With your three new picks in this month’s Global Stock Investor, SPDR S&P Emerging Markets Small Cap (EWX), the SPDR Dow Jones Intl Real Estate (RWX) and the Market Vectors Russia ETF (RSX), my bullish bias on global markets has been laid bare.
So far, so good. Every slight pullback in global markets tends to be quickly overwhelmed by a flow of new money entering into the market. There have been many investors who have been left on the sidelines, who are now buying stocks. As a result, almost all of your positions in your Global Stock Investor portfolio are hitting highs for the year, and you are constantly adjusting your stops upward.
It is remarkable to me how soon after the “greatest financial crisis since the Great Depression” that the world’s most prominent Cassandras have thrown in the towel. Jim Rogers is no longer betting on a market decline for the first time in many years. Permabear Jim Grant has predicted a “V shaped” recovery. Peter Schiff is now running for political office. Even Marc Faber, the original “Dr. Doom,” says that thanks to the coordinated stimulus packages across the globe, equities are the place to be over the next two to three years. It’s only then that wars will break out, stock markets will collapse, and Western civilization will end as we know it.
A disciplined investor’s response? “Maybe. Maybe not.” One thing is for certain. With your money earning nothing sitting in bank accounts, it’s hard to justify not being invested in higher-yielding assets. The biggest money is always made at the turning points.
That all said, I am always suspicious of extreme sentiment, whether bullish or bearish. Understand that as much as we think each crisis is unique, there is little new under the financial sun. As John Kenneth Galbraith observed: “The financial memory is very short.” Recall that the 1998 emerging markets crisis was quickly followed by the dotcom boom, when the Nasdaq rose 88%. That, in turn, was followed by the dotcom bust. But that’s why God invented stop losses. Make sure you stick to them.
Portfolio Update
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) moved up slightly on news that Chinese authorities may be about to loosen the reins on the nation’s currency, allowing appreciation against the U.S. dollar to resume. The CYB remains a defensive BUY.
iShares MSCI Taiwan Index Fund (EWT) rose 2.2% this week, hitting yet another high for the year of $12.22. With Taiwan up 19.1% since our initial recommendation, EWT remains a BUY. Adjust your stop to $10.70.
SPDR S&P Emerging Markets Small Cap (EWX) jumped 1.7% this past week, as it hit record highs. With Q4 traditionally the strongest time of the year for emerging markets, I expect this small cap bet will do well over the next three months. EWX is a BUY.
iShares MSCI South Korea Index Fund (EWY) jumped yet another 4.5% this week, also hitting a new high for the year, as Asian markets regained their footing. EWY remains a BUY. Tighten your stop to $39.00.
Freeport-McMoRan Copper & Gold Inc. (FCX) rose 2.56% this past week, closing at a high for the year of $73.15. It’s now up almost 27%, after you re-entered the stock on July 22. Your bet on “Dr. Copper” remains a BUY.
ICICI Bank Ltd. (IBN) rose slightly this past week, closing at a high of $35.84. With India’s market in a bullish phase, India’s No. 2 lender remains a BUY. Tighten your stop to $28.00.
Market Vectors Indonesia ETF (IDX) rose to a record high this week, as it flirts with the $60 level. The Asian Development Bank (ADB) upgraded its outlook of Indonesia’s economic growth this year to 4.3% citing strong private consumption and improving investment. The “new BRIC” remains a BUY. Tighten your stop to $50.00.
Market Vectors Gold Miners ETF (GDX) pulled back from its record highs last week, as the price of gold corrected below the $1,000 level. GDX remains a long-term BUY.
Market Vectors Russia ETF (RSX) is up 3.2% over the past week. With the Russian government expected to announce a large privatization program for next year, the Russian market will soar. RSX is a BUY.
SPDR Dow Jones Intl Real Estate (RWX) fell slightly in the past couple of days. I expect this to resume its upward trend soon, and perform strongly in Q4. RWX is a BUY.
Chemical & Mining Co. of Chile Inc. (SQM) jumped 4.1% this week, hitting a record high for the year on Friday. With the stock up 31.9% since our initial recommendation, the stock may have finally broken out of its trading range. SQM is still a BUY. Tighten your stop to $33.50.
