I like his thinking on this:

As part of my blog about new media in financial services, I enjoy writing about investment themes and trends from time to time. Primarily this blog is about using online new media tools and resources to become a more successful investor. I’ll have a new ebook coming out soon on this subject so you may want to sign up to reserve your copy of New Media Wealth – 25 Ways to Invest for Success in a Wired World.

I published a post recently about a new investment theme that I believe is emerging entitled “Buy America“. Very simply, as the economy continues to gain ground, investors will become more positive, and perhaps even enamored with American Companies. Why? This theme is about much more than simply owning a piece of America, it’s about our roots, rebuilding our pride and country, and becoming a part of something bigger than oneself. This is the type of investment theme that has the potential to gather a lot of enthusiasm and perhaps substantial money flows.

Not only does it appear that real estate is on the mend (at least Buffet thinks so), but it is becoming more evident that consumer confidence may have bottomed and that folks are accepting the idea of knuckling down and living within their means. In other words, we are learning how to survive in the new normal environment.

Perhaps a more important driver of this “Buy America” theme is witnessing companies like Ford and Home Depot making comebacks. For example, last month Ford blew away expectations with U.S. car sales jumping some 43%. Home Depot recently enjoyed it’s first quarterly gain in sales since 2006. It appears that American companies are indeed leading the way out of the global recession.

Toyota’s missteps certainly have not helped our perception of trust when it comes to foreign made goods.

A recent visit to the bookstore proved quite interesting when after months of nothing but gloom and doom book titles on the shelves of the business section, we’re finally seeing a couple of positive titles, including a very nice read about why capitalism trumps fear entitled
Bullish on America.

Finally, take note of the advertising that you see in financial publications and websites. In Saturday’s edition of Barron’s, there was a two page spread near the front of the publication taken out by State Street advertising one of their ETF’s, DIA, an investment in the Dow Jones Industrials Index. The title of the ad? “Invest in America, You’re Grandparents Did”.

Keep an eye on the big picture themes and trends, it can make you a smarter investor.

The United States has been through a difficult economic time.  In fact, one of the most difficult in history.  Our financial system nearly crumbled, thousands of jobs have been lost, the housing market collapsed with commercial real estate following suit, and the Government bailout has literally cost us trillions.  Many people, including Wall Street gurus and investment professionals, have given up on America.  They say we will never be the super power that we once were and we will no longer hold our place at the top.  In fact, the dollar is at an all-time low and some say it will never recover!

Bill Gross has recently made a call to buy utilities in his monthly newsletter.  Why?  For one, they are already regulated and will not have to go through the transformation that other domestic industries are facing.  Secondly, in a slow growth environment, a company’s stock should yield more than it’s risky debt, and many of the utilities provide that opportunity.

I believe in this idea, but prefer to own the telecoms specifically as they exhibit some of the same characteristics as utilities with regard to yield but may have better growth prospects.  The two ETFs that play on this opportunity are the IShares US Dow Jones Telecom (IYZ), currently yielding slightly over 4%, and the Vanguard Telecom Services Vipers (VOX) currently yielding around 2.5%.  Keep in mind that two stocks, AT&T (T) and Verizon (VZ) make up a substantial percentage of the portfolios in both of these ETFs.  In addition, many of the holdings in both ETFs are undervalued, and both are now trading above their 50 and 200 day moving averages.

In an environment where the markets have run so significantly, experts are on opposite ends with their views, and there continues to be uncertainty about an economic recovery, it seems that this value-oriented sector might just be a good place to sit.  Especially if you believe that we will be in a slow growth environment for an extended period of time.

Stephanie Sammons, CFP, and Principal of Sammons Ventures LLC holds a position in one of the ETFs mentioned above in her Covestor Investment Model Manager Portfolio.

Baseball and Balanced Portfolios

Do home runs typically win the game or is it consistently hitting singles and doubles?  Home runs are certainly more exciting, and seem to be what we remember most about a great game.  I would argue though that most baseball games are won by the fundamentals…the small stuff done right.  The teams that can consistently hit singles and doubles and continue chalking up runs probably have the best chance of success.

The same holds true for investors.  Aiming for singles and doubles in your portfolio versus homeruns can help minimize volatility and help you stay in the game.  In a time of economic “uncertainty” where even seasoned market and economic professionals are at opposite ends of the spectrum, a globally diversified and globally balanced portfolio can smooth out the ride.

The most recent GDP report for the 3rd quarter showed that the economy is growing, yet much of that is driven by government stimulus.  It is difficult to determine if that growth will continue without the stimulus.  In addition, initial jobless claims, which are reported every Thursday, continue to drift downward.  Job creation drives growth, and typically the Fed doesn’t start raising rates until unemployment has declined for a period of twelve months.  We will most likely be in a low interest rate environment for some time and continue to experience slower growth in the U.S.

There is much talk about the importance of a strong dollar from a political perspective, but the reality is that our dollar has been weak and falling for nearly 30 years.  There was meaningful appreciation only twice during that time period, but overall we have lived with a weaker dollar for many years.  Finally, gold and other commodities have been driven higher while Treasury yields have remained low.  Typically these would move together and if they moved higher, that would indicate an expectation of inflation.  Clearly, one of these camps is right and one of them is wrong.

Ultimately, a globally diversified and balanced portfolio is the best way to combat uncertainty.  Adding components such as yield to your globally balanced mix can further cushion the downside.  Investors who can manage volatility successfully and aim for singles and doubles versus home runs will have a better chance for success going forward.  (Go Yankees AND Phillies!)

Have you checked your confidence lately?  Listen closely and look around you.  Here is what I mean:  There are more houses in my upscale urban neighborhood listed for sale than ever before, and the trend is not declining.  No one that I know of is making any large purchases (cars, computers, etc), rather, it appears that the people I know are downsizing their lives.  Local businesses in the thriving community where I live are still shutting their doors, and this includes restaurants.  Recently we visited one of the best sushi places in town and it was sparsely populated.  I am only one person, but I ask you to look around and observe what you see.  What’s going on?  Are consumers confident?  Are you confident?  I’m just not feeling a recovery.  It seems that everyone is on hold.

The consumer confidence numbers for September were just released, and they’ve turned downward again.  Not by much, but still not an upward trend.  Of course, these numbers were completely overshadowed by the uptick in housing prices that was also reported today.  See why this may be a “dead cat” bounce.  The September consumer confidence numbers showed a dip after slightly improving in August, indicating that consumers are still quite apprehensive about the economy and employment.  Although consumer confidence is considered to be a “lagging” economic indicator (rather than predictive), it is still important to watch the trend to gauge what consumers are doing.  Consumer confidence rose sharply from March to May and since then has been moving sideways.

Regardless of the fact that the consumer confidence index is considered a lagging indicator, it does have the potential to impact markets and the psychology of the market.   If consumers aren’t spending, what does that mean for retailers during the holiday season?  It is still very difficult to get financing on a primary or even a secondary property.  It is difficult for business owners to get credit.  I know of some private companies that are repackaging and selling consumer debt for a handsome profit.

Remember, consumers account for significant portion of the spending in our economy!  If consumers aren’t buying, businesses aren’t growing revenues, which in turn means that businesses are either not hiring or continuing to lay people off.  It can be a vicious cycle and it could perhaps mean that we are entering into a deflationary period.    If that is the case, stocks may suffer, and commodities may suffer even more so.

Most Financial Advisors have learned a lesson.  It’s a lesson that takes time to learn, but as you watch and listen to your senior colleagues, and as you experience the pain of your own ignorance, you finally begin to understand.

The lesson is this:  What’s working, and what’s popular, is not always what’s best.  Wholesalers of investment companies visit Financial Advisor offices to talk about their best performing and most popular product offerings.  Investment companies roll out new and popular product offerings.

The problem is, what’s popular typically carries the most risk for investors. Most Financial Advisors know this intuitively, and have lived and learned the lesson.  The general public, however, has not learned the lesson.  It was growth funds in the mid-90′s, it was focused large-cap and internet funds in the late 90′s and early 2000′s, it was real estate in the early 2000′s, it was oil and financials in the late 2000′s, and now….GOLD.
All of the hype around GOLD today is a stark reminder of the old lesson.

Consider this:

• Today the price of gold went over the $1000 an ounce.  WOW!

• The exchange-traded fund “GLD” has amassed a record amount of assets at $35 Billion.

• New investment products for gold are rolling out left and right.  (SGOL-Swiss Gold Shares)

• There is an unprecedented amount of radio and tv ads about investing in gold.  Literally every commercial break on CNBC includes a gold commercial.  I saw one recently that was featuring a former spokesperson from the U.S. Mint.  Seriously?

I wish I could be a fly on the wall in Financial Advisor offices now.  I can just hear the discussions about the precious metal.  As I said, MOST Financial Advisors are smart enough not to get sucked in, and not to let their clients get sucked in.

When I feel myself getting pulled in, I’ll sing to myself “Won’t Get Fooled Again” by one of my favorite bands, The Who.  That keeps me grounded.

There is plenty of press about GOLD, and how great it is, but Brett Arends of the WSJ does a very nice job of covering where gold may go from here.  In his most recent article entitled “Gold Prices-How Much Should Gold Cost“, he reminds us of a long-standing rule of thumb in that an ounce of gold should equal the cost of one high-quality man’s suit.  If you ask me, $1000 would buy a pretty nice suit these days!

Of course, I may be wrong and I am often early, and GOLD may go to the moon.  Yes GOLD can serve as an inflation hedge but we haven’t yet seen any signs of inflation.  All of this GOLD stuff sounds like the same old song and dance to me and if I were you, I’d be very careful about investing in it, or you might learn THE lesson the hard way.  Oh, and if you’re interested, there are plenty of ways to bet against it.