Holiday update

I'm now back from summer holidays and thought it was time to give a short update on what I've been up to.

I have now purchased shares in the two European stock ETFs EFV and DPW that I discussed in my last blog entry 'A Stock v ETF Investment Dilemma'. Despite the negative news the markets keep wanting to grind higher so on a shorterm basis I still believe they have been a good buy.

Of course these ETFs are not supposed to have been trades but more of a long term investment. My conclusion is still the same, the markets have over reacted to the sovereign debt crisis and there is some good long term value to be found in European stocks at the moment.

If the reader wishes to read and know more then I would highly recommend Mebane Fabers website entry and article on 'Does Shiller PE Work in Foreign Markets'. Some of the highest 5-yr returns are predicted to be in Europe e.g. Austria, Belgium, Finalnd, Germany whereas interestingly the US is one of thre lowest.

I though this article in Market Watch was also very interesting 'It's about time to buy burnt-out European stocks'. Well to be exact it's not so much the article itself (which I clearly agree with - yes, it's an another example of confïrmational bias!) but the reaction in the comments, which unfortunately seem to have been removed now.

Most (if not all) entries were how the author was wrong and that the end of Europe is coming. If that's a true reflection of the investor sentiment out there then that surely is a bullish sign for the future performance of European equities.

Clearly being a contrarian for the sake of it is a path to ruin but I've also heard you should 'be greedy when others are fearful' (!) and it seems a lot of people are either fearful or have thrown in the towel with Europe.

Nothing in life is certain, especially when investing and predicting the future but from my perspective the risk/reward definitely justifies allocating part of a diversified portfolio to stocks in Europe.