The New Case for Europe

It is time to revisit this once troubled continent. The reality is that the European economy is now growing substantially faster than the US, with a better stock market performance to match.

Not only that, the Euro has been rising, thanks to America’s exploding budget deficits.

Rising markets and rising currencies create an upward hockey stick effect on your profits.

I bet you didn’t know that the Greek stock market rose over 40% from November, and the Euro (FXE) added another 7%!

I have been to Greece many times over the past 50 years, and I’ll tell you that I just love the place.

The beaches are perfect, the Ouzo wine enticing, and I’ll never say “No” to a good moussaka.

As for the old Youth Hostel in Athens with the permanently clogged sewer lines, I now much prefer the five star King George Hotel.

However, I don’t let Greece dictate my investment strategy.

Greece, in fact, accounts for less than 2% of Europe’s GDP.

It is not a storm in a teacup that is going on there, but a storm in a thimble.

Greece is really just a full employment contract for financial journalists, who like to throw around big words like bankruptcy, default, and contagion.

I have other things to worry about.

In fact, I am starting to come around to the belief that Europe is looking pretty good right here, refugee crisis, Brexit, and trade wars be damned!

That’s why the better hedge funds have been piling in there since the presidential election. In fact, many managers prefer foreign developed stock market than the domestic US variety.

Fiat CEO, Sergio Marchionne, the brilliant personal savior of Chrysler during the crash, thinks the beleaguered continent is about to recover from “hell” to only “purgatory.”

Only a devout Catholic could come up with such a characterization.

But I love Sergio nevertheless because he generously helps me with my Italian pronunciation when we speak (“aspirapolvere” means “vacuum cleaner”, really?).

Notice that these European based equity ETF’s vastly outperform those for the main US indexes during the same time by a large margin, many by 2:1.

And here is where I come in with my own 30,000-foot view.

The undisputed lesson of the past nine years is that you always want to own stock markets that are about to receive an overdose of quantitative easing.

Since the US Federal Reserve launched their aggressive monetary policy, the S&P 500 (SPY) has nearly quadrupled off the bottom.

Europe was a late entrant to the QE game, and it could run for at least six more months.

Corporations across the pond are being force-fed mountains of cash at recently neagative interest rates, much like a goose being fattened for a fine dish of foie gras (only decriminalized in California last year).

Get Europe off the mat, and you can also add another 10% to US share prices as well, as the global economy revives.

Buy the Wisdom Tree International Hedged Equity Fund ETF (HEDJ) down here on dips, which is long a basket of European stocks and short the Euro (FXE). The recent correction just gave us a nice fat entry point.

These could be the big performers this year.

Praise the Lord and pass the foie gras!