ONE OF MY FIRST jobs in finance was working as a clerk in the deutsche mark pit at the Chicago Mercantile Exchange. Compared to today’s electronic markets, trading seemed almost quaint. Whether you were an individual investor or a multinational bank, orders would be written (usually by hand) on small trading tickets, walked over to the roughly 20-foot-wide pit and handed to a particular broker who would then verbally announce it to the crowd. “Five (contracts) at even!” he’d yell. A couple of dozen locals would either take the trade or offer up a competing market.
Now, years later, the deutsche mark is gone, replaced by a single European currency used by 400 million people in 22 countries. The euro is the world’s most liquid and actively traded currency behind the U.S. dollar. It’s also the benchmark for a new New York Stock Exchange-listed security that I believe is poised to become a huge success.
Three years ago, I heralded the launch of fixed-income exchange-traded funds as a major breakthrough. More recently, I covered gold ETFs as a huge development in portfolio opportunity. Last week, Rydex Investments introduced the Euro Currency Trust (FXE), a currency-based ETF that trades on the NYSE. Although only recently launched, this landmark innovation represents a major victory for capital-market participants world-wide. That’s why it gets my vote as perhaps the best trade of the new year. (more…)