Global Stock Investor Hotline 53

Nicholas Vardy

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

After bouncing toward the end of last week, global stocks have resumed their downward trend.

Your current positions in your Global Stock Investor portfolio are defensive — with your bet against the euro through the UltraShort Euro ProShares (EUO) continuing to perform strongly.

That’s the only position — among any global asset class, anywhere — that benefits from the contagion coming from Europe. All other asset classes — with the exception of gold, perhaps — are no-go zones.

I’m particularly worried about one canary in the coal mine — and that is the news concerning real estate coming out of China. As indicated by the title of a recent presentation I did at the Las Vegas Money Show, “The Myth of China’s Miracle,” which you can download from my blog,, I have been long skeptical of the sustainability of China’s economic expansion. With sales of Beijing and Shanghai apartments down by 70% last month — and prices down by as much as 30%  — it looks like the Chinese real estate bubble has finally popped.

Given that this expansion was financed by now over-leveraged Chinese banks, this is seriously bad news for all four Chinese banks that are now among the world’s ten largest as measured by market capitalization. One Chinese commentator suggested in yesterday’s Financial Times that the collapse of the Chinese real estate bubble will have much greater negative impact on China than the collapse of the U.S. housing market did on the U.S. economy. Why? A back of the envelope calculation shows that real estate prices in China would have to drop only 30% for the major banks to be insolvent. And that seems to have already happened in a single month in Beijing.

That’s lousy news for all of us. Just think what the negative news out of Europe has meant for global stocks. Now throw in a collapse of the Chinese economy, and it’s bad news all around.

Thanks to a wide range of exchange-traded funds (ETFs) in currencies, commodities and short strategies in stocks, there are ways to profit from any sustained downturn. Recall that Global Stock Investor did the same in the months following the collapse of Lehman Brothers in September of 2008. But as the European and now-Chinese economies continue to unravel, look for more bearish bets in the months ahead.

Portfolio Update

The WisdomTree Dreyfus Chinese Yuan Fund (CYB) has been deteriorating perceptibly over the past couple of weeks, even as the actual exchange rate between the U.S. dollar and the Chinese yuan has remained constant. That indicates that certain investors are getting nervous about the status of the yuan. I am moving this to a HOLD.

iShares MSCI Malaysia Index (EWM) rose 2.96% as Asian markets recovered slightly. As one of the strongest relative performers among emerging markets in 2010, EWM remains a BUY.

UltraShort Euro ProShares (EUO) rose 1.46% during the past week as the euro hit another yearly low against the U.S dollar. Your bet against the euro remains a BUY.

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 or on my new blog,

Like This Article?
Now Get Our FREE Special Report:
Alternative Investing: Investing in Timber

Stock Investor editor Paul Dykewicz reveals why investing in timber may be one of the best long-term portfolio strategies you'll find today.

Get Access to the Report, 100% FREE

previous article

Global stocks rebounded last week, as the MSCI Emerging Markets Index rose just over 2%. U.S. stocks also bounced with the Nasdaq rising 1.3%, and the S&P 500 edging up 0.2%. The Dow Jones Industrial Average, however, fell 0.6%. With a loss of 8.2% for the month, May was the Dow's weakest showing since February 2009.


Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details


Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details


Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details


Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details


Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. Since 2010, Hilary's financial publications have provided stock analysis and investment advice to her subscribers:

Product Details


Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details


Used by financial advisors and individual investors all over the world, is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.