The Global Bull Looks Back Toward the United States

Nicholas Vardy

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

The iShares MSCI Israel Cap Invest Mkt Index (EIS) and the iPath DJ AIG Copper TR Sub-Idx ETN (JJC) were standout performers, jumping 6.15% and 4.0%, respectively, last week. Tighten your stops on both of these positions. (See the Portfolio Update below). Your position in the Rydex Inverse Government Long Bond Strategy Inverse (RYJUX) fell sharply as confidence in the strength of the U.S. economy jumped. Although the fundamentals behind this trade remain in place, the technicals show that it is running out of steam. I am therefore recommending that you sell your position here. You also were stopped out of Chinese gaming stock, Shanda Interactive Entertainment Ltd. (SNDA), at a loss.

Since you already have five positions linked to global equity markets, this week’s Global Bull Market Alert pick is unusual in that it is both a U.S.-based stock and high yield position. Here’s why I think PowerShares Financial Preferred (PGF) has an important role to play in your current Global Bull Market Alert portfolio.

The U.S. financial sector has been one of the top performers in the recent bull run, with many financial stocks doubling and even tripling from their March lows. A steadier way to play this trend is through the preferred shares of the financial sector, which combines equity-like exposure to the U.S. financial sector with some eye-popping yields. With its high yield of over 10.10%, PGF pays a hefty dividend that amounts to close to 1% per month. Of equal importance, during the recent June/July correction, PGF sold off much less than some of your holdings in highly volatile global stock markets. The bottom line? PGF’s high yield, combined with its relatively low volatility, gives it an important stabilizing role in your portfolio on any market pullback.

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So buy the PowerShares Financial Preferred (PGF) at market and place your stop at $14.00. In the interest of full disclosure, this is a position that I hold on behalf of my clients at my investment firm Global Guru Capital. (Please note that Global Guru Capital is not related to Eagle Publishing or any of its investment publications or trading services.)

Portfolio Update

The iShares MSCI BRIC Index ETF (BKF) ended the week up slightly as the big four emerging markets consolidated their gains. BKF remains a HOLD.

The WisdomTree Dreyfus Emerging Currency ETF (CEW) rose slightly as the U.S. dollar continued its decline. This low volatility pick remains a BUY.

The iShares MSCI Chile Investable Market Index (ECH) ended the week flat, weighed down by a large holding in the lagging agricultural sector. Your position remains a HOLD.

The iShares MSCI Israel Cap Invest Mkt Index (EIS) had a strong week — jumping another 6.15%. The Holy Land remains a BUY. Raise your stop to $42.50.

The iShares MSCI Hong Kong Index (EWH) rose slightly this week as Asian markets continue to lead global markets. I am moving this Hong Kong fund back to a BUY.

The CurrencyShares Japanese Yen Trust (FXY) rose back above the $105 level as global stock markets took a breather. The hedging role of this position, combined with Japan’s steadily improving prospects, makes FXY a defensive BUY.

The iPath DJ AIG Copper TR Sub-Idx ETN (JJC) soared yet another 4.0% — breaking through the $36 level for the first time in 2009. “Dr. Copper’s” price performance bodes well for global economic recovery. Tighten your stop to $33.50. This position remains a BUY.

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Claymore/AlphaShares China Real Estate ETF (TAO) was up 1.4%, closing the week at a record high of $18.95 for 2009 on Friday. With Asian markets leading the global recovery, this bet on the hottest sector in one of the world’s hottest markets remains a BUY. Your stop should remain at $15.80.

Rydex Weakening Dollar 2x Strategy H (RYWBX) rose another 1.2% as the U.S. dollar continued to weaken. RYWBX remains a defensive BUY.

P.S. For the first time ever, I’ve scheduled a special private meeting for my subscribers of Global Stock Investor and Global Bull Market Alert on Friday, Aug. 21, at this year’s MoneyShow in San Francisco. Think of this as a quick boot camp where I’ll reveal special techniques and "tricks of the trade" that I use in the markets. This is the kind of hands on training that I can only offer you in person. I’ll discuss my secret technique for choosing customized exit prices, an easy-to-implement formula on how much to buy of each pick to maximize your returns, and why I think the biggest returns for 2009 are still to come. I also will make myself available to answer any specific questions that you may have about any of my current recommendations. Please join me at the San Francisco Money Show, Pacific room C (4th floor), on Friday, Aug. 21, from 1:30 p.m. – 2:30 p.m. by registering here.

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After a remarkably strong, two-week rally which saw some global stock markets rise 12 out of the last 13 trading days, markets are shifting into consolidation mode. Some pullback is to be expected as markets digest some of the gains of the recent run-up. This may continue for the next week or two. But general market sentiment remains robust -- overall a more positive outlook than I would have expected from the normally sleepy summer months.


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