On Summer “Blahs,” Roubini and Romney

Nicholas Vardy

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

Although the MSCI Hong Kong Index ETF (EWH) — a position on your watch list — crept above its 50-day moving average, I am going to hold off on recommending that you re-enter this position. You already have plenty of exposure to Asia through your other holdings. In addition, I expect Hong Kong to be particularly vulnerable to an economic slowdown in China.
 
Overall, global markets are in a sour mood. Spain’s economic woes are currently dominating the headlines in Europe. Spain’s sovereign debt yields rose above 7.5% for 10-year paper on Monday, well above the 7% level that triggered the spiral in borrowing costs that led to bailouts for other euro-zone states. I’ll be spending a few days in Madrid, and will share my personal impressions of the situation in Spain then.
 
The only good news is that perma-bear Nouriel Roubini has re-emerged in the media, forecasting a “perfect storm” for global economies. And that’s been generally good news for markets. Roubini’s appearances are a reliable contrarian indicator, as described by the Roubini Sentiment Indicator. According to a quick search I did this morning with Google Trends, Roubini hasn’t been this much talked about since the market’s sharp decline last August and subsequent bounce in the fall of 2011. So, if the Roubini indicator holds, we should see the markets rally sharply this fall.
 
Tomorrow afternoon, I’ll be seeing Republican presidential nominee Mitt Romney for a fundraising event at the Mandarin Oriental Hotel here in London. Just across the street from London’s best-known department store, Harrods, the Mandarin Oriental is also home to one of my favorite bars in London. Romney is in London to meet with senior U.K. government officials, as well as to attend Friday’s opening of the Olympics, which I wrote about in yesterday’s The Global Guru. Romney will be traveling to Israel and Poland — both staunch allies of the United States — which have been pointedly ignored by the Obama administration over the course of the last four years.
 
On all fronts, Romney is setting himself up as the philosophical and economic opposite of President Barack Obama. The choice for American voters in November could not be clearer. It is as Thomas Sowell put it in the title of his classic work that I just re-read this week: “A Conflict of Visions.”

Portfolio Update

MSCI Malaysia Index (EWM) lost 2.08% last week. MSCI Emerging Markets Index is down more than 11% over the past five years. This compares with EWM’s whopping five-year 39% gain. EWM is a BUY.
 
iShares JPMorgan USD Emerg Markets Bond (EMB) dipped an even 1.00%. EMB has over $5 billion in assets-under-management, with its holdings diversified across Brazil, Mexico, Russia, Turkey, and the Philippines. This emerging markets bond fund boasts a high yield of 4.62%. It has also posted a 4.2% gain over the past three months and is up 7.5% year-to-date. EMB is a BUY.
 
Berkshire Hathaway (BRK-B) gave back 1.75% over the past five trading days. BRK-B touched the 20-day moving average (MA) in late June, but managed consistent gains above this line for the past month. Back at the 20-day MA once again, BRK-B appears poised to bounce again. BRK-B is a BUY.
 
Visa Inc. (V) fell 4.35% for the week. Visa is taking full advantage of the upcoming London Olympics by showing off its latest payment technology to the world. Visa has 140,000 of its new “PayWave” terminals installed throughout the United Kingdom. This will allow the 37 million Visa PayWave-enabled cards issued throughout Europe to make “contactless” purchases at many London retailers. Visa Inc. will report earnings today, July 25, and pay a $0.22 dividend on Aug 15. V is a BUY.
 
The TJX Companies (TJX) lost 2.35% over the previous week. TJX will pay a $0.115 dividend on Aug. 7 and is scheduled to report earnings on Aug. 14. Looking past its earnings report, TJX is well positioned to benefit from the upcoming back-to-school buying season. TJX is a BUY.
 
Stratasys, Inc. (SSYS) managed to buck the overall negative trend last week and jumped 5.14%. After a stellar launch off of its 50-day moving average, SSYS pulled back just a bit recently on weakening volume. This may be the perfect opportunity to buy up shares prior to its Aug. 1 earnings report. Analyst estimates are calling for a strong 39% earnings per share figure on 24% Q2 sales growth. SSYS is a BUY.
 
iShares Nasdaq Biotechnology (IBB) fell 3.44% for the week. Up 24.75% year-to-date, IBB ranks amongst the top three performing biotech sector funds of 2012. IBB also experienced a spike in fund inflows last week with over $53 million coming into the fund — a 2.6% increase week over week. IBB is a BUY.
 
WisdomTree Japan SmallCap Dividend ETF (DFJ) lost 3.48% over the past five trading days. DFJ is back to its well-tested $40 support level. Couple this with a recent dip below 30 on its Relative Strength Index (RSI), a “Buy” signal, and DFJ appears poised for a rebound. DFJ is a HOLD.
 
Market Vectors Indonesia Index ETF (IDX) gave back 3.85%. IDX has recovered about half of the losses it suffered during a significant June correction. Trading above its 50-day moving average, IDX is a BUY.
 
PowerShares Global Listed Private Equity Portfolio ETF (PSP) fell 2.58% last week. PSP continued to trade range-bound between the $8.65 and $9 price levels. With the lower $8.65 level being propped up by a 200-day moving average, PSP may bounce strongly from here. PSP is a BUY.
 
iShares Singapore Index ETF (EWS) dipped 1.01%. Singapore has spent many years developing its exporting capabilities, making huge profits in booming sectors such as oil-refining and electronic components. EWS is a BUY.
 
Statoil ASA (STO) dropped 1.57% over the past five trading days. Oil prices continued to weigh on STO’s stock price last week. However, Iran’s continued threats on blocking the Strait of Hormuz are keeping supply concerns at the forefront of oil traders’ concerns. STO is scheduled to report earnings tomorrow, July 26, and is a HOLD.
 
Lennar Corp (LEN) gave back 2.86% last week. Positive news on home builders continues to grow, as a wide range of statistics are showing real promise for the new-home markets. No wonder Goldman Sachs just raised Lennar’s price target to $38 — more than 25% above the current market price. LEN is a BUY.
 

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Well, the Olympics of 2012 are starting on Friday -- some of it practically right on my doorstep here in London. And, as if on cue, the sun has come out in London in the past two days, after the dreariest June, well... since, folks started measuring these things. One local newspaper even trumpeted that London will be warmer today than Hawaii. But Mother Nature has a good sense of humor. The forecast calls for showers right during the three-hour period of the opening ceremonies on Friday. L

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