The big news this past week was, of course, the suspension of bond payments by the highly indebted entity Dubai World. Global markets sold off sharply on the news, before Abu Dhabi stepped in to somewhat calm global markets. By yesterday, the threat of this event triggering a meltdown in global stocks had faded, and global markets came roaring back.
The resilience of the market to this external shock is reassuring. This is not to say that Dubai wasn’t a bubble waiting to burst. With the benefit of 20/20 hindsight, there is no lack of “I told you so’s” in the media. But what I am looking for is market tone. If the market shakes off bad news relatively quickly, that means that it is relatively robust. The surge of global liquidity keeps the energizer bunny of global markets just going and going. That won’t be the case forever. But for now, the skepticism with which the market rally is still being treated by the media is actually reassuring. And because you have your stops in place, you always know your worst-case scenario.
Your commodity-related positions in Freeport-McMoRan Copper & Gold Inc. (FCX) and Market Vectors Gold Miners ETF (GDX) both hit record highs for the year this past week. Gold hit record highs at $1,216.75 an ounce in Europe today, as investors bet on higher prices, with expectations for a fresh leg of dollar weakness and more central bank buying.
You were stopped out of the iShares MSCI Turkey Index Fund (TUR) on intraday trading on Friday. As global markets have bounced strongly since then, I am recommending that you re-enter this position by placing a relatively tight stop at $44.50. Recall that we have re-entered positions before. We were stopped out of Freeport-McMoRan Copper & Gold Inc. (FCX) during the July pullback, re-entered it later, and it has been one of our top performers since then.
I am looking for another leg up in global markets in the coming weeks. At that point, I expect to recommend that you tighten some of your stops on your Global Stock Investor positions. Otherwise, your current portfolio is well-positioned to take advantage of the final third of the Q4 rally.
Portfolio Update
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) was flat this week, even as the Chinese are getting grumpy about the European Union calling for the appreciation of the yuan. One thing is for sure: the yuan is not going down. CYB remains a defensive BUY.
Claymore/BNY Mellon BRIC ETF (EEB) closed near its high for the year of $43.92, as the big four global stock markets roared back this week. This diversified bet on the BRIC economies remains a BUY.
iShares MSCI Taiwan Index Fund (EWT) stayed above the $12 mark, even at the height of the Dubai scare last week. In a sign of the growing ties between Taiwan and China, Industrial & Commercial Bank of China Ltd., the world’s most profitable bank, is in talks to acquire a stake in Taiwan’s Cathay Financial Holding Co. With Taiwan still off of its high of $13.12, EWT remains a BUY.
SPDR S&P Emerging Markets Small Cap (EWX) climbed back up near record highs yesterday, quickly shrugging off last week’s uncertainty. As long as emerging markets remain hot, this remains a BUY.
iShares MSCI South Korea Index Fund (EWY) ended the week slightly lower, even as South Korean shares recouped most of last week’s massive losses. With the threat of the Dubai default fading, EWY remains a BUY.
Freeport-McMoRan Copper & Gold Inc. (FCX) hit a high for the year of $87.32, before pulling back, as the price of gold continues to soar. FCX remains a BUY.
Market Vectors Gold Miners ETF (GDX) closed at a high for the year of $53.68, as the price of gold continues to power ahead to record highs. GDX remains a BUY.
Market Vectors Indonesia ETF (IDX) fell sharply but then quickly rebounded above the $61 level. Indonesia’s central bank is likely to hold its benchmark rate at a record low of 6.5% until the end of the first quarter of 2010 to sustain growth. IDX remains a BUY.
Market Vectors Russia ETF (RSX) held up surprisingly well, and closed above the $31 level yesterday. RSX remains a BUY.
SPDR Dow Jones Intl Real Estate (RWX) closed back above the $36 level. This play on the global real estate recovery is a BUY.
Chemical & Mining Co. of Chile Inc. (SQM) stayed relatively steady during the turmoil last week. The stock is currently above its 50-day moving average of $38.33 and above its 200-day moving average of $34.33. These are all bullish signs. SQM remains a BUY.
P.S. With the help of global financial stimulus, a number of global markets have rallied from their lows of 2008, providing investors who were invested in the right markets at the right time with healthy returns. Although the question remains — how do you become one of those investors? For an answer, I encourage you to attend The World MoneyShow in Orlando, February 3-6, 2010, at The Gaylord Palms Hotel and Convention Center, to hear more than 60 leading experts. They will be on hand to provide you with insights and recommendations to help you identify emerging opportunities around the globe. I hope that you will join me there! Visit The World MoneyShow Orlando to register FREE today!
P.P.S. If you want to keep up with my latest insights on developments in fast-paced global markets, you can now follow me on Twitter on @NickVardy.
