Focusing On The Problems In Greece With ETFs (FXE, EFO, EFZ, EFU, EUO)

The Greek Tragedy has been a staple of world literature since 500 B.C. when Thespis, the first known Greek playwright, won what is thought to have been the first writing contest in ancient Athens.  Later, giants like Sophocles, Euripides and Aeschylus presented their works at the festival of Dionysia held every March in honor of the Greek God, Dionysus, the God of Wine.  But today a new kind of Greek Tragedy is unfolding and investors everywhere need to be aware of its ramifications, dangers and potential opportunities. 

The modern day Greek Tragedy goes like this.  The country is so far in debt that they needed a multi billion dollar bailout from their European Union brethren over the weekend.  In return for the seemingly ever growing sum of Euros, the Greeks will have to accept an austerity program that will almost surely keep them in a long term recession or even depression.

But the scary part of the Greek Tragedy is that even though all the focus is on Greece right now, Spain, Portugal, Ireland and Italy (the PIIGS) are all in the same boat. Some analysts and experts would even say that the United States and United Kingdom are right behind them; comparing these countries to The Titanic, one could say they’re all sinking with the only difference being how much water they’ve taken on board.

The drama focused on Greece last week with the following almost unbelievable events: 

  1. Greece, Portugal and Spain all get downgraded by major ratings agencies
  2. Greece leads the way to the bottom by being valued as junk.
  3. More than 60% of Germans are opposed to bailing out Greece
  4. More than 60% of Greeks don’t want to accept harsh terms that could generate a multi year depression
  5. Many well known experts are calling a Greek default anywhere from likely to inevitable.
  6. German Social Democrats, the main opposition party, are also opposed to the bailout
  7. An important German regional election is coming up on May 9 and Greek debt is coming due on May, 19 so it promises to be a couple of exciting weeks ahead
  8. Most parliaments in Europe have to approve the terms of the bailout to be announced this weekend. This is a little reported fact, that the bailout agreed upon by the heads of states is in fact conditional to parliamentary approval, which could prove to be an interesting fight over the next few days.  

You couldn’t really make this stuff up if you wanted to.

In my view, there are lots of potential missteps and potholes along the way, May will be an exciting and volatile month and what happens down the road is an even bigger question because even if Greece is resolved, the other members of the PIGGS still wait in the wings.

So how can you participate in all this excitement?

The answer to that depends upon if you’re bullish or bearish on the future of not only Greece but the entire European Union.

Bulls could consider being long Europe and the Euro and could consider: 

  • (NYSE: FXE): Currency Shares Euro Trust: ETF that gives you long exposure to the Eurodollar
  • (NYSE: EFO): ProShares Ultra MSCI EAFE: long 2X exposure to Europe, Asia, Far East   

Bears, on the other hand, could consider the following: 

  • (NYSE: EFZ): Short MSCI EAFE- an inverse ETF that tracks oppposite to the Europe, Africa, Far East Index
  • (NYSE: EFU): ProShares UltraShort MSCI EAFE-a 2X leveraged ETF that tracks inversely to the MSCI Index
  • (NYSE: EUO): ProShares Ultra Short Euro- a 2X leveraged ETF that tracks inversely to the Eurodollar 

(One note of caution, before choosing one of the “ultra” or leveraged ETFs, make sure to understand the prospectus and how these are priced and adjusted.)

There are also a number of specific country and sub-sector ETFs focused on Europe and for a full list of European ETFs, go to

No one can deny that the Greek Tragedy is making for interesting news, and with today’s wide array of ETFs, the situation also offers potential investment opportunities on both sides of the drama for people who want to participate. However this drama ends, it’s unlikely that Dionysus, also known as “the Liberator,” will step in to save the day and so investors need to be armed for whatever dangers might lie ahead.

Written By John Nyaradi From Wall Street Sector Selector

John Nyaradi is Publisher of Wall Street Sector Selector and Senior Vice President of Private Client Services for ProfitScore Capital Management, Inc.

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