Tag Archives: nysenbg

Investment Plan For The 2015 Financial Armageddon

Summary From Europe to China, the world’s economies are in turmoil. Don’t buy gold, silver, or U.S. equities, or long-term U.S. bonds. Consider short-term trades with Greece/China. And remember, cash is king. The world’s economies are a mess. Below I outline a manual to guide investors through the impending 2015 financial armageddon by pointing to several problems and providing an investment plan to help survive a crash. The Problems Chinese stock markets have nosedived 30% to 40% in the past few weeks. China’s market has yet to experience such a crash and government is in full panic mode trying to slow the decline. Official GDP growth still states at 7% but real estimates are likely to be only 4% growth. Still good, but not double digits like some years prior. China’s real estate bubble may be a major contributor to this bloodbath. The Greece debacle is still unfolding. Simply put, Europe is in a lot of mess. The Euro has declined dramatically and it will be some time for it to recover. Some European nations have taken the drastic step of reducing interest rates to negative levels (meaning banks get charged by the central bank if they don’t lend). Even if a Euro-Greek deal is reached, this will only delay a final solution as Greece’s people are not determined to change their ways. Pessimists believe that a Grexit could be followed by a dismantling of the European Union as the rest of the PIGS decide also to not pay their debt. One can only hope that Germany’s economic sway will keep the continent from falling apart. U.S. stock and bond markets are still at post-recession highs. There has not been a correction in the stock market in over 7 years; the S&P (NYSEARCA: SPY ) is up 170% since the 2008 recession ended. Irrational exuberance appears to be the only supporter of the economy. I’m not sure what will make market pop, but in my view, it is not worth the risk of holding U.S. equities. As the saying goes: What goes up must come down. Geopolitical nightmares continues. With ISIS dismantling the Middle East, Russia still making advances on Ukraine, and China slowly encroaching in the Pacific, it is clear that the U.S. has lost control as being the world’s policeman. The end of Pax Americana has come. These overhanging geopolitical issues will likely continue to plague the markets with detrimental volatility. The prospective U.S. interest rate increase terrifies investors. Yellen appears to be capriciously dying to increase the interest rates. Her veiled remarks point more and more to an imminent rate increase. Economists are betting she will do so in September . This will be a poor move, as the already shaky U.S. economy will be hurt as borrowing rates increase. Yellen’s decision might trigger a recession if her decision is too drastic. One can only hope that she further delays her decision. The Investment Plan Don’t buy bonds unless you hold intend to hold them until maturity. With interest rates most likely rising, your newly purchased bond’s price will decrease. If you are compelled to buy bonds, buy short-term bonds that will be less effected by rises in interest rate. Avoid long-term holdings in U.S. equities. Market has been too hot for too long. Would wait for a market correction for buying opportunities. Opportunities shorting equities, particularly the overheated tech sector, may arise when the market does finally selloff for the risk-taking. Others may want to consider hedging the S&P 500 with the ProShares UltraShort S&P500 (NYSEARCA: SDS ). Don’t be fooled into buying gold or silver. In previous times of turmoil these precious metals have historically been seen as safe-haven investments, however both commodities continue to downtrend. The SPDR Gold Trust (NYSEARCA: GLD ), the largest gold ETF, has declined more than 37% since its peak in 2011 bubble. In addition, iShares Silver Trust (NYSEARCA: SLV ), the largest silver ETF, is down an astonishing 67% since its 2011 peak. Both metals are to be avoided. GLD data by YCharts Those with an appetite for risk should consider small, short-term bets on both Chinese and Greek stocks. Personally holding National Bank of Greece (NYSE: NBG ) which has been having a wild wide this week. Worth the risk if trade is well timed. The Global X FTSE Greece 20 ETF (NYSEARCA: GREK ) may a “safer” bet. Buyer beware as investing in Greece is certainly not for the faint of heart. If trading, consider limit orders and stops to minimize losses. GREK data by YCharts China has had a rough couple of weeks, but in the past two days has begun to recover (though some are reporting this as a dead-cat bounce forced by the Red Army). The 30% selloff is steep for a market correction. For instance, the S&P historically typically experiences corrections of only10-20%. Should this be more than a correction, may go down more, but don’t think the paper dragon is burning yet. Recommend iShares MSCI China Index Fund (NYSEARCA: MCHI ) or iShares FTSE/Xinhua China 25 Index (NYSEARCA: FXI ), the two largest China-focused ETFs. MCHI data by YCharts Cash is king. In periods of immense market uncertainty, holding cash may be the best option. Not only has the dollar been appreciating, but its liquidity will be appreciated when markets takes a turn for the worse. When blood is in the streets, opportunities will be plentiful. Best of luck with the 2015 financial armageddon and try not to follow the herd to the slaughterhouse. Disclosure: I am/we are long NBG. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Share this article with a colleague

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.

Will Recent Strong Gains In The Greek ETF Last?

Although the Eurozone markets have perked up on the recent QE launch, Greece continues to trouble investors. The country is still deep in debt and its unemployment rate is a nagging concern. The malaise intensified in December 2014 when the Greek prime minister Antonis Samaras called snap elections in the wake of the political strife in Greece and lost it (read: Polls Indicate Syriza Win: More Pain for Greek ETF? ). Anti-austerity party Syriza came to power and kept on negotiating with the ECB to reach a debt-deal while reinforcing the cancellation of steep austerity measures. At the time of election, the leader of Syriza had vowed to cancel the austerities and quite expectedly, the intent to end austerities is flaring up a disagreement with the EU/IMF, lenders risking Greece’s stay in the Eurozone bloc. Last week, in an interview to Germany’s Stern magazine , Prime Minister Alexis Tsipras promised that Greece will be “a completely different country,” in the next six months. This positive vibe charged up the waning Greece ETF, at least for the time being, and pushed up Global X FTSE Greece 20 ETF (NYSEARCA: GREK ) by over 20% in the last five trading sessions (as of February 13, 2015), though the fund has added just 3% in the last one month. Shares of the country’s biggest bank National Bank of Greece S.A. (NYSE: NBG ) spiked on hopes that the country will retain its spot in the Euro bloc and get assistance from the ECB. The shares of NBG skyrocketed more than 45% in the last five trading sessions (as of February 13, 2015). Will the Uptrend Last? While the market was anticipating a positive outcome, the chances of a clean ending to this situation seem less likely. On February 16, dialogues between the foreign creditors and Athens failed as the latter proposed a six-month extension request of its international bailout package. If the parties fail to reach a unanimous decision by February 28, the date which connotes the expiry of the four-year bailout program offered to Greece, the country and its banks would crash into a cash crunch. The European Central Bank will decide on February 18 whether an emergency lending to the Greek banks, which definitely carry high interest rates, should be continued or not. Notably, the country is due for a hefty loan repayment in March, per Reuters. The Greece banks are already seeing signs of a capital flight at an expected rate of 2 billion euros ($2.27 billion) a week. Overall, Greece is in for trouble yet again and investors have nibbling doubts on this risky market. The Athens Stock Exchange General Index slipped more than 3.8% at the close on February 16 as drumbeats of losses were heard after the country failed to strike a debt deal (read: Greek ETF Faces Volatility on ECB Move ). Financials make up about 30% of GREK and is an important driver to the returns of the fund and the country’s current economic issues. The fund currently has a Zacks ETF Rank #3 (Hold). Bottom Line Investors should remember that despite the recent takeoff, GREK has been on a sale with a P/E (ttm) of 11 times versus the biggest European ETF Vanguard FTSE Europe ETF’s (NYSEARCA: VGK ) P/E of 15 times and the Euro zone powerhouse Germany’s iShares MSCI Germany’s (NYSEARCA: EWG ) 14 times of P/E (ttm) figure. So, a bit of a way up was probably long in arrears for GREK. This is more so given Greece’s Q3 2014 growth rate (0.7%) outstripped all other Eurozone countries (read: What is Behind the Greek ETF Surge? ). However, if the country fails to negotiate with its Eurozone associates, the rosy economy which Greece has just started to enjoy might wither away before being in full bloom. Moreover, a discord will find other Eurozone countries from Malta to Greece’s biggest creditor – Germany – in dire straits. So, all eyes should be now on the progression of the debt deal before one can surely predict the fate of the euro, Greece and the broader European market.