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For the past few years, I’ve been fortunate enough to travel to Germany each fall. My job? To share perspectives on the global economy, the capital markets, and more with readers of the German-language version of our Safe Money Report.
I’ve covered a lot of topics at these events, and I always get a ton of great questions. But one of the most interesting things for me is what rate I end up getting when I go to swap my dollars for euros before the trip! It’s been all over the map since 2010, and a great barometer of global optimism or pessimism about Europe’s prospects.
I haven’t hit up the Travelex office for this year’s trip yet. But I’d bet dollars for donuts that my dollars are going to buy more euros this time around. And the good news is, you can make money from the trend without ever leaving America’s shores!
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| The ProShares UltraShort Euro (EUO) should do well if the euro weakens. |
Look, it’s abundantly clear to me that the U.S. economy is kicking European tail. You could start with something as simple as GDP growth. The U.S. economy grew 4 percent in the second quarter, compared with NEGATIVE 0.2 percent in the largest European economy, Germany. Weaker-link Italy actually slumped into recession!
But it’s the jobs data that has me more optimistic about the U.S. outlook and the U.S. dollar versus the euro.
Take the “JOLTS” report we got Tuesday. It tracks the total amount of job openings in the U.S., the rate at which Americans are leaving their jobs because they believe there are better opportunities elsewhere, and more.
In June, the U.S. economy had 4.671 million job openings. Not only was that much higher than 4.577 million in May … and the forecast for a reading of 4.6 million … but it was also the best reading going all the way back to February 2001!
At the same time, the ratio of unemployed job seekers to job openings slumped to 2.02 in June. That was down from 2.14 in May and the lowest since April 2008 — more than six years ago. And as you know from my recent writings, we’re in the midst of a six-month-long streak of job creation of at least 200,000. That hasn’t happened since 1997.
As for Europe, unemployment was running at around 11.5 percent in June. That’s much worse than the 6.2 percent here, with countries like Italy, Spain and Greece continuing to drag down the euro zone overall.
Look, with figures like these in our own backyard and across the pond, it’s clear to me that our economic prospects have diverged with those in Europe.
Our central bank has to tighten policy. Their central bank may have to ease further.
Our job market is improving enough to create inflation problems. Their job market is nowhere near that point.
Our currency should do relatively well as a result. Their currency should not!
We’ve already seen the euro fall to its lowest since November this week. It wouldn’t take much at all to push it to a one year low, and my reading of the technicals and fundamentals suggests it could keep on dropping.
How much? Well, I wouldn’t be surprised in the least to see the euro drop to 1.28 against the buck … and maybe as far as 1.20 over time. That’ll definitely help my dollars go further this year, though it all depends on how long it takes for this trend to unfold.
In the meantime, you don’t have to book a trip to Munich or Frankfurt to profit. You can just use specialized ETFs that rise in value when select currencies fall.
The ProShares UltraShort Euro (EUO) that I’ve been recommending is starting to pay off nicely, and should do even better if an exchange rate below 1.30 materializes.
For my precise “Buy” and “Sell” recommendations on EUO, energy, or anything else, all you need to do is give Safe Money a try. Or just call us at 800-291-8545 to get up to speed. Also, remember that you can comment on the euro and the relative strength of our economy versus Europe’s at the Money and Markets website by clicking here. I’d love to hear your feedback on whether and how you’re making money on this trend!
Until next time,
Mike
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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Being late to this party is certainly a plus. I went short the euro over a year ago and continue to sit on significant losses. Timing seems to be everything on these currency bets. Hope you are right about the future direction of EUO, since I will continue to bide my time. Wish either you or Larry could provide timing perspectives.
How’s TBF doing lately???? Another fauxpas maybe!!!
I don’t get it, Mike. You’ve been critical of the Fed’s easy money policy for years now while Europe has taken the more restrictive money policy that you advocate. But in today’s column you talk about how much better the US economy is than Europe. Could it possibly be that you have been wrong about Fed policy all along, and that it’s actually Fed policy that is at least partially responsible for the much better performance of the US economy? And what ever happened to your predictions that easy money would lead to runaway inflation? I know, I know…it’s coming. Same thing you’ve been saying all along!
These guys are like broken clocks..
Eventually they’ll be right some time
Just starting
I wish you and your fellow US newsletter writers would differentiate between the UK and Europe when you discuss Europe’s troubles.. None of you do as far as I can see.
As you should already know, it’s the Euro zone that is in trouble and the UK does not use the Euro or copy the EU’s pathetic attempts to overcome its continuing financial crisis. The growth of the UK economy is beating that of the USA hands down, our growth rate is better than any other developed economy in the world and we have more people at work than ever before. In not advising your readers of these facts I think you and all the other US newsletter writers I read are doing your subscribers a disservice.