Global Macro Trading Journal
- Thread starter Daal
- Start date
How you gonna do that? Let's say I wanna buy Greek stocks here and want to hedge the FX risk. What should I do?
So what happens when/if Greece exits the EMU and re-denominates into the New Drachmae, while the rest of the EMU stays with the EUR? EURUSD is likely to shoot up, which means that you get absolutely hosed on both the stocks and the FX hedge, innit?
I was assuming they would stay in EUR. If they get out you are right, in that case you want buy after they get out.
But I dunno, if stocks are claims in real assets and can protect against hyperinflation why wouldn't they be a good protection against a move out of the EUR?Its hard to it would be worse than Zimbabwe and Germany in the 20s. As far as I know stocks retained their value in those periods
Well, they might have retained their usefulness as an asset if your liabilities were in the same ccy. If you're a foreign investor, on the other hand, owning stocks in local ccy will probably make you feel like a Hungarian with a CHF mtge in 2011.
Just a little fun fact about Dexia...
In 2008 they got saved also by one of their biggest stockholders, a state entity...
The entity borrowed from Dexia.... To buy Dexia Stock.... With their previous Dexia stock as collateral...
This was forbidden in most of Europe (forbidden everywhere now) but at the time Belgian lawed presumably allowed it...
One must admit the creativity of the financial wizards keeps on suprising...
The entity BTW is totally bankrupt but will not go through bankruptcy in the actual sense, it will just get wind down, cause bankruptcy would open the possibility of litigation against the board...
In 2008 they got saved also by one of their biggest stockholders, a state entity...
The entity borrowed from Dexia.... To buy Dexia Stock.... With their previous Dexia stock as collateral...
This was forbidden in most of Europe (forbidden everywhere now) but at the time Belgian lawed presumably allowed it...
One must admit the creativity of the financial wizards keeps on suprising...
The entity BTW is totally bankrupt but will not go through bankruptcy in the actual sense, it will just get wind down, cause bankruptcy would open the possibility of litigation against the board...
Are you sure?If stocks keep their value in real terms you would only lose money if the FX depreciation would be higher than inflation, the real exchange rate fell. This could happen of course but what could also happen is stocks have a significant real gain as I believe was in the case of Argentina
According to this there is a 78% chance that Greece leaves the EUR
http://marginalrevolution.com/margi...ot-the-same-as-the-intrade-odds.html#comments
Since the chance seems to high, its better to wait for that in order to buy Greek stocks. I see that the Argentine peso dropped about 75% over the space of a few months after the default and de-pegging. You would have made the money back by holding the Argentina stock market but you would have made a killing by buying after the collapse
This seems to be a better plan in this case
http://marginalrevolution.com/margi...ot-the-same-as-the-intrade-odds.html#comments
Since the chance seems to high, its better to wait for that in order to buy Greek stocks. I see that the Argentine peso dropped about 75% over the space of a few months after the default and de-pegging. You would have made the money back by holding the Argentina stock market but you would have made a killing by buying after the collapse
This seems to be a better plan in this case