When I visited Cyprus several years ago, I had no idea this
tiny, beautiful nation would one day play a pivotal role on the
international financial stage.
This country is slightly larger than Delaware, yet its
have the eurozone scrambling for a solution. Cyprus has long been
suspected of operating as a money-laundering hub for
Russians, which meant the European
has not been as keen to provide a Cypriot
as it has been for Greece.
But eurozone leaders settled on a last-minute bailout on March
25. The deal
provide Cyprus $13 billion in emergency
from an international lending group.
are extremely onerous: The country must close its second-largest
bank, and large depositors will take a hit in their accounts.
After closing for more than 14 days, Cyprus banks reopened on
March 29; meanwhile, many depositors haven't been allowed to
withdraw more than $130 from ATMs per day.
German Chancellor Angela Merkel said the bailout will hold
responsible those who caused the failure. The repercussions are
above $130,000 are being wiped out at Cyprus's second-largest
bank, and about 30% to 40% of big
are being confiscated at the largest bank.
are primarily Russian, this action has caused a rift between
Russia and Germany. This may force Cyprus to leave the
In addition, the precedent set by the government's seizure of
bank deposits, even if the
is suspected of being dirty, is highly irregular and poses
extreme danger to free markets worldwide. Other eurozone nations
fear the government may decide to seize bank accounts. This fear
has sent the euro sliding lower.
No one knows what the end game will be for the Cypriot crisis,
let alone the eurozone. One thing is certain: Things will likely
get worse before they get better. And that's to going create
opportunities for investors.
In fact, I've found a unique opportunity to
from the Cypriot crisis.
As you can see from the chart, the euro has weakened
dramatically during the crisis.
A weak euro aids international companies exporting items from
Europe becaue those items become comparatively less expensive to
buy with other currencies. Therefore, as the crisis worsens, the
euro weakens, which helps bolster eurozone nations' exports.
Also, a weak euro helps tourism; therefore, a tourist mecca such
as Greece should see benefits from greater numbers of visitors
attracted by favorable exchange rates.
Italy has many manufacturing firms that export; therefore, the
makes sense as a Cypriot crisis
As you can see from the daily chart, Italian political issues
have knocked down the price of this
exchange-traded fund (
to a technical
of just above $11 a share. A breakout above $12 would make a
great entry point with a 12-month target price of $15.
will also benefit from the falling euro, which makes
Global X FTSE Greece 20
a sensible choice right now. Like the Italian-based ETF, this one
has also been knocked lower to technical
in the $15 range. A breakout close above $16, combined with
improving economic conditions, may push this ETF to $20 a share
within the next 12 months.
Risks to Consider:
are highly speculative because of major internal issues within
Italy and Greece that may supersede the benefits of a weaker
Action to Take -->
I like these ETFs as speculative
based on the weakening euro and technical
being hit on the
. Buying both on a breakout close above my suggested prices
makes solid technical sense.