Hedging with Euros
So the Gartman Letters recommends buying US Equities and hedging against that by shorting the Euro. Can someone please explain why shorting the euro would be considered a hedge? thanks so much.
The idea is to hedge against US Equities blowing up if the euro collapses. Essentially, it's implying that going long on US Equities (with, say, an S&P 500 ETF) is a good bet unless Europe goes really south, in which case you'll be fine, because you're going to win big on the Euro short.
A simple trade on relative value. You can also hedge it by shorting Euro Stoxx 50. It's a similar idea if you look at recent correlations between those assets
I'd be careful, if you've been paying attention to the past month or so, you'd notice the euro has largely decoupled from risk assets, even euro equities.
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