Samba-ing out of Brazil
Taking profits in a Brazilian small-cap ETF is purely a momentum sell. Brazil is still a great story.
I'm selling slightly below the $51 target I set for this ETF (it traded below $48 Wednesday), but with the rally in the U.S. dollar and the slackening of momentum in emerging markets stocks, I'm going to take my gains here rather than wait for my June 2010 target.
This is purely a momentum sell -- it looks like the U.S. dollar is going to rally here for a bit, and that will put more downward pressure on the prices of all those assets that went up while the dollar was falling.
How long is “a bit”? That will depend on the news.
For example, this morning's announcement that Standard & Poor's had put Spain on credit watch sent the dollar up against the euro. Nothing like a little dose of fear to send the greenback higher!
I think selling on slackening momentum makes sense with this position, since I raised my target price from $44 to $51 in October based on the momentum in emerging markets created by global cash flows. (For more on my “sell momentum, hold fundamentals” strategy, see my Nov. 20 post.)
Brazil is still one of the great fundamental stories of the next decade; nothing has changed on that front that I can see. And I'd be happy to buy this ETF or the iShares MSCI Brazil ETF (EWZ) in the future at lower prices.
Jim Jubak plans to sell his personal position in Market Vectors Brazil Small Cap ETF three days after this is posted.
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Bill Stiritz owns more than 5% of the company, and has experienced an estimated $145 million in paper losses on his investment.
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