Fabian Says Sell Everything

01/16/2008 12:00 am EST


Doug Fabian

Editor, Successful ETF Investing, ETF Trader's Edge, Weekly ETF Report, and ETFU.com

Doug Fabian, editor of Successful Investing, says markets are too treacherous now and investors need to move to the sidelines.

To say that I am disappointed in this market’s failure to hold above support levels is a profound understatement. It seems like the whipsaw bug has stung us once again, and that stinger is beginning to be more than just a little annoying. Still, I would rather be stung with a small loss than fatally bitten by a giant bear.

And speaking of that giant bear, [the] terrible December employment numbers puts us that much closer to confirming a serious economic slowdown on the horizon. After the weak jobs data, we have to ask ourselves if the bear is just around the corner. While nobody knows the answer for certain, we do know that protecting our money from the ravages of a bear market is as simple as selling now and moving into cash.

We now are recommending that you sell your position in the Vanguard Total Stock Market ETF (AMEX: VTI), the Technology Select Sector SPDR (AMEX: XLK) and any domestic equity mutual fund and/or exchange-traded [equity] fund you own. (VTI closed at $136 and XLK closed above $24 Tuesday—Editor.)

Proceeds from your VTI, XLK, or domestic equity fund sales should be placed in the money market (cash).  

The selling storm [also] has come down hard on international stocks, [and] our International Fund Composite (IFC) [fell] below its 39-week moving average.

As a result of this decline in international equities, I am now recommending you sell your position in the iShares MSCI Pacific ex-Japan (NYSEArca: EPP) and the iShares MSCI EAFE Index (NYSEArca: EFA). Proceeds from the sale of each of these funds should be placed in the money market (cash). (EPP closed below $144 and EFA closed below $74 Tuesday—Editor.)

Your current portfolio allocation should now be 100% money market (cash).

When the smoke clears from the latest round of market selling we’ll be in a better position to reallocate to domestic [and international] equities. Until then, the best course of action is to get your money into the safety and security of cash.

There’s no doubt that this market is all over the place right now, so the best thing you can do is approach the volatility with the calm composure of discipline. 

The year is definitely young, and the opportunities to make money will have their day in the sun.  It might take a little while, but what goes down also goes up.  And when this market comes back up, we’ll be ready to pounce on it.

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