The European debt crisis was the by far the biggest news story of 2011, but in the nascent stage of 2012, Europe’s debt situation has been conspicuously absent from the headlines. But as the great song says, “Don’t get fooled again.” The structural problems that created Europe’s debt mess still are firmly ensconced within the continent’s fiscal DNA. That means Europe is going to continue to be a major headwind against any potential recovery in the global economy.
If we start to see European nations default on their bonds, and if we see bond yields (i.e. the cost of borrowing more money to fund the massive EU debt loads) spike to unsustainable levels, we could see a major deleveraging by banks around the globe. The real harm here is that a debt defaults could be the fissure in the dike that causes the entire global financial dam to break loose. A freeze up in European credit would cause a major contraction in economic activity in the region, and that contagion would quickly spread to the emerging markets, to Asia, and eventually to the United States.
Europe Downgraded…Stocks to Sell Off
S&P just downgraded the credit rating of 9 European countries. Debt talks broke down in Greece and their government is WARNING of DISASTER! Don’t go into next week’s potential big sell-off unprepared! Stop losing money when stocks go down!
So, what can you do to protect yourself from Europe’s demise?
On the following pages are five exchange-traded funds (ETFs) that can give you shelter from this European debt crisis.