The four-week market rally in global stock markets seems to be getting a bit long in the tooth. Asian stock markets dropped for a second day this morning, with Tokyo and Hong Kong tumbling about 3%. The U.S. earnings season got off to a negative start with aluminum maker Alcoa reporting a wider-than-expected loss yesterday. It’s still too early to put a nail in the coffin of the rally in global equity markets. After all, we still have six or seven weeks before it’s time to “sell in May, go away.” But the pause is certainly making some investors nervous.
That said, with only one of your four holdings in Global Stock Investor in the stock market — Chemical & Mining Co. of Chile Inc. (SQM) — your portfolio shouldn’t be much affected by any change in sentiment. The prospects for all of your other non-stock market-related holdings remain strong.
On the currency front, I expect the euro to resume its downward trend against the U.S. dollar. This is bullish for your position in UltraShort Euro ProShares (EUO).
Your position in the Chinese yuan through the WisdomTree Dreyfus Chinese Yuan Fund (CYB) should gain more momentum as China increases pressure to replace the U.S. dollar as a global currency.
Finally, Alpha trader George Soros stated in this interview yesterday that he also believes that U.S. Treasuries are in a bubble, and that he expects both inflation and interest rates to rise. Both these developments are a positive for your position in the UltraShort Lehman 20+ Treasury ProShares ETF (TBT).
Portfolio Update
The Chemical & Mining Co. of Chile Inc. (SQM) breached the $29 mark last Thursday before falling back. It also announced its board of directors unanimously agreed to propose a gross dividend of $1.24 per share at its 2009 annual distributable net income for the year 2008. The interim dividend of $ 0.38 per share, which was paid on November 21, 2008, will be deducted from the gross dividend of $1.24 per share. Therefore, the outstanding amount to be paid is $0.86 per share. The proposal is subject to the approval of shareholders at the company’s 2009 annual meeting, which will be held in Santiago, Chile, on April 29, 2009. SQM remains a BUY.
The UltraShort Lehman 20+ Treasury ProShares ETF (TBT) bounced sharply this week, back above the $45 level. Will the market be able to absorb the $2.5 trillion worth of Treasuries that Goldman Sachs estimates the U.S government is on track to sell in 2009? Not without higher interest rates. TBT remains a BUY.
The UltraShort Euro ProShares (EUO) was broadly flat this week. Although last week’s promise by the G-20 to double the IMF’s reserves eases the prospects of total meltdown of the euro, the eurozone’s economies remain in worse shape than the U.S. economy. With the euro down to $1.31 in this morning’s trading, EUO is a BUY.
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) fell slightly this week, though its long-term uptrend remains in place. Backed by China’s almost $2 trillion in currency reserves, the Chinese yuan is arguably the safest bet among global currencies today. CYB remains a BUY.
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