End of Summer Doldrums Continue

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
It was yet another flat week in global stock markets. The Dow Jones fell 0.55%, and S&P 500 dropped 0.39%. The MSCI Emerging Markets Index pulled back 0.76%.
 
Two of strongest sectors in the U.S. Stock market and your Alpha Investor Letter portfolio — housing and biotechnology — continued to outperform with Lennar Corp. (LEN) up 1.99% and iShares NASDAQ Biotechnology (IBB) rising 1.7%. 
 
Stratasys, Inc. (SSYS) dropped 4.61%, offering a solid opportunity to add to your position here. Four of your positions dropped below their 50-day moving averages (MA), and are now HOLDs: Berkshire Hathaway (BRK-B), WisdomTree Japan SmallCap Dividend ETF (DFJ), Market Vectors Indonesia Index ETF (IDX) and iShares MSCI Mexico Investable Market Index (EWW). With markets trading essentially flat over the past few weeks, I don’t see this as the start of a longer term trend. 
 
That said, we are entering a traditionally weak time of the year. 
 
Although October has a particularly bad reputation among investors as a bad month for stocks, September is the month that has cost investors the most money over time. Since 1926, September is the only month of the year with an overall negative average return in U.S. markets. In every other month, investors have averaged a 1% gain. 
 
Yet for all of its apparent predictability, there’s not that much you can, or even should, do. The U.S, stock market actually jumped in four out of the last six years, in September of 2006, 2007, 2009 and 2010. Unless markets completely fall out of bed, the transaction costs of selling before the end of August and re-entering the market a month later are not worth it.
 
Here’s why I remain optimistic once we get over the September hump. The recent rally in global stock markets has been driven less by optimism, but by a reduction of pessimism. This highlights one of the most counterintuitive rules of stock market behavior you’ll ever hear: the future doesn’t have to look bright for stock markets to do well. The future simply has to look better than the present. 
 
That’s also why I believe that a Romney victory in the U.S. elections will usher in a more business friendly environment and could go far in improving the stock markets’ “animal spirits.” You can read about my reflections on attending the Republican National Convention by clicking here.

Portfolio Update

MSCI Malaysia Index (EWM) rose 0.48% over the past four trading days. EWM is up 8.19% year-to-date, as of July 30. Weighted primarily in the financial services and industrials, this exchange-traded fund is set to profit from the core strengths of the Malaysian economy. EWM is a BUY.
 
iShares JPMorgan USD Emerg Markets Bond (EMB) was flat for the week. On average, emerging-markets bond funds are up 9.2% a year over the past five years and 12% a year over the past decade, according to Morningstar Inc. So far in 2012, they’re up 11.1% and are sporting an average yield of 5%. EMB is thick in the battle to push up past its $119.50 resistance point, and managed to hit $119.77 a new 52-week high on Friday. EMB is a BUY.
 
Berkshire Hathaway (BRK-B) lost a mere 0.35%. Berkshire Hathaway Inc. stock portfolio is benefiting this year from Chairman Warren Buffett’s bet on Wells Fargo & Co. (WFC), the home lender that has rallied 24% since Dec. 31. Trading right at its 50-day MA, BRK-B changed to a HOLD.
 
Visa Inc. (V) was flat over the four-day week. Goldman Sachs just reissued their buy/neutral rating on shares of Visa with a $154.00 price target on the stock. That is almost 20% up from its current levels. V is a BUY.
 
The TJX Companies (TJX) dipped 1.03% recently. Your bet on the U.S. Retail sector received a “Buy” rating from UBS last Friday. UBS put a $53 price target on the stock — nearly 15% above Tuesday’s close. TJX is a BUY.
 
Stratasys, Inc. (SSYS) lost 4.61% over the past four trading days. Over the last ten quarters, SSYS has reported earnings growth figures ranging from 33% to 1,300%. Not too shabby. For the current quarter, SSYS’ earning growth is expected to rise 37%. SSYS is a BUY.
 
iShares Nasdaq Biotechnology (IBB) gained 1.70%. Investors are increasing their bet on biotechnology as IBB took in $40.9 million just last week. IBB is a BUY.
 
WisdomTree Japan SmallCap Dividend ETF (DFJ) gave back 2.18% recently. DFJ has struggled over the past few weeks and dipped below its 50-day MA this week. Your bet on what I believe to be the cheapest asset class in the world holds a 4-star (out of five) Morningstar rating, an “Overweight” rating from S&P Capital IQ, and a “Long” rating from MarketEdge. DFJ is a HOLD.
 
Market Vectors Indonesia Index ETF (IDX) was flat last week. Like DFJ, IDX made a similar move below the 50-day MA, but managed a convincing bounce at its $27.00 support level. IDX may experience volatility going forward as its 20-day, 50-day, and 200-day MAs are all converging in the near future. IDX has moved to a HOLD.
 
PowerShares Global Listed Private Equity Portfolio ETF (PSP) came in flat. PSP’s relentless rise has leveled off recently — seemingly in line with the dip in negative presidential campaign rhetoric aimed at private equity funds. Expect PSP to pick up and continue its upward climb in the coming weeks. This well-diversified private equity fund is a BUY.
 
iShares Singapore Index ETF (EWS) gave back 0.99%.Singapore’s $38 billion REIT market has returned an average 37% in 2012, twice the gains in the U.S., U.K. and Japan, according to data compiled by Bloomberg. EWS is a BUY.
 
Statoil ASA (STO) was flat for the week. Statoil announced that recent North Sea oil worker strikes would not disrupt its operations, nor threaten production. STO confirmed there would be no drilling shutdowns in the Kvitebjorn and Ringhorne oil fields. STO remains a BUY.
 
Lennar Corp (LEN) rose 1.99% last week. Your bet on the rebounding U.S. housing market continued its upward rise last week and managed to hit a new 52-week high on Tuesday. LEN is scheduled to report earnings on Sept. 19 and is a BUY.
 
iShares MSCI South Korea Index Fund ETF (EWY) gave back 1.51%. EWY continued to suffer from the Apple-Samsung judgment, but managed to pull out of its decline and make an excellent stand at the 200-day MA. EWY is a BUY.
 
iShares MSCI Mexico Investable Market Index (EWW) gained 0.41%. Mexico continues to be an economy that defies global weakness, as the Mexico peso gains against the U.S. Dollar. Consensus is emerging that Mexico will soon replace China as the premier global manufacturer for shipments to North and South America. EWW is now a HOLD.
 
 

 

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Last week, I attended the Republican National Convention in Tampa, Fla. There, I had a chance to witness speeches from the great and the good of the Republican Party, ranging from Ann Romney to Chris Christie to Marco Rubio and Mitt Romney. As an American who has lived overseas for over 20 years, my perspective is very different from most. With Europe forever awash with an underlying anti-Americanism, I spend a lot of time defending the United States and what it stands for. But in the United

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