The Global Bull Pauses for Breath

Nicholas Vardy

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

Mark Twain said this after he went bankrupt at the age of 59. But it’s worth reminding yourself why you won’t suffer Mark Twain’s fate. First, you’ve already taken profits in the iShares MSCI BRIC Index ETF (BKF), the iPath DJ AIG Copper TR Sub-Idx ETN (JJC), iShares MSCI Chile Investable Market Index (ECH) and the iShares MSCI Hong Kong Index (EWH) to lock in gains of 41%, 36.3%, 34.2%, and 21.9%, respectively. And your remaining gains in these positions still stand at 42.1%, 53%, 29.9%, and 19.5%. Second, you have all of your stops in place. You know that you’ll be stopped out of your positions before incurring major losses.

Mr. Markets’ current moodswing notwithstanding, global economic recovery now seems firmly in the cards. Japan, the world’s second-largest economy, has climbed out of recession after its economy grew 0.9% in the second quarter. The German (#4) and French (#6) economies also bounced back unexpectedly, both growing at 0.3% in the three months preceding the end of June. The latest leading economic indicators from the Organisation for Economic Co-operation and Development (OECD) surged 1.1% in June. That’s the largest one-month increase since 1975. The performance for the BRIC economies (Brazil, Russia, India and China) was even more spectacular with the index surging 2% in June.

How does all of this impact your Global Bull Market Alert portfolio? Realize that markets tend to climb a wall of worry. View the current negativity as a welcome sign. It lowers expectations. And it’s when low expectations are beaten that markets really break out on the upside. That said, after a sharp and sudden run-up as we’ve had over the past four weeks, some correction is in the cards. So keep your powder dry this week and see how this current leg down in the markets plays out. And then get ready to pile back in for what I expect to be a very strong fourth quarter.

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Portfolio Update

The iShares MSCI BRIC Index ETF (BKF) held up well during the week before pulling back sharply on Friday. You can expect this position to flirt with its stop price before it resumes its upward trend. With the BRIC economies back on the growth track, this remains a BUY.

The WisdomTree Dreyfus Emerging Currency ETF (CEW) was flat over the week. This defensive pick remains a HOLD.

The iShares MSCI Chile Investable Market Index (ECH) pulled back slightly this week. Your position remains a HOLD.

The iShares MSCI Israel Cap Invest Mkt Index (EIS) also hit a high for the year on Thursday before pulling back. Your bet on the Holy Land remains a BUY.

The iShares MSCI Hong Kong Index (EWH) stayed above the $15.00 level the entire week — though you can expect a pull back today as Hong Kong fell in overnight trading. With Asian markets leading the global recovery, Hong Kong is a BUY.

S&P Emerging Markets Small Cap (EWX) ended its first week in the portfolio slightly higher. This position will bounce fast and far as emerging markets recover. It remains a cautious BUY.

The iPath DJ AIG Copper TR Sub-Idx ETN (JJC) broke through the $40 level for the first time this year. With your position up more than 53% since our initial recommendation, this position remains a BUY. Raise your stop to $34.50.

PowerShares Financial Preferred (PGF) hit a record high of $16.47, even as it paid out a dividend of 11.2 cents per share on Friday. This high-yielding defensive bet on U.S. financial stocks remains a BUY.

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Claymore/AlphaShares China Real Estate ETF (TAO) sunk below the $18.00 level and stayed there all last week. With China selling off sharply last week, I am keeping TAO at a HOLD.

P.S. For the first time ever, I’ve scheduled a special private meeting for my subscribers to 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 confirming with an RSVP.

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Global stock markets spent most of last week consolidating their recent gains. But they got a big boost on Friday after better-than-expected economic data on both housing and employment in the United States. With Asian stock markets also mostly higher overnight on improved news from Japan's economy, I expect that the rally in global markets will resume sooner rather than later.

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