GLOBAL STOCK INVESTOR HOTLINE UPDATE 76

Nicholas Vardy

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

We are in the dog days of summer, and your Global Stock Investor portfolio showed little movement this week.

The rally in the U.S. dollar continues as the greenback hit yet another six-month high against the euro and a 25-month high against the U.K. pound sterling. This pushed your holding in the Market Vectors Double Short Euro ETN (DRR) close to record highs. It’s a shame there isn’t an ETN to bet against the U.K. pound sterling — as that currency is looking even more vulnerable than the euro. The WisdomTree Dreyfus Chinese Yuan Fund (CYB) was steady as the yuan will continue to appreciate, despite the U.S. dollar’s continuing strength.

Given that your Global Stock Investor portfolio now includes some unusual currency plays, I want to emphasize how you can expect your holdings to behave. Your two currency bets — the Market Vectors Double Short Euro ETN (DRR) and WisdomTree Dreyfus Chinese Yuan Fund (CYB) — will be slow and steady, low volatility bets, particularly the WisdomTree Dreyfus Chinese Yuan Fund (CYB). That means you can afford to take bigger position in both of these holdings than you can in your more volatile stocks picks.

In contrast, your stock holdings, ICICI Bank Ltd. (IBN) and Millicom International Cellular (MICC), are unusually volatile stock picks but ones that you can expect to perform very strongly once market sentiment turns. In the meantime, both represent terrific values at their current levels.

Brazilian oil giant Petrobras (PBR) will continue to trade in line with the oil price. That is why I am keeping this position at a HOLD. All of our other recommendations remain BUYs.

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PORTFOLIO UPDATE

WisdomTree Dreyfus Chinese Yuan Fund (CYB) continues its slow and steady ascent against the U.S. dollar. This week, China announced that it is considering a 370-billion yuan fiscal stimulus package that includes 220 billion yuan in government spending and 150 billion yuan worth of tax cuts. Stay away from Chinese stocks but the currency, through CYB, is a BUY.

Market Vectors Double Short Euro ETN (DRR) closed at near record highs yesterday as the dollar rose to a six-month high against the euro. The single currency tumbled on weak German GDP data, raising concerns of recession in the eurozone and fueling expectations of interest rate cuts. With the euro’s downward trend firmly in place, DRR is a BUY.

ICICI Bank Ltd. (IBN) traded around the $30 level this week. Well isolated from the effects of the U.S. credit crunch and with a market capitalization of just over $13 billion, India’s second-biggest bank is a steal. The only thing keeping the stock down is the negative market sentiment. “India’s Citibank” is a BUY.

Millicom International Cellular (MICC) is trading at the same price that it was a year ago, yet it boasts much higher earnings and close to 10 million more subscribers. Millicom is set to rally strongly on any market rebound and the stock is a BUY.

NII Holdings (NIHD) remains the top stock pick of investment advisor Stifel Nicolaus, which has a “Buy” rating on the shares and an $81 price target on the stock. That’s a 60% upside from its current levels. NIHD is a BUY.

Petrobras (PBR) rose slightly this week as a report by investment bank Credit Suisse said there is "plenty of upside" for the stock given a low risk of an increase in taxes for the huge sub-salt oil reserves that Petrobras will tap in the near future. With the oil price in a solid downtrend, I am keeping this stock at a HOLD.

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With the sudden unraveling of the long commodities/short financials trade in July, the number of bullish themes in global markets this summer has diminished rapidly. I am, however, comforted by the fact that every morning when I go to buy the Financial Times here in London, I walk by a currency exchange booth, where I see that every day it takes fewer and fewer dollars to buy British Pound sterling. After six years of relentless dollar weakness, the turnaround in the U.S. dollar is a wel

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