The Big Picture

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
This remains a very volatile and mood-driven market. The good news is that the early August lows have held up after being tested two weeks ago. That suggests that despite the current choppiness, the market has steadied, and is readying for its traditional strong finish to the year. Short term, with the U.S. market up five days in a row, I expect a pullback over the next few days.
So, this week offers an excellent opportunity to give you a “big picture” overview of my current Bull Market Alert strategy.
I can break the current Bull Market Alert portfolio into three broad areas.
  1. We have two picks in defensive, leveraged precious metals plays through the ProShares Ultra Silver ETF (AGQ) and ProShares Ultra Gold (UGL). These gold and silver positions are classic “safe-haven assets.” If the market sells off this week, as I expect it will, these positions should do well.
  1. We have two “option-style” positions in the portfolio in Bank of Ireland (IRE) and National Bank of Greece (NBG). As I have stressed, you should always view these as you would highly volatile options — with the benefit of them not “expiring” quickly the way options do. Both are very “news-driven” positions, soaring 30% one day and dropping 30% the next.
Both the Irish and Greek banking sectors have now attracted “smart” private equity investment from the likes of billionaire contrarian investors Wilbur Ross (IRE) and the Qatar Investment Authority (into NBG’s weaker rivals) confirm that we are on the right track. You should view these positions as “lottery tickets” — either you’ll lose it all — or you make 3x to 10x your money. I have positions in both of these stocks.
  1. Finally, we have two positions in stocks. One is a steady dividend payer in Alliance Resource Partners L.P. (ARLP), which is much less volatile than the S&P 500 itself, even while yielding a hefty 5.2%.
The other traditional “stock pick” in Bull Market Alert is usually a fast-growth company that has managed to perform steadily even through the market’s mood swings. Spreadtrum Communications (SPRD), the fast-growing Chinese technology company that I recommended last week, currently occupies that position in your Bull Market Alert portfolio.
These are the stocks (and options) that you tend to book 10%-20% gains in the stock, and double-digit percentage and triple-digit percentage gains in the options relatively quickly. Successful example of these in the recent past have been CROCS Inc. (CROX) and Arcos Dorados Holdings Inc. (ARCO), in which you booked 18.64% and 15.29% gains in the stock, and 127% and 140% in the options, respectively, over the span of a few short days or weeks. This is approximately what I am shooting for with your current bet on Spreadtrum Communications (SPRD). As the market improves going into the fourth quarter, you’ll see more of these types of positions in your Bull Market Alert portfolio.

Portfolio Update

ProShares Ultra Silver ETF (AGQ) lost 5.99% for the week. Profit taking on the recent run in precious metals is still affecting our position in silver. AGQ bounced off of the $200 level on Thursday and currently rests near the $211 mark. This has occurred six times since July 19. AGQ’s future is tightly bound to gold prices, and gold will likely continue upward as European volatility continues. AGQ is at its 50-day moving average, but is a HOLD right now.
Alliance Resource Partners L.P. (ARLP) held firm with a 0.72% loss this past week. ARLP’s primary coal buyers are electric companies. These businesses tend to be very stable purchasers, creating a solid future for ARLP and its healthy dividend payment. ARLP remains below its 50-day moving average and is a HOLD.
Bank of Ireland (IRE) lost 7.89% during the past five trading days. Wells Fargo & Co. is attempting to buy a 1.4-billion euro U.S. commercial real estate loan portfolio from IRE. This move is one component of IRE’s mandated bailout terms. IRE is a HOLD.
National Bank of Greece SA (NBG) fell 1.20% this week. Five large central banks, including the European Central Bank, are collaborating in a joint effort to assist in the European crisis. This broad show of support is a large move towards averting a Greek financial disaster. Stabilization of the European and Greek financial system will help ensure NBG is a huge win. NBG remains a HOLD.
ProShares Ultra Gold (UGL) fell 5.25%. Profit taking continued this week, bringing down our position in gold. As gold moves higher, UGL will allow you to capture a 2x move in the price of gold bullion. Above its 50-day moving average, UGL is currently a BUY.

Spreadtrum Communications, Inc. (SPRD) jumped 3.97% during its first week in your Bull Market Alert portfolio. SPRD continued its steady, straight-line trajectory last week as its stock price recovery continued. SPRD holds sixth place on a list of U.S.-listed Chinese stocks with the highest Return on Equity ratio for the past 12 months. SPRD remains a BUY

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