|FPM Sectoral and Select Exchange Traded Products Performance - 3-Years to Sept'15
1) We'd cautiously like consumer and healthcare / biotech sectors $XLY, $XLP, $XLV and $FBT:
Both consumer discretionary and less so consumer durable / staples, of the sector ETF SPDRs (Spider) have not suffered a negative 12 month return. So respectively the worst year long drawdown was +9.2% between Oct'13 and Sept'14; and for the durable / one-off purchases sector, up 4.2% between between Oct'14 and Sept'15.
Consumer sectors are defensive sectors, where-ever in the business cycle we are in on Sept 2015. However, we identify transition firms: less liking Coca-Cola Company - $KO and Pepsico - $PEP type conglomerates and preferring Vita-Coco (privately-held producers of coconut water drink). The Top 10 Holdings of these consumer sector proxy below.See other analysis here.
2) Our least favoured sectors are on a secular downward trend. The unravelling of the energy-scam perpetrated by inventor Alva T. Edison, J.P. Morgan and cabal a century earlier is now upon us. These protagonists effected a capitalist-motive and over-rode potential human social progress and an innovative one. A result of this short-termism enterprise ambition is that capitalism and fossil-fuel activities are now endangered from the sovereign debt-bombs and fretful climate change premise. Mr Edison, famed as inventor of the light-bulb and electric current was favoured over alternative free-at-source energy-solution as proposed by Nikolai Tesla.
Due to global climate warming, right now the global economy, which contributes to anthroprogenic global warming needs to be in a "freeze" mode to contain CO2-emission i.e. economic stagnation VERITABLY needs to be the authorative accommodating policy order of the day. If indeed matter-factly, we are SERIOUSLY concerned about the state of humanity and its effect on our mother planet. A planet where almost every natural resource is securitised / monetised towards economic consumption and indebtedness to balance books. A world gorged by ever increasing populations and degrees of prosperity in a globalised capitalism. The Orwellian horrors to mind needs no rocket-scientist, simply extrapolate the effects of BRICs nations joining 20th century plutocratic economic model. Remember that economics was about the scarcity or finiteness of resources within limitless demands for it. And how politically that is balanced. But now in the 21st Century a global paradigm is upon us: as opposed to few western countries (viz. from G7 to G20 countries meeting Nov’15), in the 20th Century competing for the limited resources, there are “Three Billion New Capitalists” competing or creating substitute resources, for SUSTAINABILE harmony with the environment.
Sector SPDR ETFs as per Crude Oil - $OIL and Natural Gas - $FCG. These two are down 60% and 65% respectively over the last three years to end-September 2015 - which is our window of analysis period. Wider energy ETF SPDR - $XLE presumably constitutes horizontal and vertical industries of oil and gas assets, and fared negatively depreciated by 9% over the 3-years.
Since stored energy reserves (carbon fossil fuels in the main) outweigh the safe capacity before climate change impact ensues, we think these large oil-gas based industries face secular decline, as their reserves become "STRANDED ASSETS". Fracking and Carbon-Capture-and-Storage ventures are mistaken or diversionary offshoots that will undergo the creative-destruction process from misallocated capital and vested competition (viz. Opec lowering price to force out new entrants to the energy game). These enterprises marketed in the name of "energy security" is more public relations flannel in view of long-known carbon-emission reduction goals. More fool the sponsoring entrepreneurs and duped investors having bought into it!Take a look at performance metrics of a medium-term oil proxy below:
|FPM Sector Proxy ETF - $OIL. Source: Yahoo.com
3) Following on from FPM’S primacy of geopolitics themes, based on socio-political-environmental driven economic forces, and with oil and carbon-fossil industries as a bellwether sector in vogue transition, we base our macro and markets recommendations. We have medium-term sideways-trading cycle with long-term secular lows views, based on prospects for macro economic fundamentals i.e. selective geopolitical vision.
Gold at the bottom of its 52-week range is cyclically about...
 Reference to “Three Billion New Capitalists” is a book by Clyde Prestowitz about “the great shift of wealth and power to the East”. FPM’s contect is similarly about a wider sense of new BRICs nations.