Self Directed Investor Inc
SDI: "Empowering investors with ideas and education"
Symbol Lookup »  
Topics:ChinaETFsEarningsEconomyEnergyForexGoldIncomeLessonsIdeasTrading

  • Other news: News from PR Newswire
| More

Three Long/Short Ideas For Euro Zone Debt Drama

Tue, Nov 8, 7:14 AM ET, by Michael Johnston

Since the downgrade of U.S. credit quality in August, investors have turned their attention to the debt drama taking place overseas. Several Euro zone member nations have fallen victim to mounting government deficits, which has inevitably contributed to investor worries over the health of the financially fragile currency bloc. Economic growth has also been lackluster in the region, further contributing to the growing cloud of uncertainty looming over the debt burdened Euro zone [ETFdb Pro members can see the Ex-Europe ETFdb Portfolio]. Ongoing debt woes have taken center stage, fueling volatile trading across equity markets, and likewise putting pressure on investors’ confidence in the global economic recovery.

Greece has been the center of attention lately as EU leaders have taken the first steps to negotiating on a viable rescue plan to restore stability in the debt stricken country. Likewise, all of the ongoing debt negotiations have paved the way for increased volatility across markets, seeing as how investors have been forced to digest new pieces of information day after day. While EU policymakers are undoubtedly moving in the right direction, the day to day news headlines stemming from overseas have been contributing to wild swings in the market, with investor sentiment swaying from euphoric to fearful over the course of a trading session.

Despite talks of a three-pronged “bailout plan”, EU policymakers are still faced with serious challenges that must be addressed going forward as the economic health of the region is far from stable. Considering all of the chaos that has resulted from Greece’s debt woes, it’s hard to imagine just how the markets will react if (and when) other member nations, like Italy and Portugal, come forth with their own set of issues. Amidst the volatility, several opportunities have presented themselves as a means for investors to establish tangential exposure to developments in the Euro zone. Below we highlight three long/short ideas that may prove profitable as EU leaders continue to work on a comprehensive plan and uncertainty remains high:

  • Long CurrencyShares British Pound Sterling Trust (FXB) / Short CurrencyShares Euro Trust (FXE): This trade recommendation is essentially a bet on the outperformance of the British pound over the euro, since FXB and FXE both track the performance of the respective currency versus the U.S. dollar. The British pound has taken a beating as weakness in the euro has put considerable pressure on the economic outlook for the region as a whole. Depending on how the ongoing debt negotiations progress, the British pound may be well positioned to appreciate if EU leaders undertake an approach that further devalues the euro. Also, persistent weakness in the euro could encourage investors who still wish to maintain tangential exposure to the Euro zone to reallocate capital into pound-denominated assets.
  • Long MSCI Germany Index Fund (EWG) / Short MSCI Italy Fund (EWI): The thesis behind this trade recommendation is quite simple; it pits the strongest Euro zone member, Germany, versus one of the most heavily indebted nations: Italy. Germany is the economic backbone of Europe and this exporting powerhouse stands to potentially benefit from a weakened euro and increased interest as investors flock to “safer” investments that are still relatively undervalued. Likewise, if Italy comes under pressure as Greece has, investors who still wish to maintain tangential exposure to the Euro zone will likely be encouraged to snap up safe havens like Germany. Italy, meanwhile, seems to be headed towards the edge of a cliff; political uncertainty, record highs for financing costs, and a stubbornly high unemployment rate loom as substantial short-term and long-term obstacles.
  • Long FTSE Nordic 30 ETF (GXF) / Short MSCI EMU Index Fund (EZU): This trade recommendation pits the Scandinavian region, as represented by GXF, versus the member nations of the Euro zone, as represented by EZU. The fundamental thesis behind this trade is that the northern region of Europe offers a more favorable risk/reward profile than the Euro zone as a whole, given the fiscally conservative nature and historically stable financial systems of Sweden, Denmark, Norway, and Finland. GXF’s underlying holdings are well positioned to hold their ground in case the debt drama intensifies, while also being able to benefit from improved economic conditions as stability is restored. While the Scandinavian nations are economically tied to all of EZU’s constituents, they are not under direct stress from the potential collapse of the euro, since every country in the region (except Finland) maintains currency independence.

Disclosure. No positions at time of writing.

Click here to read the original article on ETFdb.com.


SDI Glossary: "Short" Definition
This Article's Word Cloud:   British   ETFdb   Euro   Europe   Fund   Germany   Greece   Italy   Long   MSCI   Short   Trust   been   currency   debt   economic   euro   exposure   from   have   health   investors   leaders   maintain   markets   member   nations   ongoing   over   plan   policymakers   pound   pressure   recommendation   region   stability   still   taken   tangential   that   their   thesis   this   trade   uncertainty   versus   volatility   will   with   zone

| More

XLK, ACN, ADP, EBAY: ETF Outflow Alert
Fri, Sep 30, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: XLK, ACN, ADP, EBAY Exchange traded funds (ETFs) trade just ...

RYE, DO, WMB, APC: ETF Outflow Alert
Fri, Sep 30, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: RYE, DO, WMB, APC Exchange traded funds (ETFs) trade just ...

XLP, CVS, COST, CL: ETF Outflow Alert
Fri, Sep 30, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: XLP, CVS, COST, CL Exchange traded funds (ETFs) trade just ...

Daily S&P 500 Bull 3x Shares Experiences Big Inflow
Fri, Sep 30, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: SPXL Exchange traded funds (ETFs) trade just like stocks, but ...

XRT, LAD, CAB, W: ETF Outflow Alert
Fri, Sep 30, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: XRT, LAD, CAB, W Exchange traded funds (ETFs) trade just ...

Why American Express is a Top Socially Responsible Dividend Stock (AXP)
Fri, Sep 30, 9:44 AM ET, by ETF Channel

American Express Co. (AXP) has been named a Top Socially Responsible Dividend Stock by Dividend ...

ITW Named Top 25 SAFE Dividend Stock Increasing Payments For Decades
Fri, Sep 30, 9:44 AM ET, by ETF Channel

Illinois Tool Works, Inc. (ITW) has been named to the Dividend Channel ''S.A.F.E. ...

Implied JKJ Analyst Target Price: $159
Fri, Sep 30, 9:44 AM ET, by ETF Channel

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, ...

FTXD's Underlying Holdings Imply 11% Gain Potential
Fri, Sep 30, 9:44 AM ET, by ETF Channel

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, ...

JKK's Holdings Imply 12% Gain Potential
Fri, Sep 30, 9:34 AM ET, by ETF Channel

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, ...

The Math Shows SYV Can Go To $61
Fri, Sep 30, 9:34 AM ET, by ETF Channel

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, ...

Sum Up The Parts: EZY Could Be Worth $70
Fri, Sep 30, 9:34 AM ET, by ETF Channel

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, ...

We Did The Math QCLN Can Go To $17
Fri, Sep 30, 9:34 AM ET, by ETF Channel

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, ...

Implied CSM Analyst Target Price: $58
Fri, Sep 30, 9:34 AM ET, by ETF Channel

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, ...

Shares of PJP Now Oversold
Thu, Sep 29, 4:14 PM ET, by ETF Channel

In trading on Thursday, shares of the PowerShares Dynamic Pharmaceuticals Portfolio ETF (PJP) entered into ...

UCO Crosses Above Key Moving Average Level
Thu, Sep 29, 4:14 PM ET, by ETF Channel

In trading on Thursday, shares of the ProShares Ultra Bloomberg Crude Oil ETF (UCO) crossed ...

TQQQ, KHC, WBA, MDLZ: Large Outflows Detected at ETF
Thu, Sep 29, 11:14 AM ET, by ETF Channel

Symbols mentioned in this story: TQQQ, KHC, WBA, MDLZ Exchange traded funds (ETFs) trade just ...

VYM, IBM, WMT, LLY: ETF Inflow Alert
Thu, Sep 29, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: VYM, IBM, WMT, LLY Exchange traded funds (ETFs) trade just ...

LEMB: Large Outflows Detected at ETF
Thu, Sep 29, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: LEMB Exchange traded funds (ETFs) trade just like stocks, but ...

IWB, MA, BMY, QCOM: Large Inflows Detected at ETF
Thu, Sep 29, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: IWB, MA, BMY, QCOM Exchange traded funds (ETFs) trade just ...

FLOT: ETF Inflow Alert
Thu, Sep 29, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: FLOT Exchange traded funds (ETFs) trade just like stocks, but ...

MetLife Moves Up In Analyst Rankings, Passing AMETEK
Wed, Sep 28, 12:14 PM ET, by ETF Channel

In a study of analyst recommendations at the major brokerages, for the underlying components of ...

iShares Core U.S. Credit Bond ETF Experiences Big Inflow
Wed, Sep 28, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: CRED Exchange traded funds (ETFs) trade just like stocks, but ...

FVD, ENB, PNC, AIZ: ETF Inflow Alert
Wed, Sep 28, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: FVD, ENB, PNC, AIZ Exchange traded funds (ETFs) trade just ...

iShares Core U.S. Aggregate Bond ETF Experiences Big Inflow
Wed, Sep 28, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: AGG Exchange traded funds (ETFs) trade just like stocks, but ...

IWO, MSCC, FICO, CPHD: Large Inflows Detected at ETF
Wed, Sep 28, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: IWO, MSCC, FICO, CPHD Exchange traded funds (ETFs) trade just ...

11.8% of RCD Holdings Seeing Recent Insider Buys
Wed, Sep 28, 9:44 AM ET, by ETF Channel

A look at the weighted underlying holdings of the Guggenheim S&P 500 Equal Weight Consumer ...

Thor Industries Reaches Analyst Target Price
Wed, Sep 28, 9:14 AM ET, by ETF Channel

In recent trading, shares of Thor Industries, Inc. (THO) have crossed above the average analyst ...

ATEN Crosses Above Average Analyst Target
Wed, Sep 28, 9:14 AM ET, by ETF Channel

In recent trading, shares of A10 Networks Inc (ATEN) have crossed above the average analyst ...

WWAV Crosses Above Average Analyst Target
Wed, Sep 28, 9:14 AM ET, by ETF Channel

In recent trading, shares of WhiteWave Foods Co (WWAV) have crossed above the average analyst ...

Nevro Reaches Analyst Target Price
Wed, Sep 28, 9:14 AM ET, by ETF Channel

In recent trading, shares of Nevro Corp (NVRO) have crossed above the average analyst 12-month ...

GPC Crosses Above Average Analyst Target
Wed, Sep 28, 9:14 AM ET, by ETF Channel

In recent trading, shares of Genuine Parts Co. (GPC) have crossed above the average analyst ...

Innoviva Reaches Analyst Target Price
Wed, Sep 28, 9:14 AM ET, by ETF Channel

In recent trading, shares of Innoviva Inc (INVA) have crossed above the average analyst 12-month ...

Add Up The Parts: IWB Could Be Worth $132
Wed, Sep 28, 8:14 AM ET, by ETF Channel

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, ...

See How United Technologies Ranks Among Analysts' Top Dow 30 Picks
Tue, Sep 27, 12:34 PM ET, by ETF Channel

A study of analyst recommendations at the major brokerages shows that United Technologies Corp (UTX) ...

SMH, TSM, TXN, AMAT: ETF Outflow Alert
Tue, Sep 27, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: SMH, TSM, TXN, AMAT Exchange traded funds (ETFs) trade just ...

iShares MSCI Philippines (EPHE) Shares Cross Below 200 DMA
Tue, Sep 27, 10:54 AM ET, by ETF Channel

In trading on Tuesday, shares of the iShares MSCI Philippines ETF (EPHE) crossed below their ...

SPY, WFC, VZ, CSCO: ETF Outflow Alert
Tue, Sep 27, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: SPY, WFC, VZ, CSCO Exchange traded funds (ETFs) trade just ...

XLV, AMGN, MDT, GILD: ETF Inflow Alert
Tue, Sep 27, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: XLV, AMGN, MDT, GILD Exchange traded funds (ETFs) trade just ...

IWV's Underlying Holdings Imply 10% Gain Potential
Tue, Sep 27, 9:54 AM ET, by ETF Channel

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, ...

The Math Shows VLU Can Go To $90
Tue, Sep 27, 9:54 AM ET, by ETF Channel

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, ...

FXD's Underlying Holdings Imply 11% Gain Potential
Tue, Sep 27, 9:44 AM ET, by ETF Channel

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, ...

SPXV's Underlying Holdings Could Mean 10% Gain Potential
Tue, Sep 27, 9:44 AM ET, by ETF Channel

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, ...

Sum Up The Pieces: XITK Could Be Worth $69
Tue, Sep 27, 9:44 AM ET, by ETF Channel

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, ...

Implied RSP Analyst Target Price: $91
Tue, Sep 27, 9:44 AM ET, by ETF Channel

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, ...

Douglas Emmett Reaches Analyst Target Price
Tue, Sep 27, 9:34 AM ET, by ETF Channel

In recent trading, shares of Douglas Emmett Inc (DEI) have crossed above the average analyst ...

TC PipeLines Reaches Analyst Target Price
Tue, Sep 27, 9:34 AM ET, by ETF Channel

In recent trading, shares of TC PipeLines, LP (TCP) have crossed above the average analyst ...

Implied XSD Analyst Target Price: $57
Tue, Sep 27, 9:34 AM ET, by ETF Channel

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, ...

O Crosses Above Average Analyst Target
Tue, Sep 27, 9:34 AM ET, by ETF Channel

In recent trading, shares of Realty Income Corp (O) have crossed above the average analyst ...

Implied SPHQ Analyst Target Price: $27
Tue, Sep 27, 9:24 AM ET, by ETF Channel

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, ...

  More articles:  1 2 3 4 5 6 7 next »

ABOUT US »   ADVERTISE »   CONTACT US »   TERMS OF USE & PRIVACY POLICY »

Three Long/Short Ideas For Euro Zone Debt Drama | Self Directed Investor | Copyright © 2008 - 2016, All Rights Reserved

Any ideas and opinions presented in Self Directed Investor content are for informational and educational purposes only, and do not reflect the opinions of BNK Invest, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All site visitors agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

SDI is associated with: ValueForum.com -- a subscription-based online social networking forum of serious individual investors. | MarketNewsVideo.com -- videos appearing on SDI are produced by Market News Video. | TickerTech.com -- stock quote content appearing on SDI is at least 20 minutes delayed and is powered by Ticker Technologies. | GoldStockStrategist.com -- Edited by Scott V. Nystrom, PhD, Gold Stock Strategist provides analysis on gold mining companies.