The ETF owns every security in the underlying index, and it does so absolutely all of the time. There is no thought of profit taking — and no manager to do it.

Is it clear that weighted indices have little concern with diversification — and why should they?

These are not real investment portfolios. They are sector-tracking mechanisms that have been securitized as Wall Street gambling devices. The three ETFs contained 206, 100, and 142 positions, respectively, but each had roughly 50% of the market value in the top 10 holdings.

And who do you think is influencing the fund creator’s weighting judgment?

For the rest of the story: http://kiawahgolfinvestmentseminars.net/Inv/index.cfm/18490

Steve Selengut

http://www.marketcycleinvestmentmanagement.com

http://www.valuestockindex.com

Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”

I was gritting my teeth, shaking more than just a little, palms sweaty but placing dozens of individual orders for the best NYSE, dividend-paying, companies — at prices that nearly everyone thought would drop even further.

Looking around the room, I seemed to be the only one in the office that was actually buying!

Five years later, a smaller scale but similar situation rattled the markets — we invested what we were then both calling “smart cash”, fearlessly, never doubting that we would eventually be taking profits on the new positions. And in 2000, we had a millennium celebration instead of a dot-com bubble bursting.

“Then twenty years later, where were you when the financial crisis hit the fan? Fully invested, or fully capable of taking advantage of renewed bargains in both equity and fixed income markets? And where are you today?”

For the rest of the story: http://kiawahgolfinvestmentseminars.net/Inv/index.cfm/18387

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Steve Selengut

http://marketcycleinvestmentmanagement.com

http://valuestockindex.com/

Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”

The Market Cycle Investment Management model has outperformed the popular investment indices since it was first developed in 1970. It features an approach that embraces market volatility; selects securities using strict quality, diversification, and income standards; and operates under strict disciplines for asset allocation, buying securities, and profit taking.

In 1987, MCIM portfolios recovered totally from the October fiasco in less than a year. In 2000, they experienced no downturn at all while incredible carnage devastated NASDAQ no value stocks and the mutual funds that worshipped them.

No one can deny that the June 2007 to March 2009 “financial crisis” correction was different — perhaps scarier than anything ever experienced before. NASDAQ is still below where it was in 2007 (and 50% of where it was in 1999). The S & P is 23% below its 2007 high; the DJIA about 20%; while the IGVSI is just 7% below its all time high level.

Many MCIM users have been achieving new all time highs for months. What’s in your portfolio?

For the rest of the story: http://kiawahgolfinvestmentseminars.net/Inv/index.cfm/16075

Steve Selengut

http://kiawahgolfinvestmentseminars.net

http://www.marketcycleinvestmentmanagement.com

Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”

But what is hedging all about in the first place?

Conspiracy theorists have their hands in the air. What’s that? Portfolio hedging strategies were created to expand the market for the first generation of derivative products— options and futures contracts. Hmmm, not so far fetched an idea, really. Just back up a bit and think about what they are trying to accomplish.

Hedges are designed to massage your market value numbers, a kind of security blanket that softens the highs and lows of the market cycle. But why focus on the fluff of transient market values in the first place? Cycles eventually correct themselves without the unnecessary drama, guesswork, risk, and trading fees.

It’s not the market value of the portfolio that is of primary importance. It’s the actual content of the portfolio and how you deal with the natural dynamics of the securities you own. Why can’t the media reinforce that kind of stuff instead of the emotion of the month?

If a portfolio has a semi-guaranteed “base income” of 4%, a 4% cushion (or hedge) is always in place, one that grows annually with proper asset allocation management, and adds to the market value in upward cycles— nah, too simple.

For the “rest of the story”:

http://kiawahgolfinvestmentseminars.net/Inv/index.cfm/6979

Steve Selengut

http://www.kiawahgolfinvestmentseminars.com/

http://www.sancoservices.com

Professional Portfolio Management since 1979

Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”

The Brainwashing of the American Investor ~Steven Selengut

From the end of 1999 through the end of 2009, all of the popular Wall Street market performance measurement tools were in the red. The average bloodletting level of the DJIA, the S & P 500, and the NASDAQ was a disturbing-to-some minus nineteen percent.

The Media has dubbed it “The Dismal Decade”.

Most of the investment community is either open-mouthed in shock or strident in blame about the somethings or someones who must be responsible for such horrific performance. Never again they swear to their clients— without ever a hint that they might themselves be the problem.

It won’t be long before the Wizards of Wall Street announce that they have studied the situation, and readied their sales minions to switch the shattered investment public into yet another fail proof (fool-magnet?) portfolio of hedges, gimmicks, signal responders, and panaceas for whatever the new decade brings.

Once again they will attempt to debug the market cycle and create an upward only future for the masses. Try not to be abused again— the markets aren’t broken, just the market shakers. Your portfolio should be up in market value— and not by just a little for the “dismal decade”.

These are the same geniuses that created the dotcom bubble by cramming valueless securities and speculative IPOs down your throats. They are the same charlatans who created the derivative markets and fraudulently hid their gaming devices in innocent looking rolls of tissue paper.

Wall Street thrives on the boom and bust scenario— because it doesn’t really matter to them how many of you win or lose. The evidence is clear; a boring-but-winning approach has been out there (and ignored) for three equally productive decades. The investment gods are outraged!

The past decade was a fabulous decade for old-fashioned value investors, particularly those with a reasonable selling discipline in their methodology!

It was a fabulous decade for those who understood that quality, diversification, and income generation are principles as opposed to media placating buzzwords.

It was a fabulous decade for those investors who were able to see over, beyond, and through artificial time constraints to find the long-term opportunities within every beautiful market cycle undulation. There were plenty of gyrations to gyrate to if you only knew how.

Investing is no longer a passive enterprise; and it never really was. If you can’t manage your portfolio throughout the market cycle, without succumbing either to greed, to panic, or to artificial and complicated hedging strategies, just stop. Right now. Listen and learn something old.

The only market cycle hedges needed are quality, diversification, and income— all classically defined. Throw in some disciplined selection and selling guidelines, a cost-based asset allocation formula, and a non-calendar year perspective and success will follow— cyclically.

You may miss a speculative spike or two (i.e., bubbles), but in the long run, Market Cycle Investment Management (MCIM) is a proven methodology for long run investment success.

You just can’t replace market cycle reality with calendar year gimmickry. Do better. Google investment grade value stock and request the ten-year MCIM numbers.

Change is good.

Steve Selengut

http://kiawahgolfinvestmentseminars.net/Inv/Search.cfm

Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”

I’ve been surveying the Fool’s premium service scorecards, analyzing a universe of stock recommendations that ranges from go-go growth companies to the comparatively buttoned-down dividend payers that the team at Income Investor selects for its members each month. And Income Investor is one service that I think deserves especially close scrutiny over the next 12 months.

Amid a flattish market that may well have fully priced in the coming economic recovery (and then some!), dividends are likely to be an even larger component of our total returns than they currently are. I also think that consumer staples, like Green Acres, is the place to be as economic reality (rather than anticipation) finally takes hold.

Interestingly, the Fool’s premium universe isn’t exactly overflowing with consumer staples concerns. My survey finds just 30 such companies — yet these factoids also caught my eye:

• More than half of our consumer staples stocks were recommended during the past 12 months.
• About one-quarter are currently favorite buys.
• Twenty-six sport four- or five-star CAPS ratings (out of a possible five).

Something’s happening here
That our advisors have dialed up their exposure to consumer staples makes perfect sense. Economic conditions remain rickety, after all, and the sector is home to big names, like Walgreen (NYSE: WAG), Sysco (NYSE: SYY), and Wal-Mart (NYSE: WMT), that serve up the goods that consumers don’t just want but actually need. Amid a flight to safety, necessity has been a virtue indeed. (Not coincidentally, all are dividend payers, too, though only Sysco’s payout surpasses the broader market’s.)

The sector is attractive in terms of valuations, as well. Indeed, of the nine S&P sectors tracked by a Sector Select ETF, consumer staples ranks third cheapest in terms of its aggregate price to forward earnings estimates. The likes of General Mills (NYSE: GIS) and ConAgra Foods (NYSE: CAG), for example, currently trade at P/E discounts to their historical five-year averages, their industry rivals, and the broader market.

Cheap — for now
Sector-wise, only health care and utilities are cheaper than staples. The former is marked down no doubt in part because of regulatory risk, while utilities may owe its discount to a highly leveraged profile. When — not if — inflation and interest rates finally tick back up, that dynamic could throttle returns.

The upshot: Though the market is still on its bender, unemployment remains mired above 10%. And absent the impact of economic stimulants like “Cash for Clunkers,” personal spending is moribund while the savings rate remains above average.

When consumption is restrained, folks tend to buy what they need. That’s precisely what a staple good is, of course — and precisely why this otherwise buttoned-down area of the stock market is poised to outpace the competition.

How to proceed
Across the Fool’s premium services universe, you’ll find the best-in-breed players within the sector — attractively valued businesses with years-long track records of cranking out loads of free cash flow and enriching shareholders with market-surpassing returns.

Consumer staples is also home to generous dividend payers. While the sector’s aggregate yield clocks in a bit below that of the broader market just now, it includes names like Kimberly-Clark (NYSE: KMB) and Kraft (NYSE: KFT), for example, both of which yield more than 3.5%.

That said, when it comes to payouts, we need to watch that falling stock prices don’t take back what the dividend gives (and perhaps even more). Luckily, consumer staples look cheap today, trading at a price-to-earnings (P/E) discount relative to the S&P 500 and poised to rise along with — and higher than, I think — the broader market.

Now, P/E is hardly the end-all and be-all of valuation. And in terms of price-to-book (P/B) value, you could argue that the sector looks pricey. But you shouldn’t: That P/B premium underscores strong investor preference just now for companies with tangible assets that, if the firms had to unload them, would actually attract buyers willing to pay for the privilege of owning them — unlike, say, the garbage floating on the financial industry’s balance sheets.

The Foolish bottom line
Consumer staples bargains abound, and now is a fine time to ferret them out. The industry has cooled this year relative to the market’s racier sectors, it’s true — a reflection of a market mentality and a rally that, in my view, may have gotten ahead of itself.

Which means that right now remains a prime time for investors — outfitted with information, insight, and a list of worthy consumer staples contenders — to spring into action. Sound like anyone you know? If so, I encourage you to snag a completely risk-free guest pass to a Fool service that boasts four smart consumer staples stocks among its Buy First recommendations: Income Investor.

With market-surpassing performance and a steady stream of superior dividend payers, II offers clear price targets and a scorecard of picks you can sort based on the upside potential the team currently perceives. It’s a great way to find great stocks trading on the cheap, stocks whose steady dividends mean you get paid to own them. Simply click here to give Income Investor a whirl.

Shannon Zimmerman runs point on the Fool’s Duke Street and Ready Made Millionaire services, and he runs off at the mouth each week on Motley Fool Money, the Fool’s fast ‘n’ furious podcast. Shannon doesn’t own any of the companies mentioned. You can check out the Fool’s strict disclosure policy right here.

“The continuous depreciation in the dollar and the U.S. government’s indication that, in order to resume growth and maintain public confidence, it basically won’t raise interest rates for the coming 12 to 18 months, has led to massive dollar arbitrage speculation,” said Liu Mingkang, China’s chief bank regulator, on Nov. 15 to reporters in Beijing.

According to Liu, low American interest rates and the falling dollar have “seriously affected global asset prices, fueled speculation in stock and property markets and created new, real and insurmountable risks to the recovery of the global economy, especially emerging-market economies.”

Does Liu have a point? Of course. Federal Reserve Chief Ben Bernanke has adopted an essentially 0% interest-rate policy. The current target range for the Fed Funds rate, for instance, is 0 to .25%. And due in part to these abnormally low rates, the dollar has declined about 15% since its peak in March to a 15-month low.

Because betting against the greenback appears to be a sure thing these days, speculators are selling dollars and using the proceeds to purchase currencies paying higher rates of interest, the so-called “carry trade.” The carry trade, for now, is contributing to the steep decline of the dollar, as Liu pointed out. This is, incidentally, reducing the value of the Chinese government’s hoard of greenbacks, now estimated at somewhere in the neighborhood of $1.6 trillion.

Yet Beijing’s broadside against Bernanke is misplaced. American officials have been trying to rebalance the global economy for most of this decade, and the biggest obstacle to rebalancing is China’s fixing the value of the renminbi. Until July 2005, Beijing kept the value of the renminbi tightly pegged to the dollar.

From that month forward, the Chinese permitted a dirty float, allowing the currency to adjust under controlled circumstances. They, however, went back to pegging in July of last year, the move a part of a broad package of measures to help Chinese exporters. The artificially low value of the yuan, as the Chinese currency is informally known, gives China’s manufacturers an almost unbeatable advantage in global markets.

Now, the renminbi is fixed at 6.83 to one dollar. Even after appreciating by about 21% in the three-year dirty-float period, the yuan is considered to be trading at a discount of as much as 40% to its real value.

In the earlier part of this decade, Washington was often alone in pleading with Beijing to allow the renminbi to float freely. Now, however, American officials are being joined by their Western European and East Asian counterparts, whose nations have been especially hurt by China’s currency pegging practices. When Nobel laureate Paul Krugman called on China to float the yuan last month, it became evident that world opinion, which had once tolerated Beijing’s currency management, had turned a corner.

The last thing Chinese officials want to do at this moment is to give in to global opinion and allow the market to determine the value of their currency. China’s economy is still extraordinarily dependent on foreign customers–about 38% of its gross domestic product was attributable to exports last year–and Chinese exports have fallen every month beginning with last November. Beijing obviously thinks the best defense is a good offense, so the Chinese leadership apparently ordered the highly respected Liu Mingkang to find something–anything–to complain about.

The implicit assumption in Liu’s comments is that the U.S. has an obligation to act to its own detriment and revive the global economy while his country is free to stick to its mercantilist program. That position, however much the Chinese want to maintain it, is obviously unsustainable. At one time, Washington was willing to support global prosperity and allow the Chinese to continue their beggar-thy-neighbor policies. Now, America no longer has the capacity to do so.

Whether Beijing’s unusually selfish approach was a primary cause of the global downturn or merely a contributing factor, the world cannot return to sustainable prosperity until the Chinese rebalance their economy, as they promised to do at the G-20 meeting in Pittsburgh in September.

As a practical matter, the Chinese cannot honor that agreement without floating the yuan. President Obama, during his recent visit to Beijing, was not able to get China to make this commitment. Some analysts, looking at a recently released Chinese central bank report, think the Chinese will adjust the currency’s value in the spring or the summer, but the evidence of the intention to do so is ambiguous at best.

So don’t count on China taking meaningful steps soon. The thinking in the Chinese capital is that Washington, in the 1985 Plaza Accord, ended Japan’s bid for global dominance by engineering a fall in the greenback in relation to the yen. Beijing’s political leaders are not about to let the United States do the same thing to China, especially because they perceive America to be weak. In any event, they will not do anything to undermine China’s global competitiveness until exports start growing in a sustained fashion again–and that won’t happen until the middle of next year at the earliest.

President Obama, to his credit, is trying to convince the Chinese to do their share in shoring up the world’s economy. And because Beijing does not want to do so, it is now trying to change the issue by blaming Bernanke.

Gordon G. Chang is the author of The Coming Collapse of China. He writes a weekly column for Forbes.