A Pair of Double-Digit Gainers Last Week — and Taking Profits in Commodities

Nicholas Vardy

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

The PowerShares DB Commodity Double Short ETN (DEE) hit a record high of $90.10 on Friday, as the price of oil closed at its lowest level of the year at $33.98 a barrel last Thursday. With the position up more than 22% since you entered it in early December, sell half of your stake here to lock in your profits. Move your stop to $72.50 for your remaining position.

Millicom International Cellular S.A. (MICC) soared more than 10% as it posted better-than-expected core earnings in Q4. Earnings before interest, tax, depreciation and amortization rose 31% to $406 million from a year earlier, comfortably topping Reuters’ consensus forecasts of $377 million. Tighten your stop to $34.50.

The Rydex Inverse Government Long Bond Strategy Inverse (RYJUX) was broadly flat last week — though it did jump sharply on Friday on the news that the House of Representatives approved a $789.5 billion stimulus package. The Wall Street Journal speculated that Friday’s decline in the Treasuries (and rise in RYJUX) could be “the beginning of the end” for U.S Treasuries. Last week alone, the market had to absorb a record $67 billion of bonds. Even before Congress can catch its breath, another spending program is beginning to take shape — this time to help homeowners avoid default on their mortgages. The end game is clear: more government spending. This is all bullish for RYJUX.

Your double-barreled bet against Britain bounced last week, with the CurrencyShares British Pound Sterling Trust (FXB) falling about 4% on the week and the iShares MSCI United Kingdom Index (EWU) collapsing 5.8% on Tuesday alone.

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Both the iShares iBoxx $ High Yield Corporate Bond (HYG) and Market Vectors Double Short Euro ETN (DRR) ended the week broadly flat.

Overall, your portfolio is carefully balanced across a wide range of asset classes — stocks, bonds, currencies and commodities, with the additional twist of being “long” and “short” in almost every category. That’s why you’ve probably noticed that our portfolio has very little to do with the performance of the Dow Jones or S&P 500.

Portfolio Update

The PowerShares DB Commodity Double Short ETN (DEE) hit a record high of $90.10 last week. Sell half of your position to lock in a 16.25% gain. Tighten your stop to $72.50.

Market Vectors Double Short Euro ETN (DRR) was up about 3% this week. With the eurozone economies contracting at a rate of 5.9% in Q4 (versus 3.9% for the U.S. economy), my long-term bearish outlook for the euro still stands. The British press is already making noises about how Ireland may not be able to stay in the eurozone. An unlikely scenario — but you should continue betting against the euro.

iShares MSCI Emerging Markets Index (EEM) sold off this week, along with the rest of global markets. Emerging markets have still outperformed U.S markets substantially over the last three months.

The CurrencyShares British Pound Sterling Trust (FXB) resumed its downtrend last week. That’s good news for your short position, which profits from the British pound’s decline. I continue to be bearish on the British currency’s long-term prospects.

Your short position in the iShares MSCI United Kingdom Index (EWU) gained on the weakness in global stock markets. I’m looking for the U.K. stock market to continue to weaken.

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The iShares iBoxx $ High Yield Corporate Bond (HYG) has been treading water of late. But with the position yielding double digits, it’s one of the better places around to park your money.

The Rydex Inverse Government Long Bond Strategy Inverse (RYJUX) is still in a firm uptrend. Betting against U.S. Treasuries in 2009 may be the trade of the year.

Millicom International Cellular S.A. (MICC) has had a rip-roaring couple of weeks, ending this week up another 10%. If this stock is able to break through the $50 level — and stay there — this could be one of your big winners. Move your stop to $34.50.

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