Posted on 07/18/2011
We recently came across a fine and demonstrative magazine cover from The Economist. This time it's finally not about the American economy but rather Europe and the "Euro crisis". The cover proclaims, "On the edge: why the euro crisis has just got a lot worse." Unfortunately, The Economist, which is well known for their creative and witty magazine covers, re-used a similar cover from the peak of the Financial crisis that was published back in October, 2008 which said "World on edge..." In that cover there was an image of a man about to fall off a cliff, but the current cover shows a Euro about to roll off the cliff. The rocks of the cliff happen to look like the "boot" of Italy. We can't help but admire this cover because it clearly highlights the sentiment of investors across the globe, as well as the feelings of most citizens of countries across Europe. The reason why we want to bring this to your attention is due to the fact that mainstream magazine covers often provide a reflection of what is comfortable and palatable to investors at a given time. We find magazine covers useful because they remind us of what market psychology has categorized as "certainty".
The current magazine cover has certainly painted the Euro crisis in a negative light, and from the looks of it, it appears that it's getting worse. Whether or not the market is at a bottom has yet to be determined, but the recent cover does make for an interesting observation. With all of that said, we'd like to first point out a couple of ETFs that pertain to the subject. The first one is the CurrencyShares Euro Trust (FXE), which is a fund that is designed to track the price of the Euro. On the equity side, we look at something like the iShares MSCI EMU Index Fund (EZU), which consists of stocks from the following 11 countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal and Spain. All of which are at the heart of the "Euro Crisis".
For additional ideas in the European space, you can refer to AllETF.com as it offers several great search functionalities. One of them is the ETF Xray tab, which is located on the top of the page. Simply select "Europe" as your continent under the Country section, and this will instantly provide a list of ETFs with weighting in Europe from the highest and the lowest percentage. The second way is to use the search box on the top right of the page. By typing the word "Europe," it will pull up a list of products that have interest in Europe.