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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).

SPYvVGK Chart

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.

***Editor's Note*** We're just about full on our new Quick Strike Trader service.  Too bad too, because both of yesterday's initial trades are up significantly.  So, if you're interested in making quick money from all the volatility we're seeing in the market, click here now.  But you better hurry as we plan on closing the doors on this opportunity at noon tomorrow!

IPO Update 

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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Issue Date:
 Tuesday, May 11, 2010


Notable Highs and Lows

•  Dr Pepper Snapple Group (DPS) hit a 52-week high of over $37.45.  The beverage manufacturer raised their 2010 EPS guidance.  Their market cap is now over $9 billion.

•  Newmont Mining (NEM) hit a new 52-week high of over $58.50.  The gold miner is surging higher today along with the price of gold.  They have a market cap of over $28 billion.

•  Dean Foods (DF) hit a 52-week low of under $9.50.  The company is facing stiff competition from off brand milk products.  Their net income fell 43% in the first quarter, prompting the company to suspend its full year earnings forecast.  Their market cap is now under $1.8 billion.


Quote of the Day

"Don't hit at all if it is honorably possible to avoid hitting; but never hit soft!"

                          -
Theodore Roosevelt

 
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Top Global Markets

Country Gain
Sri Lanka 25%
Denmark 17%
Indonesia 13%
Hungary 12%
Egypt 12%
*Performance from 1/1/10


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Country Loss
China 17%
Spain 13%
Portugal 13%
Italy 10%
Hong Kong 7%
*Performance from 1/1/10


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