Use those staples with discretion?

Last week we talked about how emerging markets were showing a slowdown, but we really didn't have any understanding of why. Conveniently, this story on Marketplace aired. Basically, when the US economy was crap, emerging markets were a good place to park some money for a reasonable return. As the domestic economy heats up, emerging markets are less enticing. Couple this with possible corruption and mismanagement of finances, and our USA USA USA economy seems like a better place to put your dollars. Maybe this sort of big macro news should compel us to even out our portfolio with our next buy by looking into something in the US. We can still look to better balance our sector weighting, but do so with a domestic investment.

Consumer Discretionary had been going pretty well, and as you can see below, it has been tracking (and outpacing) the US economy as a whole. This fund, as a Consumer Discretionary ETF, has been going in the direction you would expect for a recovery. You will even see the recent dips for both VCR and SPY are in line.

If you take a look at the Vanguard Consumer Staples ETF (VDC), you see another correlation:

We also noticed how the beta is calculated differently for the same item on say Yahoo Finance and Morningstar. We're not really sure why, but perhaps it may have to do with the way each is calculated. Really though, we are interested in beta in terms of broad strokes. Is something a little or a lot over or under a beta of 1? Since we are so risk-averse, we tend to prefer a lower beta, and there is not much difference to us between say 0.5 and 0.6. It makes sense to just stick with one method (or site) and use solely that for reference.

It might be a good idea to take a look at the Motley Fool's definition of beta for even further reading.


Next week we try to narrow down our purchase options. Right now we are torn between something in Discretionary, Staples, or Asian Tech, and we just need to pull the trigger on something.

Profit!