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Time to Bet Against the Euro

By Dr. Steve Sjuggerud
Monday, June 16, 2014

"They are going to trash the euro," economist Gary Shilling said a couple weeks ago.
 
I agree with him...
 
Shilling is the only economist on Wall Street to have correctly predicted lower interest rates – for decades. He is certainly one of Wall Street's most independent thinkers. And he and I agree on the euro...
 
Specifically, Shilling said:
 
Mario Draghi, the head of The European Central Bank, came out and said what I was predicting, that they are going to trash the euro because they see it as a promoter of deflation, of which they are scared stiff. (The full interview with Shilling is here.)

The fastest and easiest way for Draghi to jumpstart Europe's economy would be to "trash the euro" – as Shilling said.
 
Draghi needs to act fast... So he has taken pages out of former U.S. Federal Reserve Chairman Ben Bernanke's playbook. Several years ago, Bernanke put unprecedented economic stimulus measures in place in the U.S. – cutting interest rates to zero and printing money. This caused stock prices (and other assets like real estate) in the U.S. to soar higher than anyone could imagine, and it appears that the U.S. is on solid footing.
 
Draghi is hoping for the same. He has cut interest rates below zero, stocks are up, and he hopes the economy will recover, too.
 
Draghi's plan is to "trash the euro." We will take what he's giving...
 
It's time for us to bet on a lower euro.
 
Fortunately, we have everything that we want to see in place today...
 
We saw a similar setup in 2009. In late 2009, the euro had been soaring. And traders were betting heavily on a higher euro. So in my True Wealth newsletter in 2009, we bet against the euro – we bought shares of the ProShares UltraShort Euro Fund (EUO). Subscribers pocketed a 31% gain in six months, when we sold.
 
Fast forward to one month ago... and the setup conditions were the same as they were in 2009.
 
Draghi's back was against the wall. He needed to weaken the euro. (Central bankers might not be good for much... but one thing they can do is weaken a currency if they set their minds to it!)
 
So in last month's issue of True Wealth, we bet on Draghi trashing the euro... we bet that what happened in 2009 will happen again... and we bought shares of EUO, again.
 
So far, so good. But Draghi is not done. There are more gains to come...
 
As I write, we have an uptrend in EUO. EUO is breaking out to highs not seen since early February of this year. It's looking good.
 
Thankfully, you can set this trade up in a high-reward, low-downside-risk way...
 
The lows for EUO are around $16.50 – which is not that far from today's price around $17.50. So you can easily set up a trade where your downside risk is $1.00 – but your upside potential is $3.00 or more – if you use a $16.50 stop loss.
 
EUO is a unique investment... It will give you a lot more upside than the currency itself, if I'm right about the euro.
 
Here's how it works: If the euro falls by 1% in a day, this fund will rise by 2%. The opposite is true as well – if the euro rises 1% in a day, this fund will fall by 2%. (A proper description for this type of fund would be to call it an "inverse 2x fund.")
 
In short, Draghi is going to "trash" the euro. And EUO is an easy way to profit as he does. Check it out...
 
Good investing,
 
Steve




Further Reading:

Find more of Steve's latest market advice here:
 
Up 109% in Tech Now... Much More to Come
"I told you NOT to sell tech stocks when we were up by 98%. Now, two weeks later, we're up 109%. Is it time to sell now?"
 
Interest Rates Really Could Stay Low for Another 10 Years
"If you are betting on higher interest rates, then you are betting WITH the entire crowd – and that is usually not the most profitable place to be..."

Market Notes


NEW HIGHS OF NOTE LAST WEEK
 
Apple (AAPL)... Big Cheap Tech
Intel (INTC)... Big Cheap Tech
Oracle (ORCL)... Big Cheap Tech
Novartis (NVS)... Big Pharma
Becton-Dickenson (BDX)... medical devices
Wells Fargo (WFC)... bank
Discover Financial Services (DFS)... credit cards
Dollar General (DG)... dollar stores
Yum! Brands (YUM)... Taco Bell, Pizza Hut, KFC
Pepsico (PEP)... soft drinks
Anheuser-Busch InBev (BUD)... booze
Altria (MO)... cigarettes
Smith & Wesson (SWHC)... guns
Activision Blizzard (ATVI)... video games
Walt Disney Co. (DIS)... entertainment
Southwest Airlines (LUV)... airline
Norfolk Southern (NSC)... railroads
Union Pacific (UNP)... railroads
Alcoa (AA)... aluminum miner
Hess (HES)... Big Oil
British Petroleum (BP)... Big Oil
Halliburton (HAL)... oil services
Baker Hughes (BHI)... oil services
Schlumberger (SLB)... oil services
Carrizo Oil & Gas (CRZO)... oil and gas production
Continental Resources (CLR)... oil and gas production
EOG Resources (EOG)... oil and gas production
Caterpillar (CAT)... heavy equipment
Cummins (CMI)... diesel engines
3M (MMM)... manufacturing
Dow Chemical (DOW)... chemicals
Lockheed Martin (LMT)... "offense" contractors

NEW LOWS OF NOTE LAST WEEK
 
Not many... it's a bull market!

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