While global stock markets continue to seek direction, your Global Stock Investor positions continue to thrive. Two of your Global Stock Investor holdings hit record highs this week. The Direxion Funds Dollar Bull 2.5x Fund (DXDBX) soared 10.15% in the very first week in the portfolio to $41.76. Tighten your stop to $37.50.
The Market Vectors Double Short Euro ETN (DRR) jumped 9.7% to close at a record high of $55.46. DRR is now up 16.15% since we re-entered the position on Oct. 1. During early deals on this morning, the U.S. dollar rose beyond the 1.28 level against the euro for the first time since November 2006 as the potential impact of a recession is expected to be worse in Europe than in the United States.
The chart below, comparing the performance of DRR to the euro, illustrates the benefit you are getting from DRR’s leveraged bet on the decline of the euro. As the euro drops, DRR gains 2x as much. Tighten your stop on DRR to $44.50.
The CurrencyShares Japanese Yen Trust (FXY) was mostly flat this week, and is once again flirting with the $100 mark. This morning, the Japanese yen rose to new multi-year highs against the euro, the British pound and the Swiss franc as a fall in stock prices prompted investors to sell higher-yielding assets funded in Japan. The yen also climbed to a six-day high against the U.S. dollar.
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) was also steady this week. Thankfully, the fund didn’t exhibit any out of character swings that were evident in its price movement two weeks ago. The yuan’s daily trading band is currently set at 0.5%.
Looking ahead, I continue to expect your currency positions to strengthen in the coming week, particularly as European currencies continue to crumble. The British pound sterling is proving to be particularly vulnerable — which will directly benefit your position in the Direxion Funds Dollar Bull 2.5x Fund (DXDBX).
The British currency hit a five-year low against the dollar yesterday, tumbling to a five-year low of $1.6203. Yesterday, Mervyn King, governor of the Bank of England, said that the country was now “entering a recession” — the first time he has ever used the “R” word. He compared the recent capital flight from British banks with a “mild form” of a 1990s-style emerging market crisis, and noted that it will take a "long, slow haul" to bring economic growth back to more normal conditions. He added that policymakers will act to prevent inflation from slowing too far after the country’s worst banking crisis since World War I. The markets view this as a clear sign the Bank is gearing up for further significant cuts in U.K. interest rates. That will certainly further weaken the British pound sterling.
I continue to see these currency recommendations are the only safe havens in global financial markets. 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.
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!
