FLYING WITH A TAILWIND

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

Although you may not move billions of dollars in the currency markets each week, every time you invest in a Global Bull Market Alert recommendation, you really invest in two things: the company itself AND its home country’s currency.

Here’s a simple way to think about this complicated idea and why it can help double your investment returns: Flying from New York to London recently took me one hour less than the other way around. Same plane, same distance. But I got to my destination over an hour faster. How is that possible? Well, flying from New York to London I had the benefit of a tailwind.

Buying stocks from countries that have strong currencies is a lot like flying with a tailwind. You arrive at your investment destination faster — without any additional effort.

No other market demonstrates the benefits of a currency tailwind for US investors better in the year 2005 than Brazil.

Domestic Brazilian stock market investors are having a very good year, with returns of about 17% so far.

But U.S. investors have earned nearly twice that return – 43% – after benefiting from the Brazilian real’s appreciation against the U.S. dollar.

This week’s Global Bull Market pick — Banco Bradesco — is both the best way to play the Brazilian bull market and to benefit from the appreciating real.

Banco Bradesco is Brazil’s largest private bank, with more than 3,000 branches throughout the country. Forbes Brasil Magazine recently named Banco Bradesco the top bank in Brazil in terms of gross revenues and overall performance.

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It is also one of the fastest growing banks in the world. Last week, Banco Bradesco announced that its profits nearly doubled in the third quarter as consumer lending expanded on the back of a healthy economy. Marcio Cypriano, Banco Bradesco’s president, said he expects the bank’s loan portfolio to grow between 20 and 25 percent next year.

Finally, although Brazil has always been "a country of the future," that future may have finally arrived. Brazil’s economy, South America’s largest, is growing at 3.5 percent this year and projected to grow at 4 percent in 2006. Brazil today is probably the only major global economy where interest rates are actually falling, thanks to the government’s commitment to orthodox monetary policy aimed at promoting slow and sustainable growth.

Ironically, this sea change in Central Bank policy was instituted by none other than Arminio Fraga — a former Soros currency trader who ran the Brazilian Central Bank between 1999 and 2002.

So let’s buy Banco Bradesco (BBD) at market today, placing a stop at $46.50. There are no options on this one.

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