My Investing Notebook :: Learning from the pros; making decisions on my own. ::

Invest in Japan?

Barron’s has a lead article titled “Invest in Japan.” What do you think? Time to jump in after the huge tragedy? From my own experience, tragedies are one of the best times to jump in. Take 9/11, quick slide, nice and quick recovery. Will Japan be the same? Nobody really knows, especially with the current level of uncertainty.

If you do want to invest, as I’m thinking about it, I think investing in ETFs is the smart way to go.

Exchange-Traded Funds
Ticker Currency
FXY CurrencyShares Japanese Yen Trust
JYN Barclays iPath JPY/USD
JYF WisdomTree Dreyfus Japanese Yen
EWJ iShares MSCI Japan Index
DXJ WisdomTree Japan Hedged Equity 
DFJ WisdomTree Japan SmallCap Dividend 
ITF iShares S&P/Topix 150 Index
JSC SPDR Russell/Nomura Small Cap Japan 
SCJ iShares MSCI Japan Small Cap Index
JPP SPDR Russell/Nomura PRIME Japan

Marsico Funds

Marsico has a few good funds

Marsico Focus (MFOCX)
Marsico Growth (MGRIX)
But looks like the best one, and also part of Kiplinger’s 25, and one that I own, is Marsico Global Fund (MGLBX).

Excellent Mutual Funds

While at the Barnes & Noble today, I got drawned in by a title in US World & Reports: The 100 Best Mutual Funds for the Long Run. Sure enough, I found a few funds that I think are top quality.

Large Cap Value

The Yacktman Fund (YACKX)
Comparing it to Fidelity Contrafund, which is considered one the top funds, I can see why Yacktman is on top: 3 year return of 8.9% is much better than -0.2% for the Fidelity fund.

Foreign Large Cap Blend

Sextant International (SSIFX)
Very good returns. Better than Marsico Global, also a top rated fund.

Fidelity Canada (FICDX)
Very good returns.

Defense ETFs

Some good quality Defefense ETFs

Fidelity Select Defense & Aerospace (FSDAX)
iShares Dow Jones US Aerospace & Defense (ITA)
Source: Kiplinger’s

Good Quality Funds

In my retirement accounts, I only hold Mutual Funds. Why? More security. More diversity. I’m also open to holding ETFs, which are almost like Mutual Funds, but I try to stay away from stocks.

It’s good to rebalance every year or so. It’s been a while since I’ve done it. But because we had a decent dip recently, I think it might be a good time for me to do so. Plus, I have come across some excellent Mutual Funds in the Kiplinger’s magazine — I always try to buy their yearly issue focused on Mutual Funds.

Here are some funds which I like and which I picked mostly from that issue. I’m entering trades as I’m writing this post.

Bond Funds

Loomis Sayles Bond (LSBRX)
Pimco Total Return (PTTAX)
A pair of the best and most famous bond funds, as per Kiplinger’s.

Vanguard Total Bond Market Index (VBMFX) (also available as an ETF, (BND))

Another of our favorites, same source.

Harbor Fund (HABDX)
The portfolio of Harbor more or less reflects the distilled wisdom of Bill Gross and his colleagues at Pimco. Kiplinger’s top 25 pick.

Vanguard Infaltion-Protected Securities (VIPSX) (also available as an ETF, (TIP))
For added security, it’s always have to have some TIPS.

Large-Company Funds

Fidelity Contrafund (FCNTX)
Recently reopened. Kiplinger’s Top 25.

Longleaf Partners (LLPFX)
Kiplinger’s Top 25. Impressive returns.

International Funds

Marsico Global (MGLBX)
Very good returns. Kiplinger’s top 25 pick.

Vanguard Global Equity Fund (VHGEX)
Good returns as well. I like it.

There you have it!

ETFs That Fight Inflation

Is It Time to Buy a House Yet?

Not according to this chart.

This article, Is It Time to Buy a House Yet?, was part of today’s Must Read newsletter from Seeking Alpha (a good resource for investors). It caught my attention. I like to read stories about housing. But what really caught my attention was the chart you just saw.

Do we really have a few more years of downturn? I think so. I don’t think we’re out of the woods yet. But as with everything, and especially money issues, you never know.

Mr. Smith does have some valid and interesting points. Here a few.

Simply put: if the bubble took seven years to reach its blow-off top, then its decline will typically take a similar length of time as prices fully retrace to pre-bubble levels.

As for supply: it is common knowledge that hundreds of thousands of homes are currently in the limbo of “shadow inventory”–homes the lenders won’t foreclose on for fear they can’t be sold, homes held off the market by owners who are deeply underwater on their mortgages, etc. As soon as demand appears, then supply rockets up as those anxious to sell move properties from the “shadow inventory” into the market.

Interesting article to read.

Where to be in 2010? Investor picks.

Just the type of an article I like in the latest Barron’s, The Best ETF Bets for 2010

John Mauldin, Millennium Wave Advisors
“A healthy dose of cash and other forms of fixed income may be the best prescription for 2010.”

Mauldin recommends putting money temporarily in short-maturity corporate and municipal bond ETFs like Vanguard Short-Term Bond (BSV) and Market Vectors Short Municipal (SMB).

He sees the economy headed for a second recessionary dip later this year, and so recommends rotating into defensive funds — particularly, high-dividend-payers like Utilities Select Sector SPDR (XLU) or iShares S&P Global Utilities Index Fund (JXI).

Mauldin also likes health-care funds, especially those with biotechnology exposure such as Health Care Select Sector SPDR (XLV). He is bullish on biotech: One of the purer plays is iShares Nasdaq Biotechnology Index Fund (IBB).

“Wait for the real buying opportunity.”

Longer term, Mauldin recommends gradually shifting portfolio weights from securities of developed countries whose valuations “are out of whack” toward higher-growth markets through ETFs like iShares MSCI Emerging Markets Index Fund (EEM) or Vanguard Emerging Markets (VWO).

“Be patient and wait for markets to come to you,” he counsels. “Patience is a position, too.”

Stephen Blumenthal, President, CMG Capital Management Group
“If the recent past was the equivalent of a bungee ride, the year ahead will be more like a roller coaster. The market should continue chugging higher until April or May, when he expects a plunge, perhaps followed by another upturn before year’s end.”

“To cope with that uncertainty, it’s best to play fixed-income-based ETFs during the first quarter at least.” favorite vehicle is SPDR Barclays Capital High Yield Bond ETF (JNK)

Anticipating prolonged weakness in the U.S. dollar, Blumenthal recommends gradual acquisition of Pacific/Asia commodity producers/users represented by ETFs like iShares MSCI Pacific ex-Japan Index Fund (EPP). He finds the iShares MSCI Australia Index Fund (EWA) particularly attractive as a simultaneous play on commodity-rich Australia, its relatively strong currency, and China. A rebound in China, the world’s largest commodity consumer, should lift Market Vectors Steel (SLX) and Market Vectors Coal (KOL) as well as agriculture. CMG recommends Market Vectors Agribusiness (MOO), PowerShares Water Resources (PHO) and, for exposure to so-called soft commodities like rice and cotton, Elements/Rogers International Commodity Agriculture ETN (RJA).

“Sell the rallies and trade tactically until we get a correction,” Blumenthal advises. In other words, take profits when common measures of investor sentiment are bullish, and shop for bargains on market dips.

Thomas Orecchio, Modera Wealth Mgmt.

He uses international bond funds like SPDR Barclays Capital International Treasury Bond ETF (BWX) to balance U.S. dollar-heavy portfolios.

Even though their share prices have run up lately, developing countries have better growth prospects than developed economies, he says. Modera also is rotating into international bond funds like iShares S&P/Citi International Treasury Bond (IGOV) and SPDR Barclays Capital International Treasury Bond ETF (BWX) for fixed income, but gradually.

This year, Orecchio expects to see many more new ETFs like the IQ Hedge Multi-Strategy Tracker (QAI), which uses hedging techniques to offset risk

New Frontiers: Emerging Markets Funds

Here are some funds that offer diversified exposure to the emerging markets in Europe, Asia, Africa/Middle East, and Latin America. These are taken from the latest BusinessWeek, Dec 28th edition.

Sorted by 2009 Total Return

Easter European Equity (VEEEX)
98% Europe, 1% Asia, 1% Latin America

Fidelity Emerging Europe, Middle East, Africa (FEMEX)
70% Africa/Middle East, 30% Europe

SPDR S&P Emerging Middle East & Africa (GAF)
100% Africa/Middle East

Claymore/BNY Mellon Frontier Markets (FRN)
51% Latin America, 26% Africa/Middle East, 17% Europe, 6% Asia

Templeton Frontier Markets (TFMAX)
50% Africa/Middle East, 25% Asia, 22% Europe, 3% Latin America

Bets for a Sagging Dollar

There is a very good article on investing in the latest Kiplinger’s (Feb 2010) “Make A Buck Off A Sagging Dollar.” Their view is that the dollar is on the decline, and you better diversify. They have a few suggestions how you can do that.

I also think the long term the dollar does not look so good. Especially when comparing it to emerging markets.

Read on…

You can invest in emerging-markets bonds through  Pimco Emerging Local Bond (PLBDX). “Pimco invests in 15 markets, including Poland, South Africa, Mexico, and Thailand.” It’s on the expensive side, though, with an annual cost of 1.35%. I try to stay under 1%, but this might be worth the price.

For a lower cost alternative, check Wisdom Dreyfus Emerging Fund (CEW). “This exchange-traded fund, launched last summer, uses futures contracts to provide exposure to money-market rates of 11 emerging markets currencies, including the Polish zloty, Chinese yuan and Chilean peso.” Annual fee is 0.55%.

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