ECB
Three ETFs to Profit from Europe’s Economic Recovery
By George Leong for Daily Gains Letter | Mar 6, 2015
Eurozone Still Messy, but Economic Recovery Has Begun
Europe is open for business. Well, kind of. The region—namely the 19-country eurozone—has recently been in the news with the Greece fiasco and its potential exit.
Greece now has a four-month reprieve in the form of an extension to its current bailout loans and terms, but the distressed country still has to convince eurozone finance ministers that its revised bailout plan for austerity measures makes sense.
For the time being, we are seeing some progress in the eurozone that points to growth. I had been worried about the negative impact from the Russian mess, but so far, it appears to be a non-issue. In the end, Germany, the strongest member of the eurozone, remains on solid footing and that’s what really matters.
What’s Behind the Eurozone’s Economic Progress?
The region is also being driven by the flow of easy money after the previous decision by the European Central Bank (ECB) to maintain near-zero interest rates and buy back about US$70.0 billion in eurozone bonds monthly. Sound familiar? It’s just like what the Federal Reserve did for years. The ECB’s similar actions will likely mean gross domestic product (GDP) growth and higher stock market prices ahead in the region.
Now the eurozone is not as strong in its recovery as the U.S., but I sense there will continue to be good investment opportunities to come, especially given the cheaper relative valuation of the eurozone.
Depending on whom you listen to, the eurozone’s GDP is expected to expand anywhere from 1.2% to perhaps as high as 1.5% this year. Again, not great, but it’s … Read More
ECB’s Money Printing a Profitable Opportunity for U.S. Investors?
By George Leong for Daily Gains Letter | Jan 26, 2015
The money printing presses may be dry in the U.S., but they are just being inked up across the Atlantic in the eurozone, where they’re beginning to print easy money in the form of euros. While there are both pros and cons to this move, there is the potential for American investors to profit.
Recall how the Federal Reserve’s three rounds of quantitative easing (QE1, QE2, and QE3) over the past six years helped the stock market and economy. Of course, there are the negatives with the booming $18.0-trillion national debt.
ECB Introduces Easy Money Printing Program
Looking to avoid a hard landing, so to speak, the European Central Bank (ECB) did just as it was expected to do and held the current near-zero interest rates intact; but even more important was its decision to buy about 60 billion euros in bonds monthly in the 19-country eurozone. That’s about 69 billion greenbacks (or $69.0 billion). That amount isn’t far off of the $85.0 billion the Fed was buying, or should I say printing, each month before the ink dried up on QE3. The ECB’s program will begin in March and continue to the end of September 2016.
Just like what we witnessed in the U.S., the aim of the monetary easing in the eurozone is to help jumpstart the stalling economy and avert a potential recession.
Easy Money Just in Time
The timing for the eurozone was critical, given that the region’s two major pillars, Germany and France, are beginning to feel the effects from the other weaker member nations.
And recall that the eurozone has Greece and its financial … Read More
Interest Rates: Why They’re Not Headed Up Anytime Soon
By George Leong for Daily Gains Letter | Sep 22, 2014
The Federal Reserve has spoken and to no one’s surprise, there was really nothing new from Fed Chair Janet Yellen, who did as was expected after shaving off another $10.0 billion in monthly bond purchases. The Federal Reserve will cut the remaining $15.0 billion in October, bringing its third round of quantitative easing (QE3) to an end.
What the stock market here and around the world also heard was that the Federal Reserve will likely maintain its near-zero interest rate policy for a “considerable time” after the QE3 cuts.
The problem is that the stock market is focusing so much on when interest rates may begin to ratchet higher.
The consensus is calling for rates to move higher by mid-2015, but some feel it will not happen until 2016 if the economic growth stalls. The downward revisions in gross domestic product (GDP) growth around the world could extend the time before the Federal Reserve will raise interest rates.
In the eurozone, the European Central Bank (ECB) is adding more monetary stimulus to jump-start the economy that is faltering due, in part, to the mess in Ukraine.
The news release from the Federal Reserve says the economic growth is moderate but also warns the labor market still has work ahead of it, which appears to be the main focal point.
“To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate,” read the press release by the Federal Reserve. “In determining how long to maintain the current 0 to 1/4 percent target range for the federal … Read More
Looking for a Good Gold Play? Here’s What to Watch For
By George Leong for Daily Gains Letter | Sep 8, 2014
I have not talked about gold for some time, as there has been no reason to get excited about the yellow metal. Yes, it’s shiny, but it doesn’t appear to be sparkling at this time.
After the gold bugs got excited about the opportunities in the precious metal, pushing prices to above $1,300 following the onset of geopolitical issues in both Ukraine and the Middle East, the aftermath has been dull.
As I said back in June, the only reason I would trade gold would be to buy on weakness near $1,200 as the fundamentals, in my view, are irrelevant at this time. Gold still seems to be more of a geopolitical trade. (See “How to Make Quick Profits in Gold at This Time.”)
Look, there’s no big buying from India; China is buying, but it is simply not enough to sway the global supply/demand balance in favor of the yellow precious metal.
Chart courtesy of www.StockCharts.com
Consider the fact that the greenback has been edging higher, with the U.S. dollar index at its highest level in more than a year. This move makes the dollar-denominated gold more expensive for foreigners, who have traditionally been major purchasers. The end result is a letdown in demand for the yellow metal.
In my view, gold is simply a trade on the geopolitical risk, as there’s really no major reason to want to buy at this juncture, given the market’s underlying fundamentals.
The gold bugs clearly don’t want to hear this, but I believe that unless the situation in Ukraine or the Middle East worsens, prices could head lower, towards $1,225 or even … Read More
How to Profit from ECB’s Attempts to End Economic Slowdown
By Moe Zulfiqar for Daily Gains Letter | Mar 31, 2014
Remember what happened in the U.S. economy when the financial system was about to collapse? The banks weren’t lending to each other, businesses, or even consumers. The U.S. economy was in a deep economic slowdown. Investment banks like the Lehman Brothers had already collapsed and more would follow. Something had to be done or else it would be a disaster situation.
When all of this was happening, the Federal Reserve stepped in to save the U.S. economy. It started to use a monetary policy tool called quantitative easing. The idea was simple: print money out of thin air and then buy back bad debt from the banks. As a result of this, the banks would have liquidity, which would eventually create more lending, moving the U.S. economy towards the path of economic growth.
You can look at Japan as another example of this. In order to fight the economic slowdown in that country, the Bank of Japan took similar actions to those of the Federal Reserve—I must say, the central bank of Japan has been involved with quantitative easing for a while.
The central bank of Japan wanted economic growth, which was what the Federal Reserve had hoped for in the U.S. economy. Japan’s central bank believed that by introducing quantitative easing, the value of the currency would go down and exports from the country would increase. The Bank of Japan also hoped that the quantitative easing would take the country away from the deflationary period it has been experiencing for some time.
With this in mind, you will come across various arguments. Some will say that quantitative easing has … Read More
France Falling Prey to Eurozone Slowdown Good News for U.S. Investors?
By Moe Zulfiqar for Daily Gains Letter | Dec 16, 2013
There’s an investment opportunity in the making at one of the eurozone nations for U.S. investors, and it’s becoming more compelling each passing day.
We know the eurozone still burns. The economic slowdown in the common currency region still prevails. We have heard from the European Central Bank (ECB) that it’s still trying to work very hard to break the strength of the economic slowdown. The central bank has lowered the benchmark interest rate and hinted that it might go ahead with a form of quantitative easing. In the past, we also heard the ECB say it will do whatever it takes to save the eurozone.
Sadly, it’s failing.
You see, when the eurozone crisis began, the problems were contained to a limited number of countries, but now we see the economic slowdown spreading through the region; now, the stronger eurozone nations are falling prey to it.
The opportunity? France.
France is the second-biggest economic hub in the eurozone. The economic slowdown in the French economy continues to gain strength. We heard that in the third quarter, the French economy contracted by 0.1%. In the second quarter, it showed growth of 0.5%. (Source: “French economy contracts 0.1 pct in third quarter,” Reuters, November 14, 2013.)
Unemployment in the French economy is also on the rise. In September, the unemployment rate in France reached 11.1%—that’s 3.26 million individuals who were out of work. In October, it declined to 10.9%, but that’s still higher than it was during the same period a year ago. In October of 2012, the unemployment rate in the second-biggest eurozone nation was 10.5%. (Source: “Euro area unemployment … Read More
