Nicholas Vardy

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

It’s been yet another week for the history books. Last week turned out to be the worst week for global stock markets since 1929. But after eight straight days of losses, many global markets rallied to have their best day ever on Monday.

So how did your Global Stock Investor holdings hold up? The short answer is: “remarkably well.”

Even as the markets tumbled last Friday, the Market Vectors Double Short Euro ETN (DRR) hit a record high of $52.50. The CurrencyShares Japanese Yen Trust (FXY) breached the $100 mark three times last week during intraday trading. But this week’s early burst of euphoria on stock markets over the rescue packages launched worldwide meant that the euro rallied and the yen weakened, as did each of these positions.

The important point to realize is that compared with the unprecedented volatility of the S&P 500, your currency holdings have remained remarkably stable over the past five trading days. That should give a considerable degree of comfort during these uncertain times.

CurrencyShares Japanese Yen Trust (FXY)

Market Vectors Double Short Euro ETN (DRR)

Something unusual happened with the WisdomTree Dreyfus Chinese Yuan Fund (CYB). Although the Chinese yuan itself remained well within its trading range, CYB suffered some very curious volatility last Wednesday, and as a result, you hit your stop price.

WisdomTree Dreyfus Chinese Yuan (CYB)

As you can see, the yuan immediately returned to trade within its normal trading range. I suspect this strange behavior may have to do with the fact that CYB itself is a synthetic instrument that replicates the yuan’s movement through a combination of cash, futures and forwards trades. There may been some odd intra-day glitch in the execution of this model. But this is a just a guess on my part.

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In any case, if you were stopped out of CYB, I encourage you to get back in. I officially am recommending it again and setting the stop loss at $23.40. The fundamental story behind the yuan remains intact. It is a managed currency and continues to be an island of stability. The Chinese government won’t let the yuan get too much out of whack with Chinese central bank policy. Let’s hope that the underlying ETF is able to do the same.

I continue to see these currency recommendations as the only safe havens in global financial markets. Your currency holdings are meant to be “cash plus” type investments that insulate you from market volatility. In addition, they are bets on an underlying view on the relative prospects of each currency. I expect further weakness ahead for the euro, as well as strength for both the Japanese yen and the U.S. dollar as we move ahead. Look out for next month’s Global Stock Investor. I will share with you an additional way to invest in these strong, sustainable, and stable trends.

All of the current Global Stock Investor recommendations remain BUYs.

P.S. Surging oil and food prices, as well as deteriorating economic confidence, have stoked inflation fears around the world in recent months, leaving volatile markets and jittery private investors in their wake. In times such as these, it’s good to have this forum to discuss key developments and to hear from the best financial minds in the world. I invite you to join me at the 4th Annual World Money Show London, 14-15 November, at the Queen Elizabeth II Conference Centre. Call 800/970-4355 and mention priority code 009613 or visit The World Money Show London to register FREE today!

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Global stock markets plunged last week, their drop matched only by the falls during the Great Crash of 1929. Last week, Tokyo was down 24.3%, Frankfurt dropped 21.6%, London fell 21.1%, and New York dropped 18%.


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