The Global Bull Takes on Currencies Bets, and Cuts Back on Stocks and Commodities

So why the sudden shift in the greenback’s fate? As I noted in last week’s The Global Guru, the wheels are coming off of the 13-country eurozone economies, which last quarter contracted for the first time since the 1999 introduction of the euro. The U.K.’s economy also came to a grinding halt in Q2 for the first time in 16 years. For all of the doom and gloom about the U.S. economy, it grew at a rate of 1.9% in the same quarter. That makes the U.S. economy the gold medal winner in the global growth Olympics, at least among the world’s developed economies.

You’ve reacted quickly to this sudden, if long overdue, shift in the fate of the U.S. dollar through your last two Global Bull Market Alert picks: the Direxion Funds Dollar Bull 2.5x Fund (DXDBX) and the Market Vectors Double Short Euro ETN (DRR). And the continued weakening of Europe’s economies bodes well for the prospects of both of these picks.

The iShares MSCI Turkey ETF (TUR) has been hit by the surprising Russian invasion of Georgia in Turkey’s neighborhood. Yet, during the last three trading days, the Turkish market has begun to stage a recovery. As the crisis ebbs, expect the market to continue to do so. Remember, Turkey is probably the most volatile market in the world anyway. That also means it is most likely to bounce when the market turns.

The WisdomTree India Earnings (EPI) remains in positive territory, though it has lost some of its upward momentum after a particularly strong July. Inflation has accelerated in India, and upward pressures on wages are growing. George Soros picked a bottom in this market. And India remains a top-performing global stock market in an otherwise weak field.

The iPath DJ AIG Livestock TR Sub-Idx ETN (COW) remains the sole commodity play in the Global Bull Market Alert portfolio. The fundamental story for cattle remains strong. U.S. exports and tight supply due to early slaughters are driving up the cost of cattle. Tighter supply and growing demand mean higher prices in the long run.

As unnerving as financial markets can be in times like this, it’s worth remembering a couple of things to maintain perspective. First, even the top managers in the world are having a tough time. Gregg Coffey, one of London’s top global hedge fund managers, is running $6 billion with a stellar track record of 60% returns during the past two years. He turned over his portfolio 2.5 times a day in the past few months. And he is down 13% for the year.

Second, the media darlings of the previous year almost always fall to the bottom of performance charts. Think of the Chinese stock market dropping 60% since its peak in October. At the same time, the worst-performing markets also tend to perform the best once markets turn. And you don’t want to be sitting on the sidelines when that happens.

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