Nicholas Vardy
GLOBAL STOCK INVESTOR HOTLINE UPDATE 47
Scan across your Global Stock Investor portfolio, and you’ll see it awash in an unfamiliar color: green. Every single one of your positions was up for the week — including double-digit percentage gains in Potash (POT), up 17.29%, as well as in Barrick Gold (ABX) and Millicom (MICC), each rising more than 10%. The iShares MSCI Brazil Index ETF (EWZ), Veolia (VE) and Arcelor Mittal (MT) each also rallied about 8% this week.
A Golden Boost to Your Defensive Portfolio
With markets showing the highest degree of pessimism in recent memory, there are two possible ways you can approach the market. You can take a contrarian approach, and pile into stocks that are now a much better deal than they were two months ago. Or you can put your money to work in investments outside of the stock market. With Asian markets down sharply overnight — and knowing that the short, sharp, relief rallies we saw last week are typical of bear markets — this second approach was behind my thinking in developing last week’s "ultimate defensive global bull market portfolio."
GLOBAL STOCK INVESTOR HOTLINE UPDATE 46
The volatility of global markets over the past week has been one for the record books. After global markets sold off hard and fast across the board on Monday and Tuesday, most of them — particularly in Asia — snapped back like a rubber band in overnight trading after the Fed’s surprise rate cut.
Look for a HUGE gain in your 2x Short Position in China (FXP)… And the “ULTIMATE Defensive Global Bull Market” Portfolio
First, the good news. China’s Shanghai Composite index plunged 5.1% on Monday, and dropped 7.2% overnight, its lowest close since August. That means that you should see a HUGE jump — well over 20% — in the value of the UltraShort FTSE/Xinhua China 25 ProShares (FXP). Those of you holding the options may even see triple-digit percentage gains today. Because of the value of volatility in the options, I recommend that you take half of your profits in the May $170 FXI Put option sometime today. Remember, the more the market goes down, the more valuable your options become.
GLOBAL STOCK INVESTOR HOTLINE UPDATE 45
Global markets continued their weak start out of the gate in 2008, deflating hopes of a January rally. Technically, the U.S. market is showing signs of breaking down. So it’s more important than ever to understand how your holdings in Global Stock Investor fit into the big picture.
George Soros’ 1992 Currency Bet Revisited
On September 17, 1992, George Soros "broke the Bank of England" — and made $1 billion in the process — by betting that the United Kingdom would devalue the U.K. currency, the British Pound Sterling. With equity markets offering scarce opportunities in the face of continuing declines, this week’s Global Bull Market Alert pick recommends the same basic trade — shorting the British Currency ("British Pound Sterling" or "GBP") by selling the CurrencyShares British Pound Sterling Trust (FXB). When I advise you to sell FXB to take a so-called "short" position, you are making an investment that will become profitable if the British Pound Sterling falls in value. It is the opposite of what you do by going “long” and buying a stock.