The Money Map Advantage
Thursday, August 10, 2006
By Horacio Marquez
Email – #53
** High-Five for MI5 and Scotland Yard… Another Great Buying Opportunity Is Created
This morning, the British security forces, MI5 and Scotland Yard, stopped another terrorist plot in its tracks. Without going into the lengthy details, this just proves once more how much more secure the West has become since 9/11, despite the increased desire of terrorists to destroy our way of life.
While the attacks will pose some temporary decrease in airline traffic, I expect the public will soon forget them and economic activity will return to normalcy, as we reaffirm our confidence in the increased security and intelligence activities.
As we have predicated successfully in the past, these are occasions to buy, not to sell.
Going back to the market, we have to pat ourselves on the back as we see how our call for Fed Chairman Bernanke to pause indeed materialized. And with the current torrent of doomsayers predicting inexistent runaway inflation or recession, we repeat our realistic call for a soft landing of the economy, just as Mr. Bernanke “ordered.” The doomsayers have been forced to throw in the towel on the pause, and they’ve covered their shorts at a loss. Licking their wounds, they now insist on the highly unlikely recession story.
With the U.S. economy slowing down to trend, they instead prefer to extrapolate such a slowdown into an imaginary recession that would crush cyclicals and commodities. Well, they’d better tell Europe and Japan, China, Brazil, Russia, India and the rest of the emerging markets, which are either growing fast or accelerating their economies, demanding more commodities. So, the U.S.’s 22% of global GDP share is slowing down to trend and most of the remaining 78% is accelerating. Global growth is alive and well, thank you very much.
But the market did not rally right after the Bernanke pause, since it was discounted by much of the traders, who took profits ahead of yesterday and today’s 10- and 30-year refunding of some $23 billion in U.S. Treasuries. These events typically place some pressure in the equity markets, as Wall Street and others make some room in their books to take in the new paper by taking profits in higher volatility plays. As the paper gets placed in long-term hands, capital is freed and comes back to their preferred plays.
And today, despite this gloom and doom and profit-taking, our reiteration of our recommendation of the Brazil iShares ETF (AMEX: EWZ) of last week and our call options on the same ETF are barely below our entry price. And this is despite one of its components trading inexplicably weak.
While rampant speculation about the takeover action involving Phelps Dodge (NYSE: PD) as a target is driving its stock to the roof, and others like Falconbridge (NYSE: FAL) and Inco (NYSE: N), the Brazilian miner CVRD (NYSE: RIO) which beat estimates a few days ago is inexplicably lagging the market badly, depressing our index ETF temporarily.
In the meantime, the rest of Brazil is alive and well, with our banks Bradesco (NYSE: BBD) and Unibanco (NYSE: UBB), which also beat estimates, trading up strongly as I expected. I expect the market – and especially Brazil, emerging markets, miners and other cyclicals – to do very well in the next couple of months as it becomes clear that fears are exaggerated, and profits and economic growth are not going to magically disappear.
Enjoy and profit,
Horacio Márquez
Stock & Symbol
Current Price
Comments
Telivisa (NYSE: TV)
$18.54
Buy
Unibanco (NYSE: UBB)
$71.49
Buy
Peabody Energy (NYSE: BTU)
$47.01
Buy
IShares Brazil Fund (Amex: EWZ)
$39.67
Buy
BHP Billiton (NYSE: BHP)
$41.07
Buy
Banco Bradesco (NYSE: BBD)
$32.29
Buy
Petrobras (NYSE: PBR)
$94.02
Buy
Mitsubishi UFJ Finan. (NYSE: MTU)
$13.88
Buy
iShares Japan Fund (AMEX: EWJ)
$13.55
Buy
Tenaris (NYSE: TS)
$36.39
Buy
MSCI Austria Fund (AMEX: EWO)
$30.71
Buy
Market Watch
NASDAQ
1528.95
0.00
SP 500
813.88
0.00
DJIA
7749.81
+89.84
As Of 6:12AM 3/26/2009
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