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The Absolute Best Way to Buy European StocksBy
Tuesday, June 24, 2014
"We have prolonged banks' access to unlimited liquidity up to the end of 2016," Mario Draghi, the European Central Bank (ECB) President, said over the weekend.
My friend, Mario Draghi, and the ECB have shown us their cards. They're following squarely in the U.S.' footsteps. They're going to do everything they can to devalue their currency and inflate asset prices.
Last week, I explained why Draghi is giving us a great opportunity to short the euro. But we have an even better opportunity in European stocks, right now.
You see, Draghi's negative interest rate and easy-money policies will have two major side effects...
Today, we have a simple way to make both of these bets, in a single, simple investment. It's the absolute BEST way to invest in Europe today. Let me explain... In the U.S., I've said we're in about the seventh inning of this great Bernanke Asset Bubble. I expect stocks in the U.S. can still go higher... but it's getting late in the game.
However, in Europe, we are probably closer to the fourth inning of the "Draghi Asset Bubble." So there's a lot left to go in the game. The chart below shows what I mean...
 As you can see, the U.S. has broken out to new all-time highs in the past year. Yet, European blue chips have been nearly flat since 2005... and remain 32% below their pre-crisis highs.
Because of this, Europe offers a better opportunity than the U.S. right now. Buying Europe today is a lot like buying U.S. stocks two years ago.
Draghi is just entering crisis mode now. He has cut interest rates to negative levels and has said over and over that he's willing to do just about anything to boost Europe's economy.
His stimulus efforts should continue pumping up stock prices in Europe AND decreasing the value of the euro in the process.
One simple investment will give us all of the upside of European stocks... but protection from any falls in the euro... the WisdomTree Europe Hedged Equity Fund (HEDJ).
Importantly, HEDJ eliminates our currency risk. So if the euro falls by 10% or 20%, it won't make a difference to HEDJ. This is a key feature of this fund.
Longtime readers will remember we saw a similar setup in Japan in 2012...
In my True Wealth newsletter, we bought shares of the WisdomTree Japan Hedged Equity Fund (DXJ). DXJ is just like HEDJ, but in Japan. It was the first time I'd bought a fund like this... It worked out fantastically...
Japanese stocks soared nearly 50% five months after we bought, and the yen crashed by nearly 20% in the same time period. We enjoyed all those gains in stocks, and missed out on all those losses in Japan's currency. The fund worked exactly as advertised.
Today, we expect the same outcome in Europe. We expect...
Shares of HEDJ give us an opportunity to profit from both of these outcomes.
In short, Europe looks a lot like the U.S. did a couple years ago.
It hasn't broken out to new highs yet. And its central bankers are finally in panic mode, willing to crush the currency. A weaker euro will improve corporate profits, further helping European stock prices.
Our opportunity is great. Don't miss shares of HEDJ today.
Good investing,
Steve
Further Reading:
The U.S. stock market is hitting new highs... and many investors are wondering if it's time to take profits. But Steve says if you had sold your stocks at new highs in the past, "you would have missed out on some phenomenal gains in stocks." Surprisingly, buying stocks at new highs has been a winning strategy since the beginning of stock market history. Get the story here.
"Because the Bernanke Asset Bubble is so powerful," Steve Sjuggerud writes, "I believe we will see much higher highs before it's all over. The reasons that stocks have soared over the last few years are still in place today..." Find out what they are right here.
Market NotesA CHECK ON OUR 'HIGH HORSEPOWER' ECONOMIC INDICATOR Is the world's economic roof caving in? Not according to our high-horsepower economic indicator...
If you read investment newsletters for more than a month, you're bound to come across claims that the global economy is a wreck. The profits and share price of Cummins Inc. say otherwise.
Regular readers know we like to monitor Cummins Inc. for its take on the global economy. Cummins is the world's largest independent maker of high-horsepower diesel engines... the kind that power bulldozers, cranes, heavy trucks, mining shovels, and electrical generators. This makes its share price rise and fall with the pace of economic activity. For example, we noted the stock's big breakdown in January 2008, which came well before the economic crisis.
Cummins' take on the global economy right now is clear: Things can't be all that bad. Cummins recently reported a 12% increase in quarterly revenue. As you can see from today's chart, shares have climbed from $85 to $158 in the past two years... and are sitting at a new high.
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