Rules for Investors with UNG and GLD

As we close the books on 2013, one clear theme has emerged. Investors have flocked to developed economies and shunned emerging markets. The S&P 500 Index is on track for a nearly 30% gain this year, but many emerging markets have tumbled by double digits.

That kind of massive performance gap only emerges every decade or so, and for farsighted investors willing to look past near-term headwinds, emerging markets now represent tremendous relative value.

You don't need to tell that to the executives at major U.S. companies. They already know that emerging markets have generated -- and will continue to generate -- robust growth rates, thanks in large part to ever-rising middle classes. While developed economies are growing at a 2% pace, emerging-market economies are growing at a 4% to 5% pace. Asian emerging markets are rising an even more impressive 6%, according the International Monetary Fund (IMF).

The key takeaway: Even if you're wary of investing in volatile emerging markets directly, you can focus on the U.S. companies that are positioned to derive a rising level of sales and profits in these countries.

Thankfully, the strategists at Citigroup have already done the heavy lifting. In a recent report, Citi's Tobias Levkovich took a look at companies that already derive more than 20% of their revenue from emerging markets. These companies have invested millions of dollars to establish market dominance in these economies, and their first-mover advantage will reap rewards well into the future.

Which Industries Aren't Keeping Pace?
Levkovich has grouped these companies together in a portfolio he calls EMX, and not surprisingly, emerging-market exposure hasn't helped these stocks in 2013. The EMX basket has underperformed the S&P 500 by roughly 5 percentage points. Investors may be focusing on the fact that economic headwinds in 2013 are dampening the near-term financial performance for these companies.

The EMX portfolio holds a basket of 51 stocks, though I am most interested in the stocks that have notably underperformed the S&P 500 this year. Here are the EMX stocks that are up less than 10% in 2013.

Sometimes you need to take an idea to its illogical end to show you the absurdity of it. For quite some time now I have been writing about the proliferation of ETFs, or the ?ETFization of everything.? Which on the whole has been a boon for investors. However the ETF is still happy to create products based on hot trends or a favorable backtest.

Joel Dickson at Vanguard Advisor did a little data exercise creating ?AlphaBet portfolios? that in a backtest showed uniform outperformance relative to the S&P 500 over a ten year period. The only hitch is that the strategy being used, an alphabetical one by ticker symbol, should have no bearing on price performance.

It may seem like a long time ago, but the epic stock market meltdown of half a decade ago is again worth pondering.

From around 1,300 in August 2008, the S&P 500 Index plummeted to 1,100 by late September and below 900 by the end of November. By the time we hit bottom in March 2009, the index had tumbled below the 700 mark. A nearly 50% plunge in just seven months is virtually unprecedented.

Now, with the S&P back up to around 1,800, we've seen a five-year rebound that should make us all quite thankful. This year has been especially fruitful, as the S&P 500 has tacked on more value this year (on the basis of market cap) than in any year in its history. The market hasn't even needed any breather this year on its path to record heights.

There have been some interesting movements in a range of investment spheres over the last several weeks, and we believe it?s worth taking a closer look at each of them.

We?ll start with crude oil, an item that turned on the jets two weeks ago and rocketed higher by almost seven percent in a three day period, overtaking the widely watched 50 day moving average before consolidating.

Here?s the chart ?