How to profit from the coming Greek default
Commentary: Five trades to make before the euro implodes
By Matthew Lynn
LONDON (MarketWatch) — You don’t exactly need a crystal ball to know what the biggest event in the financial markets of the next 12 months is going to be: Greece defaulting on its debts.
This week Standard & Poor’s cut its rating on the country to CCC, the lowest of any nation in the world. Only last week we learned that Greek industrial production was down 11% year-on-year. Unemployment has risen 40% over the past year, and now stands above 16% nationally. A year on from the European Union and International Monetary Fund “rescue,” Greece is slipping into 1930s-style depression.
A country in that kind of a fix doesn’t pay back debt. Nor does it get its deficit under control. It isn’t a question of whether Greece defaults anymore. Everyone accepts that. It is simply an issue of when, by how much, on what terms — and, perhaps most crucially of all, who gets stuck with paying the bill.
Forget all you’ve read about it being a catastrophe for the markets when it happens, however. Only things that nobody really forecast make prices move in any dramatic fashion. A Greek default is about as unexpected as Rafael Nadal making the finals at Wimbledon this year.
In reality, it is already priced in. And the Germans and the French aren’t going to let it happen until they know their banking systems are safe — so there isn’t going to be a Lehman-syle collapse.
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Here are five trades you should start thinking about:
1. Buy German bunds, and sell the DAX index
2. Sell the Swiss franc
3. Sell the Belgium index
4. Buy European travel companies
5. Sell the U.S. banks but buy the dollar
Full story - including the details on the 5 recommended trades: http://www.marketwatch.com/story/how-to-profit-from-the-coming-greek-default-2011-06-14?dist=beforebell
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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