With the recent bailout of Greece, markets have not warmed up to Europe’s debt problems, and this has meant that the Euro has continued to weaken against the USD (sort of like a teeter-totter built out of CDO’s).
As of Friday, May 14, 2010, one Euro will buy a whole $1.237 USD. That means the Euro has broke through its previous support level which was at $1.24 – now the Euro is trading back at the old lows of 2008 (the last time there was such a flight to the “safe-haven” status of the USD).
According to Richard Ross (global technical strategist at Auerbach Grayson), if the Euro breaks through $1.23 the next key support isn’t until $1.21, and that will mean the Euro will have retraced all of its gains since the 2001 bull market highs. Wow.
Six Reasons Why The Price Of Gold Is Still Rising
Cheap Vacations To Europe
.
What this means is that Americans in particular (since it’s your currency the Euro is largely declining against) ought to consider buying some Euros now in order to stock up for future vacations. Maybe you aren’t thinking of going this summer, but perhaps a business trip in the fall? Even if it’s next year, I’d advise stocking up. The Euro won’t be disbanding as a currency before that (personally, I do not think it will dissolve at all, but even if it was on track to do so, this would take a while to happen).
Besides, with the lingering uncertainty (merely swept temporarily under the carpet) over U.S. debt obligations, who knows when the next stock rally will drag the USD down again. Europe’s debt problems might undergo a nice makeover during the summer (at least in the eyes of the market); earnings might improve (in fact they are already still very good) – all of this could retrace the flight to USD.
It means that now might be a really sweet window for getting into the Euro. And it will help you diversify out of USD, as well.
How To Get Out of USD and Hedge Against USD Weakness
Alternatives for Playing Euro Weakness
.
If you’re not so intent on owning Euro currency, perhaps due to your own opinions about the monetary union, consider just loading up on some undervalued European stocks. No matter what happens to the “Eurozone” politically or monetarily, individual companies will still largely rise and fall on their own terms, especially if they are multinationals and derive profits from overseas.
Novartis, Nestle, Deutsche Telekom, Total S.A., BNP Paribas, even the National Bank of Greece (for you contrarians!) – all could be great names in ADRs. You might thank yourself once their earnings continue to climb and the Euro improves again.
Consider this: the last time Europe was this cheap will soon look to be 2001. Don’t let that opportunity slip away.
*Disclaimer: I do not currently own any of the stocks mentioned here, nor the Euro itself.
If you found this article useful, please retweet it on Twitter or stumble it on StumbleUpon. I’d also love it if you subscribe to my RSS feed for free tips and posts like this one delivered right to your reader or by email (posts are not for duplication).
Related Posts - What To Expect in Stock Markets for February
- Peter Schiff's New Book: (4) Buy Foreign, But Not ADRs
- Different Banking Cultures Around the World
- Peter Schiff on the Rally and Why You Still Need to Buy Gold
- The New Gold Standard: Will Gold Be Part of A Basket of Currencies Replacing the Dollar as World Reserve?
Related Articles From Other Websites
{ 7 comments… read them below or add one }
“Consider this: the last time Europe was this cheap [$1.23] will soon look to be 2001. Don’t let that opportunity slip away.”
Total BS – the Euro was much cheaper back then at lows of $0.80c.
@dgalbraith – I said “soon” – if the Euro takes out $1.21, that’s the last resistance point before sinking to 2001 levels, according to Ross. Since posting this, the Euro has sank only slightly further, down to $1.235. We’ll see on Monday if it rallies again – if it does, I doubt it will sink back to 2001 levels.
Thanks for the article. Novartis and Nestle are Swiss-based companies and are priced in Swiss francs, not Euros.
Good point, Jay – though they are also multinationals and derive profits from everywhere – good for diversification in the face of the Euro or USD declines. Interestingly, the Euro is back at some higher levels again already – after dipping as low as $1.214 at one point on Monday, I believe.
“You Might Be Crazy not To Buy Euros Now”
and
“Disclaimer: I do not currently own any of the stocks mentioned here, nor the Euro itself”
So you are crazy :) (only joking)
All I have to say is “GO USA!” and “Go US Dollar!” :)
Thanks for the article. Novartis and Nestle are Swiss-based companies and are priced in Swiss francs, not Euros.