Tag Archives: nysejpm

Up 20% In 3 Months Since My Recommendation, Sell EUO Stakes Now

The ProShares UltraShort Euro (EUO) ETF is up 20% over the three months since I recommended it, but I’m suggesting investors close their stakes here. The factors that came against the euro are about to reverse, and I see the euro gaining strength against the dollar near-term. A favorable Greece resolution is imminent in my opinion, and the European economy is steadying. The dollar is overextended versus the euro and against other currencies and should give way now, and thus the EUO ETF’s success should end here. In mid-November, I suggested investors buy the ProShares UltraShort Euro (NYSE: EUO ). Today I’m suggesting investors close the position and take the 20% profit earned over the 3 month period. I see the factors that have worked against the euro about to reverse, so sell the EUO ETF and take your gain. Holding Period Chart of EUO +20% at Seeking Alpha If you agreed with my investment thesis on the EUO ETF shared on November 19, 2014 when I suggested investors buy the ProShares UltraShort Euro , well then you have generated a 20% paper profit in the three month holding period through the February 13 close. It’s now time to close the stake, as I am anticipating the euro will strengthen against the dollar from here. My main thesis in the aforementioned report was keyed on a potential Russian rebuttal to Europe’s hand in sanctions against it. However, the curiously timed and perhaps not coincidental drop in oil prices that occurred this winter handcuffed Russia, in my opinion. It seems to have effectively kept the cash-strapped, energy based Russian Federation from acting in the manner I anticipated it might. I speculated Russia could cut off the flow of energy into Europe in the middle of winter and harm the euro’s value against the dollar. While this is still possible, the also curiously timed recently stepped up effort by European leaders to drive a peace initiative between Ukraine and the Russian backed rebels in the East of the country is serving the same purpose, again keeping Russia from acting against Europe. Importantly, in my November report, I also said that a weakening European economy and the potential for European Central Bank (ECB) extraordinary action had been serving the dollar versus the euro and should continue to add support to the dollar. This proved to be a continuing driver against the euro, assisted by the critical political developments in Greece that later followed. In essence, the Greek issue took the place of my Russian factor and drove the euro down versus the dollar, and led the ProShares UltraShort Euro up 20% over the three month period. Intensifying fear of a Greek exit from the euro-zone has been the booster of the dollar against the euro year-to-date, and affected a great deal more than just the currencies in my opinion. In the uncertainty, demand for U.S. treasuries drove U.S. interest rates down, and thus major U.S. financial sector issues in Bank of America (NYSE: BAC ), J.P. Morgan Chase (NYSE: JPM ) and others. The stronger dollar has played an important role in the fall of oil prices along with supply issues in my view. And the uncertainty around Europe and how it might affect the United States economy worked against U.S. equities this year in my view. But all this is about to change. I anticipate a favorable resolution between Greece and its European partners is imminent. The removal of the palpable fear that has gathered around this issue should serve a U.S. market rally in my opinion. Improving expectations have already begun to drive U.S. interest rates higher, and the dollar recently gave way a bit to the euro. European economic expectations are also improving in my opinion and Japan just exited recession . As the euro gains its strength back against the overextended dollar, the EUO ETF, which is a bet against the euro, should give way. Thus, while still ahead of the announcement of a Greek deal, you have time momentarily to close the investment I suggested in November. If you need a place to invest your gains from the EUO play, on the same thesis, I have recently suggested investors look to: the UDN ETF contra-dollar investment; or a short of the UUP ETF ; and a short of the iPath S&P VIX (NYSE: VXX ); or long investments in financial sector beneficiary Bank of America , which should rise on higher U.S. interest rates. Also, I’ve suggested Greek issues including the National Bank of Greece (NYSE: NBG ) and the Global X FTSE Greece 20 ETF (NYSE: GREK ). Readers may review my column for more. Disclosure: The author is long GREK, NBG, BAC. (More…) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. Additional disclosure: I’m short VXX and UUP.

What To Hold In The Face Of Deflation

Deflation is turning into a global threat. Falling prices are bad for the economy, not good. Until government becomes willing to spend buy gold, buy bonds and buy defense stocks just in case. Today’s Great Deflation is creating a lot of casualties. Among the most interesting are big banks’ trading desks and hedge funds. Inconceivable does not mean what they think it does. Goldman Sachs (NYSE: GS ) blamed “volatility” for a bad trading quarter. (Why isn’t it volatility when prices go up?) JPMorgan Chase (NYSE: JPM ) talked up legal costs and nasty regulators rather than admit that their traders got things horribly wrong. Despite all this, the bank’s shares fell below book value , what I like to call the “Mendoza Line” of banking. JPMorgan Chase CEO Jamie Dimon is desperate to keep his bank together because, in the face of ruinous trading losses, many hedge funds are facing, well, ruin. John Paulsen and Carl Icahn got killed by the deflation in oil. Everest Capital saw its main fund wiped out by the Swiss Franc’s sudden revaluation, done in the face of continuing European deflation, and it cost West Ham the shirt off their backs . FXCM (NYSE: FXCM ) was forced into an emergency rescue due its customers’ losses in currencies. Funds have been forced to cut their losses on soybeans. Even the computers are getting killed. Deflation means a shortage of buyers in the face of abundant supply. It is precisely what the world faced in the early 1930s. Unfortunately both policymakers and traders are acting as they did then. They refuse to acknowledge the reality that, without buyers, markets can’t clear, and they’re doing everything they can to discourage buyers as a matter of policy. John Mason is right. The business model of the big banks is flawed . So are their political models. The world is threatened by squeezed margins, cuts in production, business contraction, falling wages – the same negative spiral that Japan has suffered from for two decades. The most dangerous delusion is that the problem will take care of itself and that demand will magically “materialize” because there are so many bargains out there. It didn’t in the 1930s, and it won’t in the 2010s. What the hedge funds and the big banks should be doing is getting on the phone to policymakers and telling them to buy, buy, buy, to spend, spend, spend. Maybe send Elizabeth Warren’s PAC a check. Streetwise Research’s call to buy gold is, unfortunately, good short-term advice. So is the call to hold strong bonds, especially U.S. government bonds, which despite their tiny yields have kept going up in price, delivering big capital gains over the last six months. But that’s short-term advice. At some point governments will realize they need to spend big to stimulate domestic demand and whip deflation. I hope they do it before public demand switches to guns from butter but, just in case, you might want to keep some Boeing (NYSE: BA ) in your portfolio.