The Low-Stress Workout

07/08/2010 10:37 am EST

Focus: GLOBAL

Igor Greenwald

Chief Investment Strategist, MLP Profits

It's the computer programs' job to drive the market up and drive it down. Humans just try to explain why it might have gone the way it did—if humans were still doing the driving.

So, if you'd care to believe that stocks rallied this week because the lost US jobs showed up, or because European banks are stress-testing like East German swimmers, or because Chinese workers have been "rewarded" with more bank stock in their pension fund, more power to you and God bless. You might be the crown prince of Abu Dhabi, dangling petrodollars over a begging bowl palmed by your former colonial masters. A drastic reversal of fortune like that can certainly jangle the senses.

And—speaking of reversals—BP (NYSE: BP) shares are up 22% from their lows in ten days, bucking the most recent bit of unpleasantness in the markets. Spanish banking giant Banco Santander (NYSE: STD) has recouped as much during its five-day winning streak, spurting to its highest close since April Wednesday. The developments in its homeland are far from bullish, but Santander still has growth in the Americas to fall back on as it copes with the Spanish property bust. It shouldn’t need to raise new capital. But if it does, perhaps the North African sovereign wealth funds will come through. They might fancy a Spanish bargain.

Coincidentally, Spanish stocks are now up 8.3% for July and nearly 12% in dollar terms thanks to the pop in the euro. Greek and Portuguese equities have appreciated more than 7% against the greenback, just like everyone knew they would.

Greece’s economic malaise grinds on as painful cuts and tax hikes test the austerity-minded government. But Germany just keeps on exporting
to Asia and the Americas. And the ungainly monetary union limps on, propped up by German willingness to spread the wealth and Europe’s to follow German prescriptions.

In the emerging sphere, cheap chic is all the rage, so that Brazil, Turkey, and Hungary have returned some 6% so far this month in dollar terms. Russia, Taiwan, and South Africa, another inexpensive trio, are up nearly 3% over the last week.

Crisis over? That seems like a stretch, despite the fleetingly friendly disposition of the trading algorithms. But after the last two months, it’s a relief to see a gain, no matter how tenuous its underpinnings.

No matter how tenuous they are, there’s every likelihood that leading German manufacturer Daimler AG (OTC: DDAIF) will keep on making its interest payments. That’s what makes its high-yielding US-traded debt security such a good play, writes Carla Pasternak. With German bunds yielding a record-low 2.6%, it’s no wonder Daimler’s note, yielding 7.25%, is trading above par value.

Meanwhile, with crude prices rebounding, Gordon Pape highlights an attractive Canadian oil sands play, Cenovus Energy (NYSE: CVE), that remains something of a black sheep for energy investors. A yield approaching 3% offers an extra margin of safety. The world would really have to fall apart for this week’s featured picks to go bad.

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