Many traders know the old saw “overbought can become more overbought.” Strongly trending markets may look ready to crack on paper but keep going longer than anyone expects. The other side of that coin is that steep rallies can have equally steep corrections, and they, too, can last longer than anyone expects. #-ad_banner-#Right now, the energy sector seems to be at a crossroads between these two possibilities. After a sharp run up this year, the Energy Select Sector SPDR ETF (NYSE: XLE) became very extended to the upside by numerous metrics. Momentum indicators such as the… Read More

Many traders know the old saw “overbought can become more overbought.” Strongly trending markets may look ready to crack on paper but keep going longer than anyone expects. The other side of that coin is that steep rallies can have equally steep corrections, and they, too, can last longer than anyone expects. #-ad_banner-#Right now, the energy sector seems to be at a crossroads between these two possibilities. After a sharp run up this year, the Energy Select Sector SPDR ETF (NYSE: XLE) became very extended to the upside by numerous metrics. Momentum indicators such as the Relative Strength Index (RSI), the spread to key moving averages, lopsided bullish sentiment and an uncharacteristically high price/earnings (P/E) ratio all suggest it is time for a correction. The question now is how to play it. Do we buy this dip or do we wait for a pullback to a lower-risk entry point?   For me, after the energy sector has racked up 20%-plus gains since February, the latter is far more palatable. I may miss the next leg higher, but given that the market is still overbought, controlling risk is paramount. On the daily chart, we can… Read More

As the monsoon season drew to a close in India last September, the local economy looked waterlogged.  The nation’s currency, the rupee, had just slid to an all-time low against the dollar, as quarterly growth fell to just 4.4%, the slowest growth rate since the global economic crisis of 2009. In response, Indian stocks accelerated their declines as it became increasingly apparent that any economic turnaround would be slowing in coming. Yet as is often the case with many markets, sectors, or even individual stocks, the point of maximum pessimism is often the best time to invest.  That was surely… Read More

As the monsoon season drew to a close in India last September, the local economy looked waterlogged.  The nation’s currency, the rupee, had just slid to an all-time low against the dollar, as quarterly growth fell to just 4.4%, the slowest growth rate since the global economic crisis of 2009. In response, Indian stocks accelerated their declines as it became increasingly apparent that any economic turnaround would be slowing in coming. Yet as is often the case with many markets, sectors, or even individual stocks, the point of maximum pessimism is often the best time to invest.  That was surely the case with India stocks, which have staged a remarkable comeback. In just the past 10 months, India’s SENSEX index has rallied an impressive 35%, and many India-focused exchange-traded funds have done a lot better than that. (These ETFs have benefited from a rebound in the rupee, which has magnified gains.) #-ad_banner-#The catalyst behind this remarkable rebound is quite simple: Narendra Modi.  India’s new prime minister began his campaign last fall on a platform of economic rejuvenation, and Indian stocks have already begun to reflect an anticipation of much better days ahead. India’s Economic Times has… Read More

Investing in specific markets or regions has always been about one thing: the trade-off for higher returns in emerging markets and lower risk in developed markets.  #-ad_banner-#Emerging markets like the BRIC nations — Brazil, Russia, India and China — have long promised high rates of economic growth and soaring stock values. Unfortunately, as any emerging-markets investor during the past couple of years can tell you, these markets are also likely to underperform spectacularly on fears of a debt bubble or geopolitical problems.  In contrast, developed markets like the United States and Europe offer relative peace of mind but… Read More

Investing in specific markets or regions has always been about one thing: the trade-off for higher returns in emerging markets and lower risk in developed markets.  #-ad_banner-#Emerging markets like the BRIC nations — Brazil, Russia, India and China — have long promised high rates of economic growth and soaring stock values. Unfortunately, as any emerging-markets investor during the past couple of years can tell you, these markets are also likely to underperform spectacularly on fears of a debt bubble or geopolitical problems.  In contrast, developed markets like the United States and Europe offer relative peace of mind but weaker returns over the long run. An investment in the iShares MSCI EAFE (NYSE: EFA), an exchange-traded fund invested in developed markets, over the past 10 years would have exposed you to just three-quarters the volatility of the iShares Emerging Markets Fund (NYSE: EEM) — but yielded a compound annualized return of just 7%.  However, there’s a way to combine the rapid growth of emerging markets and the safety of developed markets — and you can find it in one country.  This year marks the country’s 23rd consecutive year of economic growth. This country’s stable political backdrop and investor-friendly environment… Read More

They say, the bigger the ship, the longer it takes to turn it around. When it comes to stocks, the deeper the bear market, the longer it takes to right the ship. #-ad_banner-#One area where conditions appear to be slowly improving after getting mauled by the bears is the gold mining sector. After peaking in 2011, gold and gold stocks have been in a tailspin. Following a failed rally attempt in 2012, the pace of the decline accelerated. By late last year, the Market Vectors Gold Miners ETF (NYSE: GDX) was down roughly 70%. The best part about… Read More

They say, the bigger the ship, the longer it takes to turn it around. When it comes to stocks, the deeper the bear market, the longer it takes to right the ship. #-ad_banner-#One area where conditions appear to be slowly improving after getting mauled by the bears is the gold mining sector. After peaking in 2011, gold and gold stocks have been in a tailspin. Following a failed rally attempt in 2012, the pace of the decline accelerated. By late last year, the Market Vectors Gold Miners ETF (NYSE: GDX) was down roughly 70%. The best part about trading is that we can pick the timeframe in which we operate. Therefore, we can make some money in the short term while we wait for the major change in trend to develop. Yamana Gold (NYSE: AUY) presents such an opportunity. Over the past two months, it has developed a pattern that looks to be the end of the most recent phase of its decline and could send prices high enough to challenge their bear market trendline. From April through this week, AUY has traded in a sideways pattern, and we can see an inverted head-and-shoulders formation. Momentum… Read More

Companies are deep in the throes of buyback fever.  #-ad_banner-#Just released data from S&P Capital IQ suggest that the dollar value of buyback activity in the first quarter of 2014 was the highest in nearly seven years. Companies spent $158 billion on their own stock, which works out to an annualized pace of around $630 billion. This is a trend that keeps on recurring. Last summer, I noted that companies had spent $455 billion on buybacks in the 12 months ended June 30, 2013.  Back then, I recommended a pair of exchange-traded funds (ETFs) that were well-positioned to profit from this… Read More

Companies are deep in the throes of buyback fever.  #-ad_banner-#Just released data from S&P Capital IQ suggest that the dollar value of buyback activity in the first quarter of 2014 was the highest in nearly seven years. Companies spent $158 billion on their own stock, which works out to an annualized pace of around $630 billion. This is a trend that keeps on recurring. Last summer, I noted that companies had spent $455 billion on buybacks in the 12 months ended June 30, 2013.  Back then, I recommended a pair of exchange-traded funds (ETFs) that were well-positioned to profit from this trend. Both the PowerShares Buyback Achievers (NYSE: PKW) and the AdvisorShares TrimTabs Float Shrink ETF (NYSE: TTFS) have delivered great returns to investors, according to Morningstar.  The AdvisorShares fund lacks the long-term track record of the PowerShares fund, but we do know that since it opened for trading on Oct. 5, 2011, at a price of $26.44, it has risen 91%. In that time, the PowerShares fund has risen 86% while the S&P 500 Index is up 70%. Arguably, these two buyback-focused ETFs are equally suitable for investors. Or are they? A closer look reveals some key differences,… Read More

As the crow flies, it’s 4,400 miles from Punta Arenas, Chile, to Barranquilla, Colombia.  #-ad_banner-#The two cities flank the southern and northern ends of western South America, and from end to end, you’ll find the most dynamic economies in the Western Hemisphere. And the remarkable economic strength seen in those countries, in contrast to the more challenged economies in the eastern part of South America, explains why you can’t simply paint the notion of emerging markets with a broad brush.  Make no mistake, a rising tide has lifted many boats in South America.  Brazil has witnessed a remarkable economic renaissance,… Read More

As the crow flies, it’s 4,400 miles from Punta Arenas, Chile, to Barranquilla, Colombia.  #-ad_banner-#The two cities flank the southern and northern ends of western South America, and from end to end, you’ll find the most dynamic economies in the Western Hemisphere. And the remarkable economic strength seen in those countries, in contrast to the more challenged economies in the eastern part of South America, explains why you can’t simply paint the notion of emerging markets with a broad brush.  Make no mistake, a rising tide has lifted many boats in South America.  Brazil has witnessed a remarkable economic renaissance, and is now the world’s seventh-largest economy. To the south, Argentina remains blessed with an impressive set of natural resources, and a well-educated middle class. But these countries are also beset by deep-rooted structural challenges, and are increasingly being run with a dubious government hand. Investors need to brace for inflation scares, GDP slumps, social unrest and currency swings, and the higher risk doesn’t necessarily yield greater returns.  Yet if you pivot west, you’ll find a completely different economic environment. Chile, Peru and Colombia, which are often referred to as the Andean nations, possess all the key virtues that emerging-market… Read More

I talk to a variety of investors on a daily basis — and most everyone is stuck in a rut. #-ad_banner-#Successful or not, they invest the same way over and over again. Most don’t look beyond what they are already comfortable with, no matter what. The ability to think outside the box is often what differentiates outstanding investors. Venturing beyond your comfort zone into different strategies and types of investments can make the difference between another average year and your best year ever. This is particularly true when it comes to looking for dividend yield. The majority of… Read More

I talk to a variety of investors on a daily basis — and most everyone is stuck in a rut. #-ad_banner-#Successful or not, they invest the same way over and over again. Most don’t look beyond what they are already comfortable with, no matter what. The ability to think outside the box is often what differentiates outstanding investors. Venturing beyond your comfort zone into different strategies and types of investments can make the difference between another average year and your best year ever. This is particularly true when it comes to looking for dividend yield. The majority of income investors are focused only on U.S. stocks — which means they’re missing out on the massive opportunities available beyond America’s borders. In a recent study, mutual fund research firm Lipper found that U.S. stock income funds have $359 billion in assets — with just $13 billion allocated to international stock income funds.  Perhaps even more interesting, of the $1 trillion in dividends paid worldwide in 2013, U.S. companies accounted for 37%. This means that nearly two-thirds of the world’s dividend payouts — 63% — comes from international stocks.  In other words, most American stock investors are missing out… Read More

A credit spread strategy known as a bull put spread offers traders all the benefits of put selling while taking on less risk. To initiate a bull put spread, the trader sells a put option and simultaneously purchases another put option on the same underlying asset with the same expiration date but a lower strike price. A net credit is collected, and while you generate less income than you would by selling a put alone, the purchased put acts as insurance against big losses.#-ad_banner-# Today, I want… Read More

A credit spread strategy known as a bull put spread offers traders all the benefits of put selling while taking on less risk. To initiate a bull put spread, the trader sells a put option and simultaneously purchases another put option on the same underlying asset with the same expiration date but a lower strike price. A net credit is collected, and while you generate less income than you would by selling a put alone, the purchased put acts as insurance against big losses.#-ad_banner-# Today, I want to look at a specific bull put spread trade in Yahoo (Nasdaq: YHOO). Because we may be obligated to buy shares of the underlying stock or ETF with this strategy, it is important that we are quite willing to own the shares at the strike price of the put being sold. Therefore, I’ll take a moment to discuss why I am bullish on YHOO. Yahoo owns a 23% stake in Chinese e-commerce company Alibaba, which filed for an initial public offering this week that could turn out to be one of the biggest in history. Alibaba handles more online transactions… Read More

Thirteen years ago, four emerging markets were singled out by a Goldman Sachs economist as possessing a strong chance at stealing some of the G7 countries’ thunder.#-ad_banner-# Neatly packed into a four-letter acronym, the BRICs — Brazil, Russia, India and China — rose to prominence after the term was coined by Jim O’Neill. The tides have shifted, however, and O’Neill is endorsing a new slate of players in the developing world. Since the end of last year, the torch has been passed from the BRICs to the MINT countries: Mexico, Indonesia, Nigeria and Turkey. These four have emerged… Read More

Thirteen years ago, four emerging markets were singled out by a Goldman Sachs economist as possessing a strong chance at stealing some of the G7 countries’ thunder.#-ad_banner-# Neatly packed into a four-letter acronym, the BRICs — Brazil, Russia, India and China — rose to prominence after the term was coined by Jim O’Neill. The tides have shifted, however, and O’Neill is endorsing a new slate of players in the developing world. Since the end of last year, the torch has been passed from the BRICs to the MINT countries: Mexico, Indonesia, Nigeria and Turkey. These four have emerged as the next wave of rapidly growing markets soon to gain global clout, and investors are taking note.   Each economy possesses a relatively younger population and a budding middle class, both supporting attention-worthy GDP growth — but do they offer real promise as investments? Let’s take a closer look. Mexico​ Advancing infrastructure, a large domestic consumer market, and increasing exports to the U.S. and its Latin American neighbors helped land Mexico on the MINT list. Mexico’s close ties with the U.S. could help or hinder the nation, as the economic links between the two are tight, and slow growth… Read More

Investors who were gutsy enough to buy real estate investment trusts (REITs) at the height of the economic crisis in 2008 have been well rewarded. Not only did these REITs see their shares soar from those lows, but they’ve been treated to a surging tide of dividends.#-ad_banner-#​ Case in point: Simon Property Group (NYSE: SPG), the nation’s largest REIT. Its stock has rebounded more than 150% in the past five years, and if you bought Simon back when it traded at $45 in the summer of 2009 and held on,… Read More

Investors who were gutsy enough to buy real estate investment trusts (REITs) at the height of the economic crisis in 2008 have been well rewarded. Not only did these REITs see their shares soar from those lows, but they’ve been treated to a surging tide of dividends.#-ad_banner-#​ Case in point: Simon Property Group (NYSE: SPG), the nation’s largest REIT. Its stock has rebounded more than 150% in the past five years, and if you bought Simon back when it traded at $45 in the summer of 2009 and held on, then today’s $5 annual dividend would work out to be a juicy 9% dividend yield. But this kind of window has most likely closed. Not only has the share price surge pushed the dividend yield down below 3%, but the dividends themselves are no longer growing at an impressive rate. Simon’s Dividend Growth Is Cooling For Simon Property Group, the era of double-digit growth in yields may have come to an end, which is a concern since its dividend yields aren’t all that compelling anyway. Outside the U.S., it’s unclear if REIT dividends will grow any faster,… Read More