The Shadow Stock Trader
Friday, July 11, 2008
By Horacio Marquez
Email – #5
** We take advantage of market weakness to go into the largest source of profit growth in the world…
Today, we saw the market getting hit on baseless rumors about Fannie Mae and Freddie Mac, along with a similarly erroneous report in the Jerusalem Post about the Israeli Air Force practicing in Iranian air space. Also, two days ago there were fraudulent rumors being spread (which were immediately denied), that PIMCO was reducing its exposure to Lehman Brothers.
These ridiculous rumors are a show of desperation by “the shorts“ who are looking to create a market panic to force capitulation, which would allow them to close their positions profitably. Any time that they’ve tried to close, the market tends to gap up, which self-defeats them. Just witness the S&P Depositary Receipts, nicknamed “spiders” (NYSE: SPY), which exploded in volume after 2:00 PM and reversed. These wild rumors, capitulation, followed by huge volume increase and reversals are typical of tradable bottoms.
In fact, the last three tradable bottoms - in August of 2007 and in the two bottoms of January and March of this year – we saw the VIX (volatility) index spike intraday above 32. We are almost there. So get your checkbook ready, since these are extremely attractive levels of negativeness. We’re seeing t ons of value at these levels, an all-time record in shorts and $3.2 trillion in cash sitting on the sidelines.
With the fiscal stimulus, the foreign exchange stimulus from a low U.S. dollar, and the monetary stimulus from short-term rates at 0% ( in real terms) - the U.S. economy will reaccelerate in the second half.
At the same time, we are not seeing any meaningful weakness in emerging economies, against much pundit maligning. So we are taking advantage of these very favorable trends and this market opportunity to buy emerging markets at a 20% discount, thank you very much shorts and fearful investors!
As we saw today, a key Asian steelmaker, that reported in South Korea, raised its sales and earnings outlook. That means the demand for cars, ships and appliances in Asia keeps thriving and shortages of steel abound. It always gets darkest before dawn.
Enjoy and profit,
Horacio Marqez
All Shadow StockTrader recommendations will be posted on the Monument Street Publishing website. Simply go to http://www.monumentstreetpublishing.com and click on “Money Shadow Stock Trader.”
Stock
Current Price
Comments
iShares MSCI Emerging Markets Index (EEM)
$129.06
Buy
Vanguard Financials ETF (VFH)
$35.78
Buy
iShares MSCI Australia Index (EWA)
$25.26
Buy
All Money Shadow Stock Trader recommendations are posted on The Monument Street Publishing website – www.MonumentStreetpublishing.com Just click on ‘The Money Shadow Stock Trader’
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Your password is: 1849107
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Market Watch
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As Of 6:15AM 3/26/2009
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