The Global Bull Pulls in Its Horns — For Now

Nicholas Vardy

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

All the world’s financial eyes continue to be on Greece. The latest news is that Greece reached agreement with the European Union and the International Monetary Fund (IMF) on an aid package amounting to an eye-popping 110 billion euros ($145 billion). Clearly, European leaders have tried to come up with a headline number that will “shock and awe” the market into the belief that it has addressed the crisis in Greece head on. Under the current plan, eurozone countries will extend loans to Greece at an interest rate of about 5% — far lower than the prohibitively high costs Greece would face if it were to try to borrow money on the market. The fly in the ointment is that the German parliament must approve Germany’s substantial contribution to the bailout package. And with elections coming up in Germany, and public opinion dead set against a bailout, uncertainty continues to reign

So, where does that leave your Global Bull Market Alert portfolio? You have a short position in the euro through the UltraShort Euro ProShares (EUO), which benefits from the turmoil in Europe. You also have a defensive position in the form of CurrencyShares Japanese Yen Trust (FXY).

Your other stock positions, however, are more subject to the whims of the market. And when sell-offs come, the market continues to throw the baby out with the bathwater.

Take the case of Aixtron AG Ads (AIXG), a stock you were stopped out of on Thursday at a loss. The stock had come within a hairsbreadth of hitting a high for the year just a week earlier. On Thursday, it announced its financial results, topping analysts’ consensus with a 417% gain in earnings. Sales rose 234%, also above estimates, even as margins increased. The company also boosted its full-year guidance, as Aixtron’s president and CEO cited "huge rises in demand" and increasing operating leverage. Yet, the stock dropped 9%. Go figure.

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So, Aixtron is out of the Global Bull Market Alert portfolio for now. But with numbers like these, don’t be surprised if it creeps back into the portfolio in the near future.

Portfolio Update

Cognizant Technology Solutions Corp. (CTSH) fell back this week. The good news is that the stock has been trading in a fairly tight range even in the midst of the global sell-off. When you see tight action like this, it’s positive, because it tells you big investors aren’t unloading their shares. CTSH remains a BUY.

UltraShort Euro ProShares (EUO) hit a record high of $21.77, before ending the week 0.8% higher. With criticism of the European Union’s handling of the Greek crisis rising, and the downgrades of Portugal and Spain raising the prospects of contagion, your bet against the European currency remains a BUY.

CurrencyShares Japanese Yen Trust (FXY) ended the week slightly higher, as risk appetite in global markets rose. As a safe-haven currency, FXY remains a defensive BUY.

MercadoLibre (MELI) fell this past week in sympathy with global markets. The company will release financial results for Q1 2010 on May 6, 2010, after the close of the day’s trading. With brokerage Thomas Weisel putting a $70 price target on the stock, MELI remains a BUY.

Millicom International (MICC) also dropped back this week. Brokerage Morgan Joseph recently issued a report stating that it expects Millicom’s growth to skyrocket as the global economy recovers. Millicom has also recently entered Rwanda, and is looking at doing the same in Costa Rica. MICC is a volatile stock, but remains a BUY.

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Mechel (MTL) announced the launch of a public offering of preferred shares and preferred American Depositary Shares. With the price range set between $21.00 and $27.60 per preferred share, there is an implicit cap on Mechel’s rise until this offering is completed. Until then, MTL is now a HOLD.

China North East Petroleum Holdings Ltd (NEP) rose slightly on the week. All eyes and ears are on additional information that will come out when it files its annual report on Form 10-K, expected some time this month. NEP remains a BUY for patient investors.

P.S. Please join me Wednesday, May 12, 2010 at the MoneyShow in Las Vegas for a subscribers-only meeting. This exclusive event will take place from 10:00 a.m. to 11:00 a.m. in the Calabria room at Caesar’s Palace. To RSVP for this event, please click on this link, and supply the requested information. This private meeting will be open only to paid subscribers of Global Stock Investor and Global Bull Market Alert. See you there.

P.P.S. If you want to keep up with my latest insights on developments in fast-paced global markets, you can now follow me on Twitter on @NickVardy or on my new blog,

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Yesterday was the toughest day for global stocks since the sharp corrections of early February, as Standard & Poor’s downgraded Greece's debt to junk status and cut Portugal's credit rating by two notches. That development, combined with Goldman Sachs' shaky testimony in front of Congress, hit the market hard. All of the major U.S. indices were down more than 2%. And you can expect little respite today, as all the major Asian markets are down overnight as well.


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