By LM Lupo

Master Portfolio Update

Fresh Positions Opened and Stale Positions Closed

For the month of October and early November, we added two new positions and closed a significant long term cash position in the corn futures market of our Master Portfolio for a +69.0% gain.  For the past month, the master portfolio is up over +6.0%,  while the S&P500 trimmed  more than  -2.0% of its value. 

Our new equity positions include two Chinese firms traded on the NASDAQ to complete a clean sweep for international stock exposure. All of the Master Portfolio chips now stack against the largest debtor nation in the world with a swooning currency value on the international markets: the U.S. 

We noted in our third quarter report that commodities continue to print historic prices, but this is likely to cool in the near future, particularly with the U.S. economic slowdown, thus the reduction in our futures scoreboard and Master Portfolio positions.   

Sinovac, 3S Bio, & Shengdatech

Several of our Chinese holdings will report earnings in the coming weeks, such as Sinovac (SVA), 3S Bio (SSRX), and Shengdatech (SDTH).  All of these companies share rapid earnings growth, accelerated revenue, impressive CAGRs, and  microscopic price to earnings growth ratios (PEG), which should support higher valuations and long term equity appreciation.  We do not favor short sighted analysis with respect to earnings or investing, but we do find our fundamental and technical models comfortably bullish all three Chinese equities for this earnings season, particularly since the earnings growth is sustainable for several years out given the recent production capacity expansion of all three companies.  

Again, we do not recommend lionizing individual investors as though they were rock stars, but it is worth noting that even Berkshire Hathaway and Warren Buffet are currently scanning China for additional equity investment opportunities, even after taking substantial profits on a few positions.  Their motivation is simple.  Where does one invest for value while protecting ones asset from massive currency devaluation?  China based growth stocks, of course.  

$US Dollar and Bonds Vs. Crude Oil and Gold

A headline for the tag team wrestling  match of the century.  Unfortunately, someone threw "the chair" at the US dollar, so our crude and gold positions should continue to print new highs with the former breaching the psychological key resistance of $100 in the near future.  We hold a $1200 objective in the bullion market, per our February 2007 analysis, given the strong physical fundamentals and an abysmal $US dollar.  No, the dollar is not so much a fundamental construct for higher prices, but rather a psychological construct.  After all, U.S.  investors are down nearly 50% in EU based purchasing power in less than eight years. 

WatlooSoft© projects a 4.00% target in the 10 year bond market position below, but as we noted in our prior report, the leash is tight for liquidation in both the futures market and cash positions.  For now, the major U.S. stock indexes are probing extremes in volatility and pessimism, which should support stock prices and sentiment in the coming weeks. 

In conclusion, our long term forecast of higher foreign equities, particularly Chinese, and less than impressive U.S. based equity returns remains thematic.

We make order out of market chaos©.

For current quarter  11.5.2007, Total Return Includes dividends and interest for Bonds and S&P 500.

All totals include open and closed positions during the actual performing quarters.  The positions and portfolio above is for educational purposes and not a recommendation to either buy or sell securities, futures, or options.  WatlooSoft© 2007 is a registered FinancialTrader.com software product licensed as decision support for all of FinancialTrader.com technical signals. 

 2007 FinancialTrader.com Inc. All rights reserved.  Copying and redistribution prohibited. Financial Trader Research obtains information from sources deemed reliable, but does not warrant its accuracy and disclaims for itself and its information providers all liability arising from its use. No information provided shall constitute tax, legal, or investment advice, or an offer to buy or sell securities.

Comments please write: editor@financialtrader.com

Making market order out of market chaos.©  FinancialTrader.com 1997-2007©