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- Buy $15,000 worth each of SPDR S&P Biotech ETF (XBI, news, msgs) and iShares S&P MidCap 400 Growth Index (IJK, news, msgs) at the open.
Strategy Lab is MSN Money's stock-picking challenge. To learn more about the game and the contenders, click here.
Overall, I see the dollar strengthening, at least for the short run, as the economic slowdown bites deeper in the United Kingdom and the euro zone, and as the U.S. Federal Reserve prepares to raise interest rates later in the year.
That's why I'm putting $10,000 of my Strategy Lab portfolio into PowerShares DB US Dollar Index Bullish (UUP, news, msgs). The dollar may weaken again, but I think it's going to have a respite now as the rest of the world catches our economic bug.
In the rest of my Strategy Lab portfolio, I'll invest for the bear market and prepare for the new bull. That means sticking with some strong stocks and sector ETFs and buying other things that could pop if the market turns around for real.
Two ETFs I like now are SPDR S&P Biotech ETF (XBI, news, msgs) and iShares S&P MidCap 400 Growth Index (IJK, news, msgs). Both areas have held up well, and midcap growth would be an early beneficiary of a market recovery. I'm putting $15,000 into each.
Biotech looks like one of the strongest sectors in the market now, especially with Amgen's (AMGN, news, msgs) strong earnings and good results from an osteoporosis drug; Roche Holdings' (RHHBF, news, msgs) bid for the 44% of Genentech (DNA, news, msgs) it doesn't own; and Bristol-Myers Squibb's (BMY, news, msgs) offer to purchase ImClone Systems (IMCL, news, msgs). Some of those bids may be raised, and they point out the value in this sector.
I'm also putting $5,000 into the speculative ProShares Ultrashort FTSE/Xinhua 25 Index (FXP, news, msgs), a two-for-one play on Shanghai's decline. This is not for the faint of heart. If you want to do this at home, you can also buy put options on the iShares FTSE Xinhua 25 Index (FXI, news, msgs). Either position would get crushed in a bear-market rally, which might very well occur around the Olympics. Bear-market rallies can be quite powerful. But ultimately, China's Mother of All Bubbles will unravel more, driving the Shanghai index to new lows. (Click here for more on this topic.)
I'm keeping some powder dry to eventually jump back into the energy sector, which I think has further to go on the downside, but which I think is a good long-term buy. I'll let you know as soon as I'm ready to pull the trigger.
I'm also holding back on gold during this period of a strengthening dollar, but may commit more to that area when the time is right.
Stay tuned for some individual stock recommendations in my next journal.
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