Yesterday was the toughest day for global stocks since the sharp corrections of early February, as Standard & Poor’s downgraded Greece’s debt to junk status and cut Portugal’s credit rating by two notches. That development, combined with Goldman Sachs’ shaky testimony in front of Congress, hit the market hard. All of the major U.S. indices were down more than 2%. And you can expect little respite today, as all the major Asian markets are down overnight as well.
Thus, it’s no surprise that your positions in Global Stock Investor portfolio were hit as well. You were stopped out of Freeport-McMoRan Copper & Gold Inc. (FCX) on intraday trading for a gain of 3.60%. FCX is an exceptionally volatile stock and we have been stopped out of it before. So, I am keeping FCX on the watch list for re-entry at an opportune moment. Steelmaker ArcelorMittal (MT) and iShares MSCI Turkey Invest Mkt Index (TUR) also are trading near their stop prices, so I am moving both to a HOLD.
But there was some good news as well. Your Global Stock Investor portfolio’s bet against the euro through the UltraShort Euro ProShares (EUO) is designed to benefit from Greece’s (and Europe’s) woes. Sure enough, EUO rose 4% on the week, hitting a record high of $21.77.
Several of your other positions are holding up exceptionally well. The global sell-off notwithstanding, both iShares MSCI South Korea Index Fund (EWY) and Market Vectors Indonesia ETF (IDX) hit highs for the year during the past week. Market Vectors Russia ETF (RSX) also has been exceptionally strong.
After such a steady upward move since the February lows, markets were, in many ways, looking for an excuse for a correction. And when risk aversion soars, there is no escape, and all of your stock positions in Global Stock Investor are going to tumble. The baby goes out with the bathwater. All you can do is control your downside risk by sticking to your stops.
Overall, I remain optimistic that the global economy is on the way to recovery. Both countries and companies are growing at a faster-than-expected rate. And that bodes well for the months ahead.
Portfolio Update
Market Vectors Brazil Small-Cap ETF (BRF) continues in its funk, as Brazil lags its BRIC rivals. Nevertheless, BRF remains a BUY.
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) was flat this week, and the focus shifted away from the prospect of yuan revaluation. That said, revaluation is not a question of “if” but “when.” CYB remains a BUY.
iShares MSCI Israel Cap Invest Mkt Index (EIS) dropped in sympathy with global markets. The Bank of Israel left interest rates for May where they were for April. EIS remains a BUY.
UltraShort Euro ProShares (EUO) rose 4% this past week, hitting a record high of $21.77 as Greece’s debt was downgraded to junk status. With the threat of contagion spreading to Portugal and other European “PIIGS,” your bet against the euro remains a BUY.
iShares MSCI South Korea Index Fund (EWY) actually hit a high of $52.90 on Monday — its highest level since August 2008 — before pulling back in yesterday’s sell-off. But the news remains good. South Korea’s won is trading near a 19-month high. GDP grew 1.8% in Q1, beating expectations of 1.5%. EWY remains a BUY.
Market Vectors Indonesia ETF (IDX) hit yet another record high of $74.84 on April 23, before pulling back slightly. Although this position will pull back in sympathy with other Asian markets, it remains among the strongest global markets on the planet. IDX remains a BUY.
ArcelorMittal (MT) continued to pull back this week as global markets corrected. With the world’s biggest steel company nears its stop price, this position is now a HOLD.
Market Vectors Russia ETF (RSX) actually held up remarkably well this past week, before falling back in yesterday’s sell-off. This volatile bet remains a BUY.
iShares MSCI Turkey Invest Mkt Index (TUR) dropped below the $60 level on yesterday’s sell-off. One of the top performers of 2010, Turkey remains a solid bet. But as it is near its stop price, I am moving it to a HOLD.
VALE S.A. (VALE) dropped back sharply on yesterday’s sell-off. This global commodity play remains a BUY.
P.S. Please join me Wednesday, May 12, 2010 at the MoneyShow in Las Vegas for a subscribers-only meeting. This exclusive event will take place from 10:00 a.m. to 11:00 a.m. in the Calabria room at Caesar’s Palace. To RSVP for this event, please click on this link, and supply the requested information. This private meeting will be open only to paid subscribers of Global Stock Investor and Global Bull Market Alert. See you there.
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 or on my new blog, NickVardy.com.
