Many a U.S. patriot may cite American ingenuity and core economic strengths. Nevertheless, a U.S.-centric investment approach is riddled with risk.
At the risk of sounding like an unpatriotic American, I'm going to reiterate what I've been saying all year long; that is, if I had to own stock ETFs for one country, I'd use China ETFs.
(See May 09, Would I Rather Invest in China ETFs or U.S. ETFs. Or watch July 09 interview on Fox Business News, Investing In China Via GMF.)
It's still unclear whether the U.S. can muster a sustainable economic recovery. It would require U.S. financial institutions to lend substantially to small businesses and U.S. consumers to spend copiously. Simply put, neither banks nor consumers may be in a position to do so.
In contrast, the middle class in China is stepping up and stepping out. And that means they have spending power. (They also have investing power.)
Take, for example, China's latest PMI results. The country's manufacturing sector grew at the fastest pace in five years!
Is there really any doubt about China's economic resurgence? I'm not suggesting that China doesn't face scrutiny from emerging market partners, or that Chinese real estate isn't frothy. Still, if you want the gift that keeps on gifting, consider Small Cap China (HAO) for your Buy List.
Speaking of froth, there's a lot of concern about the price of gold. However, the peaks in the spot price for the commodity are entirely nominal. $1200 per ounce is nowhere near the inflation-adjusted highs of $2000 per ounce in the early 80s.
Gold in a bubble? Hardly. That said, the slope of the trendline is hinting at euphoria for the yellow metal. One should expect a correction; in fact, it's possible that the 4% pullback in Gold (GLD) on Friday, 12/4/09 is the start of a pullback.
Still, if gold gets back into the $1000 - $1050 range, my interest would certainly perk up. Keep an eye on the 50-Day Moving Average for GLD.
A third area that's had the media chomping at the bubble bit is emerging market bonds. For one thing, emerging market bonds experienced their largest monthly inflow on record this past October. And then, the Dubai debacle added fuel to the is-there-a-bubble fear such that... everyone is searching for an emerging nation that might default on its obligations.
However, the excess yield over comparable U.S. Treasuries in June 2007 was 1.4%. Today, the excess yield is still 4.0%... down from 5.0% in October 2008 when the financial crisis began to accelerate... but still offering reasonable risk-v-reward. The iShares JP Morgan Emerging Market Bond Fund (EMB) also offers a measure of portfolio diversification.
If you'd like to learn more about ETF investing... then tune into In the Money With Gary Gordon. You can listen to the show LIVE, via podcast or on your iPod.
Disclosure Statement: ETF Expert is a web log (blog) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company and/or its clients may hold positions in the ETFs, mutual funds and/or index funds mentioned above. The company does not receive compensation from any of the fund providers covered in this feature. Moreover, the commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.