A Profitable Week despite Debt-Ceiling Worries

Nicholas Vardy

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

The on-going drama over raising the U.S. debt ceiling has swept worries of a Greek default under the rug. All eyes remain focused on the U.S. government as the battle to see who “blinks first” wages on. Although investors do not believe lawmakers are foolish enough to allow a catastrophe, the markets cannot help but climb the proverbial “wall of worry.”

A recent Reuters poll found that wrangling over the debt ceiling has already damaged the U.S. economy. The Economist magazine now predicts that the United States may lose its top-notch AAA credit rating from at least one major rating agency. The debt-ceiling debate has driven your bet against U.S. Treasuries, via ProShares UltraShort Lehman 20+ (TBT), up 3.13% over the past five trading days. Any more bad news like this will likely cause this position to soar as U.S interest rates rise to compensate for the additional risk of a potential downgrade.

Despite the troubles in the United States, your Alpha Investor Letter Portfolio had a strong week — posting gains in nearly all of your holdings. Your bet on precious metals via Market Vectors Gold Miners ETF (GDX) rose 1.02%. This was due primarily to a late-day Tuesday rally in gold-based exchange-traded funds (ETFs) that carried precious metals ETFs to record highs. Two of your positions also became “buys” as WisdomTree Dreyfus Chinese Yuan Fund (CYB) and iShares MSCI Taiwan Index (EWT) moved above their 50-day moving averages.

Emerging markets bounced strongly as investor dollars left the uncertainty of domestic markets. The MSCI Emerging Markets Index (EEM) surged nearly 2%, compared with the S&P 500’s small 0.45% gain. This was most evident in Asian markets and reflected in several of your Asian-based holdings. iShares MSCI Singapore Index (EWS) climbed 3.62%, iShares MSCI Taiwan Index (EWT) rose 3.56%, Market Vectors Indonesia ETF (IDX) increased 2.57%, Market Vectors Russia ETF (RSX) rose 3.17%, and Brazil’s Vale S.A. (VALE) went up 2.13%. Domestically, Las Vegas Sands Corp. (LVS) managed to climb a respectable 2.55%, even in the wake of Washington shenanigans.

Despite good news regarding JinkoSolar Holding Co., Ltd. (JKS), this volatile stock recorded a significant drop. Your newest position in the biotech sector, First Trust NYSE Arca Biotechnology (FBT), also had a weak start.

Overall, markets remain locked in a trading range that has taken shape over the past few weeks. This behavior is quite normal for the season, and it is unlikely that we will see any significant breakout to the upside during these “dog days of summer.”

Portfolio Update

WisdomTree Dreyfus Chinese Yuan Fund (CYB) rose 0.39% over the past week. CYB’s price continues to stay bound within a comfortable price range. CYB is above its 50-day moving average and is a BUY.

WisdomTree Japan SmallCap Dividend Fund (DFJ) ended the week with a gain of 0.88%. Several major Japanese companies will report earnings this week. Expectations are high, as earnings have been making a swift comeback during the quake recovery. Well above its 50-day moving average, DFJ is a BUY.

iShares MSCI Singapore Index (EWS) jumped 3.62% over the previous week. Asian companies have been rising across the board lately thanks due to positive earnings reports from their American trading partners. EWS is above its 50-day moving average and is a BUY.

iShares MSCI Malaysia Index (EWM) posted a 1.95% gain for the week. Emerging markets have been rising significantly and EWM has benefited from this trend. Now trading above its 50-day moving average, EWM is a BUY.

iShares MSCI South Korea Index (EWY) gained 1.31%. The higher growth rates and fiscally stable governments in Asia have attracted a large influx of investment dollars. Based upon its 50-day moving average, EWY is a BUY.

iShares MSCI Taiwan Index (EWT) increased by 3.56% over the previous week. Again, EWT is moving higher with the recent lift in the “Asian tide.” Currently above its 50-day moving average, EWT is a BUY.

Freeport-McMoRan Copper & Gold Inc. (FCX) dropped a mere 0.39% last week. Gold continues to be strong in the face of the U.S. government’s fiscally uncertain position. FCX is still a BUY.

Market Vectors Indonesia ETF (IDX) increased by 2.57% last week. A recent study by The Economist ranked 42 global markets based on market strength. Indonesia placed second in its “Top ETFs Around The World” listing. IDX is well above its 50-day moving average and is a BUY.

JinkoSolar Holding Co., Ltd. (JKS) dropped 5.25% over the past five trading days. JKS is the “Top Crystalline Module Provider” to Germany’s PHOTON Power AG for use in its upcoming large-scale solar projects. This is good news for this volatile solar play. JinkoSolar reports earnings on Aug. 15. JKS is currently below its 50-day moving average and is a HOLD.

Las Vegas Sands Corp. (LVS) is up 2.55% for the week. LVS has enjoyed recent gains due to positive expectations for its upcoming earnings report. The company reports earnings today, July 26. Holding well above its 50-day moving average, LVS is still a BUY.

Market Vectors Russia ETF (RSX) rose 3.17% last week. Russia recently recorded yet another month of solid industrial production data. In addition, a downtick in unemployment, coupled with an uptick in personal income, serves as another positive sign for this Russian play. Moving up swiftly from its 50-day moving average, RSX is a BUY.

ProShares UltraShort Lehman 20+ (TBT) rose 3.13% over the past five days. The recent selling of August T-bills suggests an increase in investor uncertainty as the debate surrounding the U.S. debt ceiling comes down to the wire. This has helped TBT over the past week. Flirting with its 50-day moving average, TBT is currently a HOLD.

Vale S.A. (VALE) rose 2.13% last week. The world’s largest iron ore producer continues to position itself for future growth. For example, it announced plans for more than $2 billion in new storage infrastructure. VALE reports earnings on July 28. VALE is well above its 50-day moving average and is a BUY.

Market Vectors Gold Miners ETF (GDX) is up 1.02% over the past week. Gold continues its rise above the $1,600 level. As of now, gold futures are positive across the board. GDX is a BUY.

First Trust NYSE Arca Biotechnology (FBT) lost 3.23% last week. This biotech ETF has risen 113% over the last five years, making it the best-performing ETF of its kind over that period. FBT is currently below its 50-day moving average and is a HOLD.

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