Markets Back In “Risk-On” Mode

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
Global markets have endured a tough week, with the S&P 500 sliding 4.62% and emerging markets dropping 7.28%. Continuing “headline risk” from Europe, combined with the failure of the U.S. “Super Committee” to agree on budget cuts put the markets under a lot of pressure.
 
Technically, global stock markets are as oversold as they have been since early August and the start of October. Both of those times were followed by sharp rallies. In addition, Monday’s loss was the fourth in a row. When that happens in November, prices tend to perk up over the next week. That’s especially the case right before Thanksgiving. On the one hand, the market today is still very much susceptible to headline risk. On the other, odds are that we’ll see a strong bounce in the markets over the weeks ahead.
 
The standout performer in your portfolio was the ProShares UltraShort FTSE China 25 (FXP), which soared 17.09% this past week. But with the markets pulling back sharply, almost all of your holdings in your Alpha Investor Letter portfolio dropped below their 50-day moving average, and are now a HOLD. The one exception? Berkshire Hathaway (BRK-B), which remains a BUY.
 
On a personal note, I want to wish you a terrific Thanksgiving. As you can imagine, Thanksgiving is very different here in London than in the United States.
How will I be celebrating Thanksgiving dinner in an international city like London? At a French restaurant, in the company of an American friend (born in Brazil but now a U.K. citizen living in Switzerland), and our Hungarian and Italian companions.
 
That’s an American Thanksgiving in London in the early 21st century.
 

Portfolio Update

WisdomTree Japan SmallCap Dividend Fund (DFJ) dropped 1.5% this past week, holding up better than most markets. With Japanese economic growth on the rebound, the fundamentals for DFJ remain intact. DFJ is a HOLD.
 
Las Vegas Sands Corp. (LVS) dropped 8.83%. Moody’s Investors Service lifted its rating on Las Vegas Sands Corp.’s (LVS) debt by a notch, citing the casino operator’s strong operating performance in Macau and Singapore, and growth expectations in both of those markets. LVS is currently a HOLD.
 
ProShares UltraShort FTSE China 25 (FXP) soared 17.09% this past week. China continues to be among the weakest markets in the world, and this was confirmed in this week’s “risk-on” trading. Still trading below its 50-day moving average, FXP remains a HOLD.
 
MSCI South Korea Index (EWY) fell 6.56% over the past five trading days. South Korea’s short-term external debt declined in the third quarter by the most since the 2008 global financial crisis, while new long-term borrowing increased. That’s good news for the market overall. EWY is a HOLD.
 
MSCI Malaysia Index (EWM) dropped 4.07% last week. The Malaysia Institute of Economic Research expects Malaysia’s Gross Domestic Product (GDP) growth to hit 5% next year. EWM is a HOLD.
 
First Trust NYSE Arca Biotech Index (FBT) gave back 5.58% over the past week. Trading right near its stop price of $30.00, FBT is a HOLD.
 
Market Vectors Russia ETF (RSX) lost 8.4%. Tied strongly to the price of commodities, RSX is now a HOLD.
 
iShares JPMorgan USD Emerging Markets Bond (EMB) dipped 1.97% last week. This position proved itself as a safe haven during times of market turmoil, and is the top-performing financial asset class in the world this year. EMB is now a HOLD.
 
Market Vectors Indonesia Index ETF (IDX) fell 7.5%. Indonesian budget airline Lion Air placed a $21.7 billion order with Boeing, the airplane giant’s biggest commercial order on record. IDX is a HOLD.
 
Gold Miners ETF (GDX) dropped 8.12% over the past week. Yet the smart money continues to bet on gold, with Alpha Investor David Einhorn announcing that he has increased the size of his holding in GDX recently. GDX is a HOLD.
 
iShares Singapore ETF (EWS) dropped 6.07%. The Singapore government expects the economy will grow 1% to 3% in 2012, after expanding 5% this year. EWS is a HOLD.
 
iShares Taiwan ETF (EWT) dipped 6.87% last week. Taiwan’s unemployment rate rose to 4.3% in October after the island’s economic growth slowed. EWT is a HOLD.
 
Berkshire Hathaway (BRK-B) fell 2.03%. Your bet on Buffett and America remained remarkably stable even in the face of global turmoil. BRK-B remains a BUY.
 
Listed Private Equity ETF (PSP) dropped an ominous 6.66% this past week. When this pick bounces, it’ll bounce big. Trading below its 50-day moving average, PSP is a HOLD.
 
iShares MSCI Hong Kong Index (EWH) dropped 5.45% this past week. Reports are that George Soros is looking to set up a distressed real estate fund in Hong Kong soon. EWH is a HOLD.
 
Freeport McMoRan Copper & Gold Inc. (FCX) dropped 8.94%. A barometer of global sentiment in the markets, and stuck below its 50-day moving average, FCX remains a HOLD.
 

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Global stock markets endured a bad week, as the S&P 500 pulled back below key support levels at 1,220. As a result, you stopped out of your position in Celcom Israel (CEL) at a loss. Nevertheless, with the seasonality of the market positive, I am inclined to stay with my bullish bias through the end of the year.
 
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