Global Stock Investor Hotline 10

Nicholas Vardy

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

Global stock markets are rallying today after better-than-expected data fueled hopes that the U.S. economy is showing tentative signs of a recovery. The government is expected to release a report that will indicate the U.S. economy shrank at a pace of 5% in Q1 of this year. While still extremely weak, this would be viewed as a hopeful sign that the worst of the recession may be behind us. And although I passed several Asian tourists wearing ominous-looking surgical masks on my way into my office in London today, fears are also fading over the economic impact of a possible swine flu pandemic.

It is, of course, earnings season, and both of your stock positions in your Global Stock Investor portfolio reported earnings since last week’s hotline.

Your most recent position, Freeport-McMoRan Copper & Gold Inc. (FCX), earned $43 million in Q1, or $0.11 a share. That’s a far cry from the pace of last year’s $1.1 billion — $2.64 a share — when copper was above $3.50 a pound. But it was better than if the red metal had not rallied back to near $2 a pound. For the quarter, copper and gold volumes were higher than had been anticipated. Freeport’s copper sales reached a landmark 1 billion pounds, up from 911 million pounds a year ago. And sales of 545 thousand ounces of gold far outstripped the 280 thousand ounces sold in the first quarter of 2008. That all said, Freeport tends to trade in line with the price of the copper and gold it produces.

Chemical & Mining Co. of Chile Inc. (SQM) also reported earnings yesterday for the first quarter of 2009. The company’s net earnings shot up 33% from $86.3 million to $64.8 million ($0.33 per ADR from $0.25 per ADR). Considering the difficult circumstances of world markets, SQM’s strong increase in quarterly operating income and net income is very good news.

Your position in the UltraShort Lehman 20+ Treasury ProShares (TBT) jumped above the $48 level for the first time since mid-March. With the Fed embarking on a policy of quantitative easing, we’re now fighting the Fed on this position. Any big gains in this position will come quickly on the back of a sudden shift in sentiment against U.S. Treasuries.

Portfolio Update

The WisdomTree Dreyfus Chinese Yuan Fund (CYB) was largely flat this week. The People’s Bank of China has set today’s central parity rate for the dollar-yuan pair at 6.8274. A steady “cash-plus” style investment, CYB remains a BUY.

The UltraShort Euro ProShares (EUO) paused for a breather this week, as risk appetite returned to the markets. With the euro back up over the 1.32-level to the U.S. dollar, it’s a good time to short the euro. EUO is a BUY.

Freeport-McMoRan Copper & Gold Inc. (FCX) has become a big favorite of the Mad Money man, Jim Cramer, who sees Freeport McMoRan as a play on China’s economic stimulus plan. FCX is a BUY.

With Chemical & Mining Co. of Chile Inc. (SQM) reporting a 33% jump in earnings in Q1 of this year, compared with the same period last year, SQM remains a BUY.

The UltraShort Lehman 20+ Treasury ProShares ETF (TBT) shot up to the $48 level this week. As your bet against U.S. Treasuries, TBT remains a BUY.

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Global stock markets retreated this morning as investors worried that the outbreak of swine flu in North America could grow into a worldwide pandemic that deepens the global recession.

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