Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
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Published: November 15, 2004
The MSCI EAFE iShares (EFA) is an exchange-traded fund that is based
on the Morgan Stanley
Capital International EAFE Index. The EAFE Index covers stocks from
much of the globe, with the fund holding nearly 800 non-U.S. securities.
EAFE stands for "Europe, Australasia Far East." The fund
essentially holds companies that are centered in Europe, Asia, Australia
and New Zealand (it does not hold North or South American stocks). The
national stock markets this fund covers include: Australia, Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland,
Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore,
Spain, Sweden, Switzerland and the United Kingdom. It does not include
any stocks from Africa or Latin America.
Like all foreign funds, the dollar's fluctuations have an impact on the
fund's value. The dollar's recent weakness has contributed to the fund's
strong performance in early Q4 of 2004. Remember, a weak dollar means
that the stocks that you hold, which are valued in foreign currencies,
will command more dollars when they are sold. A weak dollar is good for
dollar-based foreign investors. Unfortunately, although I am very
long-term bearish towards US currency, it is probably stretched for the
short-term and late-comers to this rally could be buying not only an
overbought set of global stock markets, but an oversold US dollar. A
dollar rally coupled with a fall in stocks would aggravate losses in
EFA.
As I noted above, the fund is fairly well diversified. It holds shares
in nearly 800 companies, with the top 10 holdings accounting for less
than 19% of the funds value. Only BP PLC, formerly British Petroleum,
comprises more than 2.50% of EFA, at 2.64%. Of the top 10 holdings, only
two -- Nestle (NSRGY.PNK) and the Royal Bank of Scotland (RBSPF.PNK) --
do not trade as American Depositary Receipts (ADRs) on the New York
Stock Exchange. They are not at all liquid, and many brokerage firms
prohibit trades in Pink Sheet issues. (An ADR is a way that a foreign
company can permit its shares to trade in the United States. Those that
trade on the NY Stock Exchange must file regular financial reports with
the SEC.)
It is worth noting that EFA is heavily weighted to Financial Services
firms (26.76%). If the Fed keeps increasing interest rates, then other
central banks may follow suit, thus flattening yield curves across the
globe. Flat yield curves will cut into bank and brokerage profits.
Furthermore, continued rate hikes may slow the global economy, thus
sending stocks lower later in 2005.
The other large sector weightings are consumer discretionary (18.36%),
industrials (9.58%) and energy (8.63%). The latter two are already past
their prime, given our place in the business cycle, and the overburdened
consumer is likely to soon give up the ghost as well. The outlook for
EFA, especially in the medium-term and long-term, is not particularly
rosy.
| MSCI
EAFE iShares (EFA) |
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| Type: |
Foreign |
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| Similar
funds: |
S&P
500 SPDR (SPY) |
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MSCI Japan
iShares (EWJ) |
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| Options?: |
Yes, illiquid |
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| Performance
Data |
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| 52-week
High: |
$154.20 |
11/12/2004 |
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Annualized
return since: |
| 52-week
Low: |
$123.30 |
11/17/2003 |
|
One-year |
23.16% |
| YTD
Return: |
12.59% |
(as
of 10/8/2004) |
Three-year |
10.23% |
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Five-year |
N/A |
| Dividends: |
$1.57 |
past
12-mos |
Life of fund* |
6.98% |
| Expense
Ratio: |
0.35% |
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*
- Started trading 8/28/2001 |
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| Correlation
Data* |
(1/02/02-10/31/04) |
Holdings* |
(as of 10/31/2004) |
| Dow
Jones Industrials |
79.0% |
|
BP (BP) |
2.64% |
| S&P
500 |
|
77.4% |
|
HSBC (HBC) |
2.14% |
| Nasdaq
Composite |
74.2% |
|
Vodafone (VOD) |
2.13% |
| Nasdaq-100 |
|
70.6% |
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Total SA (TOT) |
1.53% |
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GlaxoSmithKline
(GSK) |
1.52% |
| SPY |
|
76.3% |
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Royal Dutch Ptr
(RD) |
1.42% |
| EWJ |
|
72.6% |
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Novartis (NVS) |
1.40% |
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Toyota (TM) |
1.35% |
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Nestle (NSRGY)** |
1.21% |
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Royal Bank Scotland
(RBSPF)** |
3.19% |
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* Percent top ten are
of total |
18.53% |
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**
Pink sheets only, very illiquid and many brokers do not trade |
| Average
Daily Volume |
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Average
Daily Price Range |
| Oct-04 |
561,500 |
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Oct-04 |
1.1% |
| 2004
YTD |
534,094 |
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2004 YTD |
1.2% |
| 2003 |
442,133 |
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2003 |
1.3% |
| *
- Correlation measures how closely the two items track each
other |
* Includes
prior day's close (true range) |
HOW TO MAKE MONEY IN EFA THIS YEAR
EFA is overbought in both the daily and weekly time frame. It
is showing substantial momentum divergences at current prices, both on
the daily and weekly charts. However, there is still no sell signal and
price patterns, based on the Elliott Wave Theory, still allow for a move
to $155-$165 in the next couple of months before the fund turns very
sharply lower. For now, buy dips to the $145-$148 range.
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