It is becoming obvious that we will either get massive money printing from the ECB, or the crisis will get out of hand. Buying FSG is one way for investors to benefit from possible action by the ECB while protecting downside.
The FSG is an ETF that seeks to replicate, net of expenses, twice the daily return of the Gold Bull/S&P500 Bear index. The fund is designed for investors who believe that gold will increase in value relative to the large-cap U.S. equity market. Essentially, the FSG tracks the spread between the stock market and gold. If the ECB decides to act, gold will most likely be a bigger beneficiary than stocks. If the ECB does not act, we will enter a terrible deflationary period where both gold and stocks will go down, but gold will go down less.
Gold will be one of the biggest beneficiaries of ECB money printing because printing of Euros will cause inflation to spike. Gold benefited far more than the stock market did when the Fed underwent major QE. If the situation was that simple then gold would be an obvious buy, but because of the Germans' reluctance to print money, the outlook in uncertain. The uncertain outlook for the ECB is why FSG is a better play right now than GLD.
FSG is the place to be for those (like myself) who believe that if the crisis is to be solved, it will require massive action on the part of the ECB. This action will be very bullish for gold and stocks. Below is a chart of FSG over the last 6 months.
click to enlarge
Owning FSG is the way to be "bearish" with a hedge. By owning FSG, bearish investors will not need to worry about a possible surprise announcement by the ECB that has a massive impact. However, investors should not feel naive to think that FSG will surge if we continue down the dangerous path that we are currently on. See my article here on why gold is not a safe investment to see why owning FSG is a better bet than simply buying gold.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.