Just the other day, Forbes columnist, Kate Stalter, interviewed the editor of the AAII Journal. She asked Mr. Charles Rotblut, a Chartered Finacial Analyst, if he had any ideas for investors. His suggestions? Investors should examine Rydex S&P 500 Equal Weight Utilities ETF (RYU), Rydex S&P 500 Equal Weight Health Care ETF (RYH) and Rydex S&P 500 Equal Weight Consumer Staples ETF (RHS).
Clearly, Mr. Rotblut is focused solely on relative strength. He recommended what has been working over the last 1, 2 and 3 months, or at least what hasn’t been beaten up so badly. (Not that there’s anything wrong with that.)
Relative strength is a venerable tool. Indeed, when there’s a clear “risk-off” bias in an ultra-volatile world, why would anyone ignore recent out-performance?
On the flip side of the coin, the media have often pulverized 10-year thinkers like Warren Buffett and Bruce Berkowitz. Buffett was pronounced “over-the-hill” throughout the dot-com frenzy circa 1996-2000 – a period during which Mr. Buffett under-achieved. “He just doesn’t get the New Economy,” they said in unison. Today, Berkowitz of the Fairholme Fund sees value in financial stocks, and he is taking plenty of heat for it.
The truth is, the vast majority of us live in the moment; very few of us have the stomach for gut-churning losses during a de-leveraging of global credit. I have offered plenty of relative strength ideas for risk-averse investors — ideas like PowerShares Low Volatility ETF (SPLV). (Review “Lower-Beta Stock ETFs For A Safer September.”)
At the same time, one needs to have a methodology for addressing the circumstances for taking on more stock risk. In the today's Podcast, I talk about the exchange-traded products that I use for identifying when the global economy may actually improve. These investment indicators include things like iPath Copper (JJC), iShares Preferred (PFF) as well as iPath VIX S&P 500 Short-Term Futures (VXX).
Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.