Is it just me, or has the permanently glum Nouriel Roubini become a â€śsofty?â€ť The good professor has received more accolades than any other analyst or economist for predicting the demise of market-based securities in 2008.
Never-mind the horrific calls he made the following year:
1. In April 2009, near Dow 7950, Roubini predicted the markets would retest the March lows of Dow 6500. They never did.
2. In July 2009, near Dow 8100, he described the marketâ€™s run as nothing more than a bear rally. Yet the Dow rose 38% over the next 9 months.
3. In October 2009, near 9700, Roubini called for a bearish 10%-20% pullback. Not only was he 6 months early, but the marketâ€™s sell-off went from 11200 to 9700. The current cyclical low is essentially at the same spot where Roubini first made his bearish callâ€¦ 6 months earlier. You can’t be much more “off” than that.
In truth, I am not giving Nouriel Roubini a bad time; rather, this is more of a condemnation on fortune telling and the mainstream media’s needÂ for heroes. Nobody has any idea what will happen… that’s the greatest certainty of all.
Iâ€™m not suggesting that one should ever dismiss the ideas espoused by intellectuals. Yet you have to be open to the possibility that a thinker will be wrong. And not just in the arena of market-based investing.
Iâ€™ve watched Nouriel Roubini pile on top of every crisis since 2008. He did not anticipate the investment markets rebounding form the sovereign debt fears, so he softened his stance on sovereign debt. He did not anticipate markets recovering from the U.S. â€śsoft patchâ€ť either. In fact, Roubini all but assured a double-dip recession.
Now, with each passing week, the prophet keeps shifting his stance. 2nd half GDP will grind to a halt? Well, thatâ€™s not the same as a double-dip. And in his latest commentary, heâ€™s placed the double-dip possibility at 40%. Mr. Gloom is less and less gloomy with each passing day.
When Mr. Roubini has been wise enough to get out of the prediction game, he has put forward some sensible medicine for the ailing economy. For instance, he is advocating for aÂ â€śpayroll tax break.â€ť This would get more money into the hands of employees immediately and it will encourage employers to hire… as theyâ€™ll be paying less for those new employees. Since itâ€™s not a prediction of impending doom, however, his call for smart stimulus isnâ€™t likely to generate much in the way of front page headlines.
Â Of course, if you read between the back page headlines for Roubini’s “payroll tax break,” you can see that he has hope for the U.S. economy after all. That’s why you should getÂ your â€śBuy Listâ€ť ready for cash that you may still have on the sidelines.
Here are 3 ETFÂ areas that deserve attention when respective ETFsÂ pull back 3%-5%Â percentage points from intra-day peaks:
1. Small Cap Emergers. In a recent column, I demonstrated how smaller economies have lower correlations with one another and/or with large economies. The same can be said about small-sized companies in those smaller economies.
Essentially, you will be able to enhance your portfolio gains AND lower your risk by including small cap emerging stock ETFs. The relative strength demonstrates a likelihood of continued percentage performance. Meanwhile, the lower correlation gives you better diversification. Consider WisdomTree Small Cap Emerging Markets (DGS) and Market Vectors Small Cap Brazil (BRF).
2. Telecom. The valuation of the industry as a whole is magnificent, but this isn’t a valuation based market.Â Okay, fair enough. Then take a look at relative strength and you’llÂ recognize telecom as the strongest in the 10 U.S. sectors.
Andit gets better. The yield is second only to the slower-movingÂ utilities.Â What’s more, if you’re looking for a recession-resistant arena, know thatÂ telecom equipment and wireless services wereÂ among the very few to grow during the 2008-2009 downturn. Consider Vanguard Telecom (VOX) andÂ iShares Global Telecom (IXP).
3. “Apple ETFs.” If the U.S. stock market rallies in Q4, you know that it won’t do it without it’sÂ Nasdaq champ, Apple (AAPL).Â OnÂ 9/17/10, when Apple fell slightly, we still witnessed $645 million flow into buying on the weakness.
ETFs with heavy exposure to the big AAPL? The Internet Architecture Fund (IAH) as well as First Trust Nasdaq 100 Technology (QTEC).
Disclosure Statement: ETF ExpertÂ is a web log (â€ťblogâ€ť) that makes the world of ETFseasier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.