Reuters is reporting that the ECB’s Executive Board has proposed a program that would enable the bank to buy 50 billion euros ($58 billion) in bonds per month starting in March.  The program could run 18 months which would inject 900 billion euros of liquidity into European financial markets.  This is certain to cause asset price inflation.  Cagey raptors will ambush this prey immediately.  There are a lot of ways to play Euro QE and the way I like best is to buy shares of HEDJ.  This ETF is invested in Euro traded megacaps and is backed up with a USD/Euro currency hedge to protect again deterioration in exchange rates.

Let’s compare HEDJ to an American equity alternative, SPY.  By most measures, the broad European market trades at a discount to the broad American market:

Ratio HEDJ SPY advantage
Average Price/Earnings 15.36 17.21 12.04%
Average Price/Book 1.94 2.49 28.35%
Average Price/Sales 0.96 1.78 85.42%

Every raptor knows what has happened to the major US indexes since Bernanke begin QE in earnest and now the Europeans are prepared to follow that path.  This is an excellent opportunity to pick up some easy capital gains in a well diversified vehicle over the next couple of years and earn 2.11% yield while we wait.

Action to take: Buy HEDJ up to $60.00.  I’ll be using today’s closing price of 58.63 as my reference price on velociraptor.cc and will follow a 25% trailing stop loss.

Devour your prey, raptors!

ECB to increase QE – buy WisdomTree Europe Hedged Equity ETF (HEDJ)

Never miss another opportunity to devour prey!

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One thought on “ECB to increase QE – buy WisdomTree Europe Hedged Equity ETF (HEDJ)

  • January 22, 2015 at 11:53 pm
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    Mario Draghi at the ECB did not disappoint. Expectations were that QE would be paced at 50 Billion Euro a month for 18 months. Instead, we get announcement for 60 Billion Euro a month. That’s 20% bonus QE. The US market jumped about 1.5% on the news and our pick HEDJ moved very nearly 2 percent. The biggest gains are yet to come however.

    Raptors should respect portfolio diversification and I recommend a full allocation to HEDJ to be held for at the 18 months Euro QE lasts.

    Reply

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