Global Stock Investor Hotline 39

Nicholas Vardy

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

What a difference a week makes. Just since Wednesday, global stocks have entered their sharpest decline since the June and October 2009 corrections.

Investor sentiment shifted suddenly, thanks to a combination of Obama’s anti-banking rhetoric, an uncertainty surrounding Ben Bernanke’s re-appointment, and, most importantly, moves by the Chinese government to tighten lending. China’s three leading banks, the Industrial & Commercial Bank of China Ltd., China Citic Bank Corp. and Bank of China Ltd. all suspended loans for the rest of January. As a result, Asian markets now have fallen sharply for the sixth-straight day from fears that the cut-off of Chinese stimulus will undercut the global recovery in its nascent stages.

So, how did this news impact your Global Stock Investor portfolio?

Recall that I had tightened your stops in some of your positions so that we could prune the portfolio of relatively weak performers. As a result, you were stopped out of the Claymore/BNY Mellon BRIC ETF (EEB) and the SPDR Dow Jones Intl Real Estate (RWX), both at slight losses.

In addition, both the Market Vectors Russia ETF (RSX) and Freeport-McMoRan Copper & Gold Inc. (FCX) hit their stop prices yesterday on intra-day trading, and you exited with gains of 16.4% and 25.4%, respectively. You also stopped out of VALE S.A. (VALE) today for an 8.61% profit. You’ve hit your stop positions before and have re-entered some of them successfully. I am putting these positions on our “watch list” for possible re-entry as markets settle.

You are also very close to your stop prices on Chemical & Mining Co. of Chile Inc. (SQM) and iShares MSCI Taiwan Index (EWT), both of which I have moved to HOLD.

Exclusive  Blinded By The Light

So, where does that leave you now?

Global financial markets are clearly oversold. And, global markets rarely go down six days in a row without some sort of strong bounce. And there is reason to think that global markets will settle, once Chinese banks turn on the lending spigots as we enter February.

So, the question is whether you buy into the market dip aggressively? Or, do you adhere to an old trader’s saw that when the market is uncertain, you need to step back from the plate?

I am recommending that you do what I am doing for my money management clients: hold off on most additional investments until the dust settles. You can always re-enter positions later.

And, as always, keep your stops in place. Think of it like keeping your seat-belts fastened in a flight — just in case of unexpected turbulence.

Portfolio Update

The WisdomTree Dreyfus Chinese Yuan Fund (CYB) always outperforms during times of turmoil, just by staying flat. Despite pressures on the Chinese government on all fronts to revalue the yuan, I am keeping this actively managed currency at a HOLD.

iShares MSCI Taiwan Index Fund (EWT) fell sharply this week to an eight-week low, after flirting with 12-month highs just the week before. Yet, if you want evidence of a global economic turnaround, look no further than Taiwan. Its industrial output soared an eye-popping 47.34% in December as the island exited its worst-ever recession. EWT is now a HOLD.

SPDR S&P Emerging Markets Small Cap (EWX) also fell sharply, after hitting a record high of $49.88 only two weeks ago. I am still bullish on emerging markets and small caps, in particular, EWX. But because of the sharp sell-off, I am moving this temporarily to a HOLD.

Exclusive  Will the Bull Market Stand the Test of New Taxes?

iShares MSCI South Korea Index Fund (EWY) fell back along with the rest of global markets, after closing at a 12-month high just a week ago. South Korea posted a current account surplus of US$1.52 billion in December. That was below analyst expectations for a surplus of US$2.23 billion, following the US$4.277 billion surplus in November. EWY is a HOLD.

Market Vectors Gold Miners ETF (GDX) dropped sharply, but seems to have found support around the $43 level. Despite being counter-cyclical over longer-time horizons, the gold price and gold mining stocks tend to decline alongside more traditional stocks during times of stress in the marketplace. With GDX declining 13.9% over the past ten trading days, I am keeping this temporarily at a HOLD.

Market Vectors Indonesia ETF (IDX) dropped along with other Asian markets last week. Yet, Indonesia’s fundamentals remain strong and are getting stronger. Fitch Ratings Monday upgraded Indonesia’s sovereign credit rating to one notch below investment grade, reflecting the country’s resilience to the recent global financial crisis. IDX remains a BUY.

Arcelor Mittal (MT) also fell sharply as investors dumped any stock linked to the prospects of global economic recovery. Yet, the company is ramping up production. Arcelor Mittal Tallin, an Estonia-based steel galvanizing subsidiary, plans to restart its production operations in February, as the market situation and demand has improved. Systems tests were started in December. This bet on steel and global economic recovery is now a HOLD.

iShares MSCI Turkey Invest Mkt Index (TUR) held up remarkably well for a traditionally volatile market, having recently hit a 12-month high of $59.17. Turkey is the unheralded success story of global investing. TUR is a BUY.

Exclusive  Reviewing Attractive Clean Energy Income Assets

Chemical & Mining Co. of Chile Inc. (SQM) pulled back below the $40.00 level. With the stock now dangerously close to its stop price of $38.00, SQM is a HOLD.

P.S. I’ve scheduled a special private meeting for my subscribers of Global Stock Investor and Global Bull Market Alert on Friday, Feb. 5, at this year’s MoneyShow in Orlando, where I’ll reveal special techniques and "tricks of the trade" that I use in investing. This is the kind of hands-on training that I can only offer you in person. I’ll also discuss my secret technique for choosing customized exit prices, as well as an easy-to-implement formula on how much of each pick to buy to maximize your returns. I’ll also discuss where I think the biggest returns for 2010 will be found. Please join me at the Orlando Money Show, Destin room, on Friday, Feb. 5, from 3:30 to 4:30 p.m. by registering here.

P.P.S. If you want to keep up with my latest insights on developments in fast-paced global markets, you can now follow me on Twitter on @NickVardy.

Like This Article?
Now Get Our FREE Special Report:
Alternative Investing: Investing in Timber

Stock Investor editor Paul Dykewicz reveals why investing in timber may be one of the best long-term portfolio strategies you'll find today.

Get Access to the Report, 100% FREE

previous article

What a difference a week makes. After closing at a bull market high on Tuesday, the S&P 500 dropped nearly 5.1% in the following three trading sessions, closing down more than 1% on each occasion. The Dow Jones industrial average suffered its worst week since dropping to a 12-year low in early March. My iPhone was teeming all day Friday with emails that stop losses have been hit in my clients' portfolios.


Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Profits Alert
  • Hi-Tech Trader

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • Intelligence Report
  • Bullseye Stock Trader

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. Since 2010, Hilary's financial publications have provided stock analysis and investment advice to her subscribers:

Product Details

  • GameChangers
  • Value Authority
  • High Octane Trader
  • Triple-Digit Trader
  • 2-Day Trader
  • IPO Edge
  • Inner Circle

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Technical Traders Alert
  • Success Trading Group

Used by financial advisors and individual investors all over the world, is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor