. Whether an investment is made in a particular security depends on many factors, including portfolio balancing, timing, cash and capital reserves, asset allocation and numerous other factors. Readers are advised to do their own research on our picks and decide in light of their own circumstances, whether an investment is appropriate.
What's-Hot-or-Not Historical Picks
February 2, 2013 E Mini (ES - CME) June 2013 $1,496.75, or IYY ETF
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in IYY over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Disclaimer: The views expressed in this blog are opinions only and are not investment advice. Persons investing should seek the advice of a licensed professional to guide them and should not rely on the opinions expressed herein. This blog is not a solicitation for investment and we do not accept unsolicited investment funds.