An Easy Way To Profit From Europe's Debt
Crisis
The Dynamic Wealth Report
May 11, 2010
by Corey Williams, Editor
What a crazy ride the markets have been on over the last week. As an
individual investor, it’s easy to feel like you’re caught up in a perfect
storm. I know I’ve had a few waves wash over my investment boat.
When storm clouds roll in, it’s important to hold onto your core
principles and sell discipline. You don’t want to sell into a panic.
It’s a sure fire way to sell at the bottom every time.
The good news is, with every storm there are new investing
opportunities. That’s why it’s always good to keep a portion of your
portfolio in cash. You need dry powder if you’re going to capitalize on
a panic.
The biggest hurdle for many investors to overcome is their own fears.
Don’t let fear paralyze you into inaction. Remember, as Warren Buffet
says, the time to be greedy is when everybody else is fearful. And the
time to be fearful is when everybody else is greedy.
I don’t think you need to look any further than ground zero of the
recent market turmoil to find a great opportunity. Take a look at
European stocks. They’ve been lagging behind US stocks so far this year.
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Here’s a year-to-date chart of the SPDR S&P 500 ETF (SPY) and the
Vanguard European ETF (VGK).

You can see SPY is outperforming VGK by more than 13% so far this year.
This is a major break from the two ETFs performance since March of 2009. They had nearly identical performance until sovereign debt issues reared
their head in February. You can clearly see where the two began to go
their separate ways on the chart.
Now the European Union finally has a real plan in place to bail out
Greece. And more importantly, they set aside $1 trillion to ensure other
debt laden European countries don’t face the same fate as Greece.
The EU knew they had to act decisively to put an end to investors’
fears. And that’s exactly what they did. The $1 trillion fund will
ensure there’s sufficient liquidity for all EU members to finance their
sovereign debts for as long as it’s necessary.
It’s such a powerful force it’s being called the “nuclear option”. It’s
a last resort. But it gets the job done.
With the recent turmoil now in the rearview mirror, I’m expecting
European stocks to play catch up.
I wouldn’t be surprised to see VGK outperform SPY over the next few
weeks and months. At least until VGK catches up with SPY. That means
now’s a great time to buy VGK.
But VGK isn’t the only way to play a rebound in European stocks. Many of
the other ETF providers have European ETFs too.
If you’re looking to capitalize on a short term trade, you might take a
look at
ProShares Ultra MSCI Europe (UPV).
UPV is a leveraged ETF. It’s designed to go up twice as much as the MSCI
Europe Index on a daily basis. If we get the bounce in European stocks
I’m expecting, UPV should double the returns of the non-leveraged ETFs.
The leverage in UPV can turn a 10% bounce in European stocks into a very
profitable 20% gain.
But it’s not going to happen unless you put aside your fears and buy
when everyone else is still afraid. Don’t let a golden opportunity pass
you by. Take a look at the European ETFs today.
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It’s been a quiet week in the IPO market. Hong Kong’s Swire Properties
shelved their IPO last week as market sentiment cratered. Apparently the
Dow dropping 1,000 points in a matter of minutes puts investors in a bad
mood…
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