Dow 13,000!

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
After flirting with the 13,000 level over the course of the last few weeks, the Dow Jones Industrial Average finally closed above that psychologically important mark for the first time since May 2008. The Dow now has staged a 22% rebound since early October, and its 6.4% gain for 2012 marks the strongest beginning to a year since 1998. The Dow would need to rise just 8.9% to return to the record 14,164.53 hit on October 9, 2007.
Although round numbers should not be important, the reality is that for widely watched indexes like the Dow, they are. There is little doubt that in closing above the 13,000 level, the Dow Jones Industrial Average reflects the increasingly optimistic mood of investors. And if you’re honest, your “fear” about the markets is slowly transforming into “greed.”
The real story here, however, is not that the Dow finally broke through this level — but why it took so long. After all, it’s been nearly a month since the Dow first came within 1% of 13,000. The market’s action over the next couple of days will be key. If the Dow’s reluctance in recent weeks was caused by the normal difficulties of breaking through a resistance level, then the stock market should rise strongly in the next couple of days, now that this resistance level has been broken.
Given that the market’s rise has occurred on such low volumes, there are reasons to be skeptical of the rally’s sustainability. I know from my quarterly update conference call with my subscribers last week, several of you are equally skeptical. (If you missed the call or want to hear it again, click here.)
Here is my view. Everyone (including myself) keeps waiting for a 3-6% pullback in the markets. But as soon as the markets pull back the slightest bit, it seems that buyers rush in. The actual default by Greece when it came (as declared by ratings agency S&P) was greeted with a collective yawn. There seems to be little that can derail this market.
Given that your investment time frame in Alpha Investor Letter is medium to long term, instead of “calling a top” on the market, I leave appropriately wide stops so that you don’t get stopped out during any “normal” pullback.
Your Alpha Investor Letter portfolio had a solid week. The top performers were the Market Vectors Russia ETF (RSX) and Visa (V), up 4.73% and 4.16%, respectively. The WisdomTree Japan SmallCap Dividend Fund (DFJ) also gained 3.46% and Las Vegas Sands Corp. (LVS) rose 3.10%. As is always the case during bullish phases of the market, global stocks are outperforming their U.S counterparts. However, you have a terrific mix of both, so you are well set to reap the gains in the months ahead.

Portfolio Update

WisdomTree Japan SmallCap Dividend Fund (DFJ) gained 3.46% over the past week. DFJ recently completed a three-week long period of trading sideways. This type of move normally culminates with a sustained move in a defined direction, and DFJ’s breakout to the upside is a huge positive for this position. DFJ is a BUY.
Las Vegas Sands Corp. (LVS) rose 3.10% over the past five trading days. LVS announced it would pay off $189.7 million in debt outstanding on its balance sheet, thereby eliminating a $12 million/year interest charge, “the most expensive remaining debt obligation on the balance sheet of the company,” according to Las Vegas Sands CEO Sheldon Adelson. LVS will pay a $0.25 dividend on March 16. LVS is a BUY.
MSCI South Korea Index (EWY) remained nearly flat, losing just 0.39%. Sentiment lifted as government data showed South Korea’s industrial output posted a surprise surge in January from December, easing concerns about a sharp slowing in the economy. EWY is a BUY.

MSCI Malaysia Index (EWM) was flat for the week. Economic forecasts for Malaysia are positive for 2012 and cite domestic demand as a primary driving factor. Construction is the largest gainer, and forecasts expect it to lead the economy in 2012 by doubling to 7%. Forecasts also show manufacturing growing 4.5% and services rising by 6.5%. EWM is a BUY.
Market Vectors Russia ETF (RSX) gapped above its 200-day moving average and added 4.73% last week. Emerging markets have done well in 2012, and RSX has been along for the ride. Historically, Russia is a particularly volatile market, and it’s either one of the world’s best performing markets — or the worst. You are now up nearly 11% since opening this position in RSX. RSX is a BUY.
iShares JPMorgan USD Emerging Markets Bond (EMB) rose 1.04% over the past five trading days. Your bet on global bonds continued to “pay dividends” and logged yet another consecutive winning week. This safe-haven play will continue to do well in a low interest rate global environment. EMB is a BUY.
Market Vectors Indonesia Index ETF (IDX) gave back 2.99%. IDX was unable to break through its 200-day moving average last week and this situation caused a slight pullback as investors adjusted their positions. However, IDX managed to bounce off of the $28 price level yet again — a line that represents a very well established support level going back as far as September 2011. IDX dipped below its 50-day moving average last week and is now a HOLD.
iShares Singapore ETF (EWS) remained flat for the week, losing just 0.39%. Singapore’s finance minister recently exempted gold and other precious metals from Singapore’s goods and services tax. This change will attract greater amount of investment capital into the Singapore economy. EWS is a BUY.
Berkshire Hathaway (BRK-B) was flat last week, losing 0.24%. I commented last week on BRK-B’s battle to break through the formidable $80 resistance level. Last Monday and Tuesday reflected two of the best attempts at this breach, each seeing the barrier broken. For those of you who like to look at charts, take note of the 50-day moving average rising up and putting “the squeeze” on the situation. It is likely that all of this excitement will come to a head in the next week or two, and I expect a breakout to the upside. BRK-B is a BUY.
iShares MSCI Hong Kong Index (EWH) gained 1.28%. The Hong Kong stock market is on a tear, posting its best start to the year since 1991, when the index rose 17.4% in the first two months of the year. EWH is a BUY.
PowerShares Listed Private Equity (PSP) rose 1.04%. Your bet on private equity has been on a tear in 2012, and is now up an astonishing 17.77% in 2012. That’s almost three times the gain in the Dow Jones Industrial Average, and is consistent with its remarkable performance after the market bottomed in March 2009. PSP is a BUY.
Freeport McMoRan Copper & Gold Inc. (FCX) lost 0.71%. Research firm BMO Capital Markets expects the copper supply would remain tight, noting that new supply discoveries were extremely rare. BMO Capital Markets has an “Outperform” rating on FCX and a $55 price target — nearly 20% above its current trading price. FCX is a BUY.
Visa Inc. (V) had another fantastic week, rising 4.16% and hitting yet another 52-week high. A new revenue stream is emerging for Visa — and it could be a monster. Mobile phones are quickly gaining the ability to store payment credentials and utilize them for purchases. When the ever-growing, mobile-enabled, global masses start charging in force with their armory of mobile phones, Visa should benefit exponentially from this explosion of payment transactions. One of my favorite ideas, V is a BUY.
Ford Motor Co. (F) gave back 2.23%. Ford has drifted slightly lower as some of the news-driven shine has faded from its recent huge run. However, Ford’s 50-day and 200-day moving averages met last Friday, defining an extremely important support level from a technical perspective. This line-in-the-sand likely represents a strong buying opportunity. F is a BUY.
Yum! Brands, Inc. (YUM) added 0.70% last week. Standard & Poor’s Ratings Services upgraded YUM!’s rating on Tuesday, based upon its improved finances. Standard & Poor’s also cited Yum!’s past successful international expansion and its impressive ability to absorb increases in food input costs. YUM! is a BUY

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