DollarOne update, How to make 30% in one day

Hi folks,

 

Well it's been a really wild ride this week. And if you took my advice on the home builders you made around 10% before yesterday and probably still making some money today. There are many changes taking place abroad that may effect our market conditions over the next year or so.

The most interesting one is the economic upturn in Brazil. Brazilians have really united in their fight for economic dominance over the region and are succeeding. They've made the stability of their economy a matter of natinoal pride and it's working. President Lula da Silva is the knight in shinning armor that Brazil has been waiting for and he's taking some real action.

"Brazil used to be one of the world's most indebted countries. But thanks to surging commodity prices and better fiscal management it's now sitting on a pile of cash -- and looking for places to spend it. Dan Grech reports. Listen to this Story"

Here's piece from NPR's Marketplace:

KAI RYSSDAL: Brazilian President Lula da Silva said today he's hopeful the latest round of global trade talks can still be saved. There's been some concern what's known as the Doha round might be DOA come the end of the year. Lula's vote counts, because Brazil's been leading a group of developing countries pressing the U.S. and Europe to change their trade policies -- agriculture, specifically. And there's some news today which leads one to believe Brazil might be taken even more seriously now. It used to be one of the world's most indebted countries. But thanks to surging commodity prices and better fiscal management, Brazil's now sitting on a pile of cash. And it's looking for places to spend it. From the Americas Desk at WLRN in Miami, Marketplace's Dan Grech reports.

DAN GRECH: To get a feel for how extraordinary Brazil's turnaround has been, let's rewind to 2002. Voters there elected a leftist union leader as president and the international markets freaked out. Investors yanked $60 billion out of Brazil, a flight of unprecedented proportions. Now, five years later, Brazil has paid off its international debt, its budget is balanced, and investors are back.

Analyst Chris Garman is with the Eurasia Group.

CHRIS GARMAN: Brazil's government pursued responsible and orthodox monetary policy, drove inflation down, and as a result, the country's debt-to-GDP ratio has been declining ever since.

Brazil even has $162 billion in reserves. The country's leftist administration says it will use that money not for social programs, but for investments with a potentially high return. Professor Riordan Roett is with Johns Hopkins University. He says Brazil's President Lula has made fixing the country's finances a matter of national pride.

RIORDAN ROETT: He's able to explain to the poor that the reason bolsa familia and the various social investment programs are working is because the macroeconomics are so strong. And for the first time in Brazilian history, poverty levels have begun to drop, and that's what got him elected the second time.

The international community is getting ready to reward President Lula for his fiscal discipline. After years languishing at junk status, Brazil's credit rating is expected to be lifted next year to investment grade.

Are you excited yet? Well you should be. The question is, how do I play Brazil? Well you'll most likely want to invest in an ETF or ADR as it would be too difficult to find an individual stock. In case you're wondering what ADRs are, they were Introduced to the financial markets in 1927, an American depositary receipt (ADR) is a stock that trades in the United States but represents a specified number of shares in a foreign corporation. ADRs are bought and sold on American markets just like regular stocks, and are issued/sponsored in the U.S. by a bank or brokerage. An Exchange Traded Fund (ETF) on the other hand is an investment product representing a basket of securities that track an index such as the Standard & Poor's 500 Index. ETFs, which are available to individual investors only through brokers, trade like stocks on an exchange. I would recommend ETFs when it comes to places like Brazil or China because they spread the high risk across a lot of companies. I like EEB and BIK, but do your own research and pick your own ETFs.

 

 

Now, on to making 30%

 

As you may have heard Alibaba.com is going to do an IPO on Nov 6th.

Read this if you don't know about Alibaba:
http://money.cnn.com/2007/10/22/news/international/bc.apfn.as.fin.china.alibaba.ap/?postversion=2007102211
It's basically the best b2b site on the web and actually makes money.
So anyway, take that day off, stay at home, be very ready. Or if you're like me, trade it the night before on the Hong Kong market. ORRRR, if you want to play it safe you can buy some Yahoo if it dips between now and then and look for a 10% rise on the 6th of Nov. Either way, this is about as sure a short-term Chinese gain as you can hope for. But remember, do NOT take any unnecessary risks, if you're scared that it's already gone up too much on the day of the IPO and you missed your chance then stay out.

 

Now back to Earth

 

... And back to housing. As you know the fires have destroyed close to 700 homes in Southern California so far. This may be good news for some businesses as bad a news as it is for the homeowners that have lost their homes. The Home Builders will probably see a moderate gain this week but not likely as many of the homes were not insured and many of the owners will not be buying again soon. Hotels in the area however will get an unseasonable windfall. California hotels have at best a moderate booking rate during the winter months but they're all booked now and for many weeks to come. This might be a good time to buy Marriott (MAR) which is near it's 52 week low today.

 

And as we look at the economic calendar we can speculate that housing and home builders will likely take a big hit this week. Existing and New home sales numbers come out this week along with earnings from Pulte Homes (PHM). Those three pieces of data should do well to kill the home builders at least another 5-8%. So if you think you've missed the short boat, just wait till Thursday.

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.  

Economic Calendar for the Week of October 22 – October 26

Date ET Economic Report For Estimate Actual Prior Impact Wed. October 24 10:00 Existing Home Sales Sept 5.30M   5.50M Moderate Wed. October 24 10:30 Crude Inventories 10/19 NA   1784K Moderate Thu. October 25 08:30 Durable Goods Orders Sept 1.5%   -4.9% Moderate Thu. October 25 08:30 Jobless Claims (Initial) 10/20 320K   337K Moderate Thu. October 25 10:00 New Home Sales Sept 785K   795K Moderate Fri. October 26 10:00 Consumer Sentiment Index (UoM) Oct 82.5   82.0 Moderate

As always you can see all the posts on the blog they get posted to at dollarone.blogspot.com

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