Slight Increases in Equity Allocation This Week, But Still Underweight

As the "muddle through the credit crisis" hypothesis gained a bit more credibility this week, it made sense to boost equity allocations somewhat, though we remain partial to the underweight argument.

We've tried to raise equity allocations via gaining exposure to diverse major investment trends, including:

• Agriculture - Monsanto (MON) and Syngenta (SYT), two of the leaders in agri-biotech. We summarize the major trends here ("Allocation and Agriculture"). We're also watching two agriculture ETNs: iPath Dow Jones AIG-Agriculture ETN (JJA) and ELEMENTS Linked to the Rogers International Commodity Index - Agriculture ETN (RJA).
  
• Africa & Middle East (a broad fund with some "frontier" market exposure.) See our previous post titled Allocation and Africa.
  
• U.S. - Vanguard Total Stock Market ETF (VTI), a Wilshire 5000 Index tracker - Selloff provided a better probability of a long-term entry point.

We're looking for further opportunities in these areas, as well as some additional ones, such as:

• Water and Industrial Processes - Flowserve (FLS), a leader in pumps, flow control and other flow solutions; sells into a diverse industrial end-market. Suez SA (SZE) a France-based utility planning to separate its diversified global water business.
  
• Solar - FirstSolar (FSLR) may pull back after recent flare-up after CEO's comments that he is in project talks with several large utilities. We certainly believe him -- coal-fired power projects are coming off the drawing boards as expected carbon costs rise, nuclear projects aren't being added quickly owing to NIMBY, and oil/gas/hydro prices continue their uptrends -- but collaborations with utilities may take a while to develop.
• Genomics - Illumina (ILMN), a leader in genetic analysis. Find a brief description of this super-trend here: "New Technologies Spur the Race to Affordable Genome Sequencing," as well as the backdrop for a very long-term view here on combating the increasing risk of plagues using new antibiotics, genetic testing, and anti viral drugs.
• China (PGJ, consisting of 25 ADRs) - 40% selloff from peak provided a more fair discounting of the risks, which we've discussed in several previous posts.
• Energy - SPDR S&P Oil & Gas Exploration & Production ETF (XOP), Vanguard Energy ETF (VDE), or iShares S&P Global Energy Sector (IXC)
  
• Canada - iShares MSCI Canada Index (EWC)
• Brazil - iShares MSCI Brazil Index (EWZ)
• Education - ITT Industries (ESI), a well-managed company at a 40% discount to its peak, and up sharply today after Congress introduced a new student loan aid bill. Good summary of Education credit issue here.