ETF Expert

I had forgotten why the day after Thanksgiving had been dubbed, "Black Friday." The way that November has been mauling and manhandling worldwide stock markets, my mind was drifting back towards the infamous "Black Monday" of October 19, 1987.

But I digress. Black Friday is supposed to be a good thing. Why? Because it often marks the first time in the year when retailers are actually turning a profit (i.e. "going into the black.")

And while it’s too early to tell whether this particular Black Friday will receive good, bad or mixed reviews from Wall Street, Main Street is shopping. Analysts are estimating 4.2% growth for the season. (I know people who went to the shopping malls at 4:00 a.m. for supposed bargains!)

Now… here’s the thing. The 10-year average growth on holiday retail is 4.8%. From that perspective, consumers may be slowing down. On the other hand, in spite of all of the recession talk, consumers are still spending. (The Grinch doesn’t seem to be stopping the shopping!)

Growth is growth. 4.2% more than last year’s season is, all things considered, not too shabby.

Would I get in line to buy shares of the Retail HOLDRs (RTH) or the S&P Retail Select (XRT)? NO… I would not. Retail has not looked good from a technical, economic or anecdotal perspective.

However, the broader implications of a willingness on the part of consumers to spend rather than scale back… that may be telling us something about the overall economy. More specifically, as bad as the housing slump is, a recession is by no means imminent. (And if that’s the case, stocks as an asset class could rebound on a little bit of optimism.)

Greenspan spoke about the U.S. economy in Norway today. He expressed confidence in the U.S. economy’s great flexibility — a characteristic that reduces the risk of recession.

He noted that the U.S. corporate sector was faring "remarkably well." Translation? 35% of the economy is holding up its end of GDP. (Price-to-forward earnings ratios of 14 on the S&P 500 show that stocks are very cheap on a historical basis.)

And yet, Greenspan did discuss the evaporating "wealth effect." Consumers know that they are not as rich with their home prices falling. Savings accounts are yielding less and less with each rate cut. And stock portfolios are flat… with the fear that they can fall further.

What ETFs make sense with so much uncertainty? You stay with the largest companies. You stick with the multinationals that garner a great percentage of their overall revenue from overseas. And you make certain that you have a "plan to sell" if today’s rebound is little more than a one-day reprieve.

You know what I like. But in case you don’t, you may want to review a recent post or two.

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.