ETF Expert

It’s hard to imagine that stocks have been hit with 3 whole days of stock losses. Or is it 2 whole days and a mixed close for the major benchmarks? (Eight months ago, one might have been shocked by consecutive gains!)

But today? In the midst of Dow 10,000 celebration and dollar devaluation?

Actually, the reasons for the sell-off are reasonably straightforward. You might hear whispers about consumer confidence or unemployment… but that’s just noise. Right now, it’s all about the current enthusiasm for suddenly owning the much-maligned U.S. dollar.

Keep in mind, since the U.S. dollar began a downward spiral in late February of 2009, stocks have been ”en fuego.” When the dollar went down, stocks went up… a lot!

Now, we’re seeing a near-term reversal. For instance, on Friday, 10/23/09, the U.S. dollar rose on 2x the normal volume for the PowerShares Dollar Bullish Fund (UUP). On Monday, 10/26/2009, UUP pole-vaulted on 3.5x the normal volume, as a record 6,800,000 shares traded hands; in fact, the U.S. dollar had jumped more in a single day than it had in an entire month.

Here on Tuesday, 10/27, the dollar buyers are trying to go 3 for 3. It’s almost as if they are jumping over their own relatives to get a piece of the PowerShares Dollar Bullish Fund (UUP).

Nevertheless, if you think the humongous fake-out has finally arrived… that the mother of all bear market crashes is about to occur… you’re probably an Elliot Wave fanatic. Either that, or you’ve spent too much time hanging out with Mel Gibson.

There are too many tailwinds aiding and abetting stock assets in the intermediate term. For example, there isn’t a money manager on the planet that isn’t being asked to put money back to work. That means any corrective phase will likely be met with purchases.

Second, the macroeconomic environment is favorable in the intermendiate term as well. Are unemployment and debt levels worrisome… of course! Still, ”not-yet” inflationary GDP growth, negligible interest rates, upbeat corporate guidance and multinational profitability are equally venerable.

Third, and most important, the U.S. dollar simply can’t be expected to sustain a long-term uptrend over the next 6-9 months. You have a U.S. government that all but assures ongoing weakness, while world governments see no choice but to diversify into other currencies. And as long as the dollar is weakening, riskier assets as well as international stock assets will be the biggest beneficiaries.

 Here are 3 international ETFs that bulls will be clamoring to own… when the dollar-induced, stock market pullback ends:

 1. iShares MSCI Brazil (EWZ). Personally, I may be a bigger fan of Brazil’s middle class purchasing power and domestic economy via Claymore Brazil Small Cap (BRF). However, the world is gaga for international energy, international materials, and the Brazilian “real,” all of which perform well for the investor in EWZ.

2. iShares MSCI Australia (EWA). The Aussies never even had a recession. Their economy is growing… and projected to keep growing. They recently raised interest rates and boast some of the highest yields in the developed world for carry trade investors. Owners of this stock fund get the currency benefit and the likelihood of stock gains in the intermediate term.

3. Market Vectors Gold Miners (GDX). Global companies involved in the gold mining industry can soar, even if the price of gold is stable. But don’t count on the spot price of gold going down very far. The support is there for a significant move higher… which only makes it more profitable for the miners to find/acquire/exploit/sell product.

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.

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