Sit Tight On The Global Bull’s Roller Coaster Ride

As usual, global markets were hit even harder, and the MSCI’s main world stock index dropped 6% off its all-time high just 10 days ago. And Wall Street’s "fear gauge" — that is, volatility as measured by the VIX index — hit highs not seen since April 2003.

The reason? Worries that the U.S. subprime mortgage market could derail U.S. economic growth trumped the good news about a surprise rebound in U.S. economic growth during the second quarter.

My view is that as long as the credit crunch doesn’t trigger a more serious economic slowdown in the United States, the world economy — and the equity market — should continue to chug along. It already appears that global financial markets are stabilizing as investors begin to conclude that worries about a fallout from U.S. mortgage market ills may have been overdone.

With global markets sharply oversold, and the VIX at four-year highs, I would expect our positions to bounce strongly over the coming weeks. And with our Global Bull Market Alert portfolio well-positioned across a wide range of markets and sectors, let’s stick with our current positions and wait for markets to stabilize.

PORTFOLIO UPDATE

Two of our positions reported better than expected earnings last week.

Terex Corp. (TEX)

Terex reported that its Q2 profit rose 54% on higher sales from favorable currency exchange rates. Earnings increased to $1.66 per share, beating expectations of $1.62 per share. The company raised its full-year earnings guidance and now sees 2007 earnings between $5.50 and $5.70 per share, up from its prior forecast for a profit range of $5 to $5.40 per share. It also lifted its full-year revenue outlook to a range of $8.8 billion to $9 billion. The sell-off means that it’s a good time to add to your positions here.

Potash Corp. (POT)

Potash announced the best quarterly earnings in the history of the company, with earnings hitting $0.88 per share in Q2. That’s a 63% jump compared to the same period last year as farmers around the world raced to buy fertilizer to grow more crops. These earnings, which would have been $0.09 per share higher if not for the strengthening Canadian dollar, were 42% above the previous best of $0.62 per share achieved in Q1. Earnings of $1.50 per share for the first six months of 2007 were 58% ahead of the $0.95 per share earned in the first half of 2006.

Chief Executive Bill Doyle summed it up well in a conference call: "We believe we are entering a five-year period that will be the most exciting time that our company has ever seen."

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