Global Stock Investor Hotline 4

Nicholas Vardy

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

The news in global stock markets isn’t getting any better. With the S&P 500 down over 20% since the start of the year, the broad U.S. market is trading lower than when Alan Greenspan gave his famous "irrational exuberance" speech in December of 1996. Nor is the market too enamored with the Obama administration’s economic plans. Virtually all of the stock market’s decline has come since Obama’s inauguration. So much for the “January effect” and the “Obama bounce.”

Your position in the PowerShares DB Commodity Double Short ETN (DEE) remains a bright light in the portfolio, hitting $100.96 on March 2. It’s had a heck of a (but volatile) ride since we recommended it in mid-December.

There will be a turning point for commodities, after which I intend to recommend the inverse of this position, to ride the recovery upward. But until that turning point comes, I am keeping DEE at a HOLD.

The Chinese yuan, through the WisdomTree Dreyfus Chinese Yuan Fund (CYB), is nudging steadily upward. The chart below illustrates its massive outperformance compared with the S&P 500 over the past three months. “Boring” never looked so “sexy.” I am moving the Chinese yuan fund back to a BUY.

The UltraShort Lehman 20+ Treasury ProShares (TBT) traded back above the $48.00 level this past week before correcting. Obama’s breathtaking projected budget deficit of $1.75 trillion for 2009 alone now approaches the entire currency reserves of China. TBT remains a BUY.

While our “alternative asset classes” have performed well, any stock positions in your Global Stock Investor portfolio have been hit hard. Last week, you were stopped out of the two stock holdings, Millicom International (MICC) and Nextel Holdings (NIHD), that we had re-entered in January in the hope of a new year rally.

Even last month’s Global Stock Investor pick, Chemical & Mining Co. of Chile Inc. (SQM), one of the strongest stocks on the planet from both a fundamental and technical standpoint, is losing steam. The company almost tripled its earnings in 2008 and it still is down. With investors throwing out the baby with the bathwater, I cannot in good conscience recommend that you continue to buy SQM. I am moving it to a HOLD.

Portfolio Update

The WisdomTree Dreyfus Chinese Yuan Fund (CYB) stayed steady as the media reported that new yuan loans in February may touch 1.1 trillion yuan (161 billion U.S. dollars), analysts said. This is bullish for China and the yuan. I am moving CYB back to a BUY.

PowerShares DB Commodity Double Short ETN (DEE) hit another record high this past week. With its upward momentum waning, I am keeping this at a HOLD.

Chemical & Mining Co. of Chile Inc. (SQM), a world leader in a strong sector, is in one of the best-performing markets in the world. Yet its stock price is still performing weakly. Because — as the economist John Maynard Keynes noted — the market can stay irrational longer than you can stay solvent, I am moving SQM to a HOLD.

UltraShort Lehman 20+ Treasury ProShares (TBT) started nudging upward again this past week. With the U.S. government deficit hitting breathtaking levels, this still seems to be a one-way bet. TBT remains a BUY.

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It's a grim time for U.S stock markets. After the worst start to the year in January since the Great Depression, February turned out to be even worse. The Dow Jones Industrial Average was down 11.72%, its worst February since 1933. The S&P 500 didn't do much better, ending down 11%.


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