03
Jan
2012

ETF Periscope: One Man’s Oracle is Just Another’s Cup of Tea Leaves

One Man’s Oracle is Just Another’s Cup of Tea Leaves

“By letting it go it all gets done. The world is won by those who let it go. But when you try and try, the world is beyond the winning. -- Lao Tzu

For numerous Wall Street investors, the past year had all the marks of a funhouse run amuck. Little fun, lots of muck.

Whipsaw market action created vertigo amongst even seasoned money managers.

Frequent doses of high volatility scared away small retail investors in droves, but not before they realized that the pockets of their portfolios had been picked yet again by the wild price gyrations that trailed in the wake of whatever boat happened to carry the most recent cargo of news.

Gold bugs multiplied exponentially as the shiny metal scaled the walls of record highs, only to be rudely confronted by the sound of a pop in the bubble.

Tears and fear could be seen and felt as the devastating effect of nature’s one-two punch of earthquake and tsunami took its toll on Japan, both in human suffering and global economic impact.

The bad comedy of political theater out of Washington left more observers than usual scratching their heads and wondering if there was even a remote chance that any adults would appear to send the mischievous rascals mistakenly put in charge off to their rooms without any supper.

Then there was Europe, up to its continental eyeballs in sovereign debt. Despite perhaps an intrinsic flaw in its monetary structure that offered no exit, the European Union held periodic summits promising results that were not to be.

However, the pronouncements were often made with sufficient conviction to rally the troops of Wall Street investors to the cause, sending prices higher until they recognized that no real solutions had been put into play.

As the Periscope has noted before, it wasn’t a bad year to have simply taken the year off, retreated to the sidelines on some tropical beach, ready to emerge around the New Year, tan, fit and ready to invest.

In any event, now is the beginning of the New Year, and a perfect time to throw the runes and make fearless predictions.

Here, then, are a few more for your consideration and entertainment.

What the Periscope Sees

If the euro-zone does, in fact, have structural flaws that remain outside the practical realm of repairs, then a bet against the euro would be a reasonable one to make. To this end, the ETF EUO (Proshares UltraShort Euro) serves as one way to play Europe to the downside. EUO tracks the euro and corresponds to 2X (-200%) the opposite of its daily performance of the U.S. dollar price of the euro.

Relatively speaking, China has traveled below the radar on the screen of economic news, at least as far as Wall Street was concerned. A review of the world’s formerly fastest growing economy might lead an investor to consider that the Sino bubble has, while not exactly burst, surely sprung a slow leak. Whether it can be repaired faster before it deflates further will be a key to global growth in 2012.

A short play on FXI (iShares FTSE China 25 Index Fund), which tracks the FTSE China 25 Index, could prove to be a good way to go.

If you prefer a rosier take on the direction the market will take, here’s a couple of ETFs that could ride the wave of an upward trend.

Gold has experienced what by any measure can be considered a serious correction since its highs earlier in the past year. It is now hitting levels that should offer a discounted point of entry for both new and old gold bugs. GLD (SPDR Gold Trust), which tracks gold bullion, is the ETF of choice for many gold traders and investors. Go long the precious metal.

Finally, AMJ (Alerian MLP Index ETN), tracks the Alerian MLP Index. MLPs (Master Limited Partnerships) were created as a tax incentive for energy investors during the Reagan years. They have generally proven to be a solid performer in both Bull and Bear markets, and Alerian is perfect for playing the MLP energy sector.

Have a safe, healthy and prosperous 2012!

ETF Periscope

Full disclosure:  The author does not personally hold any of the ETFs mentioned in this week’s “What the Periscope Sees.”

Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.

ETF Periscope
daniel / Tag: AMJ, ETF, EU, EUO, FXI, GLD /