How Are You Hedging Against The Euro/Greek Crisis?

[w11guy]

most people in the "Know" are liquidating everything; there are some mind blowing events coming along and electronic trading or property will be the last thing on peoples minds if it will even be possible (trading that is)

Just look over the past 3 months how many seriously wealthy people have sold their houses.. not to buy another..the sheep need to wake up & realize we are going thro a serious time that will change the World totally, i am not talking about prophesy.

All the Games in Europe/US and middle East are just diversions the real serious stuff is happening in plain sight, most people are so chemically dumbed down their brains are just about working or they just aint bothered

Laughable. Why would they sell their houses? Wealthy people have enough money to have a nice house and live in comfort. They don't worry about whether their house will drop in value. Yes things will get bad, but selling our homes isn't the solution. Where will we all live? And who will buy the houses if everyone sells? And who are these wealthy people in the know selling to? Other wealthy people not in the know?

Re-read what you wrote and then tell me if you seriously expect anyone to believe that you know people in the know and they shared this info with you so you could alert us folks on thai visa. Completely laughable.

w11guy, why would I sell my houses in Europe? I would end up with Euros and I would rather hold the properties, especially considering that they are located in my hometown.

The land and the houses will always have a value even if the currencies become worthless, I could live in the house and plant something to eat in the garden.

The current situation is the reason I decided not to sell any property, even though I am not living there most of the time and they are not suitable for renting them out.

I am also considering buying more land, agricultural land and businesses that have material assets such as machines, in addition to gold/silver. But this is easier said than done especially with the foreign business and land ownership restrictions in Thailand and without experience in agriculture.

It would also be an advantage to marry into a family with a lot of land holdings and an agricultural business I suppose.

Investing in knowledge and skills is another option.

Yes, that was my point. It is the other poster that said people were selling their houses, not me.

[g00dgirl]

balance risk with appropriate heaps of cash (USD, EUR, GBP, CAD, JPY, SGD) even though cash in these currencies provide zero yield on overnight basis.

-sell, respectively avoid high yield currencies such as (BRL, TRY, ZAR, AUD, NZD) which are always hammered in a crisis.

Naam, can you explain a bit more in detail why I should not hold AUD and ZAR, but USD and EUR currencies?

(I'm doing the opposite, mainly because I am living of the high interest rates that I am getting from AUD and ZAR btu also because I am thinking that the EUR and the USD are in trouble.)

[samran]

Goodgirl,

What use are the high interest rates when the value of those currency falls?

You end up getting less baht when you swap.

[g00dgirl]

Yes, that was my point. It is the other poster that said people were selling their houses, not me.

Sorry I meant to write/address terryp of course.

[Naam]

balance risk with appropriate heaps of cash (USD, EUR, GBP, CAD, JPY, SGD) even though cash in these currencies provide zero yield on overnight basis.

-sell, respectively avoid high yield currencies such as (BRL, TRY, ZAR, AUD, NZD) which are always hammered in a crisis.

Naam, can you explain a bit more in detail why I should not hold AUD and ZAR, but USD and EUR currencies?

(I'm doing the opposite, mainly because I am living of the high interest rates that I am getting from AUD and ZAR btu also because I am thinking that the EUR and the USD are in trouble.)

we have to differentiate acording to scenarios g00dgirl. i answered a specific question posted by Samran which referred to "times like these". there's nothing wrong holding high yield currencies and pocket fat interest in "good girl times". i am investing in HY currencies since the day you wore pampers (no offence meant!) but i don't hesitate to get out when black clouds are on the horizon.

the reason why i switch currencies during crisis times is, as already mentioned, that in these times HY currencies are under attack due to heightened risk aversion. take a look at USD AUD three months ago and compare the exchange rate today. the 6% or even 6.5% in AUD are gone with the wind because AUD lost >8% vs. USD (108>99) the latter has been and still is considered "flight to quality" in crisis times no matter what rubbish the gloom & doomers publish.

the same applies to USD ZAR (7.43>8.33 = -12%). another example is USD NZD (84.2>73.9 = -12%). all three examples clearly prove that USD @ zero yield would have fared much better than AUD, ZAR or NZD due to the Greek problem.

as far as "getting out" is concerned... it is a sad story that the layman investor tries to squeeze out the last percentage fraction and goes into long term fixed deposits which handcuff him/her because there's no getting out without big losses. he/she can't even make a forward deal to avoid losses because the cost of interest differentials eat up each and every penny yield and more.

the lesson in essence: if HY currencies then only 3month maturities @ lower interest because the cost involving switching is bearable. but a forward deal USD ZAR or USD AUD on fixed deposits with a maturity of 5 years to compensate the loss of depreciation will not only cost an arm and a leg but the investor loses on top shirt, shoes, socks and (if applicable) knickers.

if my explanation was not clear enough please do not hesitate to ask additional questions.

[g00dgirl]

If these HY currencies are falling against the USD, I always feel that this does not concern me much, because I currently have no interest in USD, I won't need USD in the future and I have no connection to the USA or any country that uses the USD either. Is this ignorant considering that the USD is one of the world's dominant reserve currencies? I am holding "some" USD in one of my accounts, but only a small percentage of my total cash, probably about 5%.

If they are falling against the USD, are they falling against the THB, too?

I have thought about converting some of my AUD to SGD for diversification but I have been unsure of the right time and hesitant because the loss of income from interest.

[Naam]

If these HY currencies are falling against the USD, I always feel that this does not concern me much,

wrong feeling.

If they are falling against the USD, are they falling against the THB, too?

take a look (AUD THB / ZAR THB / NZD THB):

[Naam]

because I am thinking that the EUR and the USD are in trouble

i think you are thinking that because you let others think and adopt their thoughts without scrutinising these thoughts. let me tell you a secret, but don't tell anybody else! promise? the first time i took a job abroad my salary and perks were paid, respectively quoted in US Dollars. at that time i was warned by experts and advised not to accept the job because not only a huge depreciation and last not least the demise of the US Dollar was already lurking around the corner.

that was in summer 1974, i.e. nearly 38 (THIRTY-EIGHT) years ago

[rakman]

bond strategy

-sell European and U.S. financials except the extremely sound ones on who's background check you have devoted a lot of time and which you check daily and buy or increase some "medium sound" financial debtors which are country systemic (government intervention highly likely) which yield 8-13% on their subordinated Tier1 and LT2 bonds.

-buy, respectively increase at bargain prices high yield / high risk bonds of non-financial debtors which are hammered in times like these but provide double digit current yields (forget any yields to maturity!) and balance risk with appropriate heaps of cash (USD, EUR, GBP, CAD, JPY, SGD) even though cash in these currencies provide zero yield on overnight basis.

-if you don't trust your bank with too much cash park your cash in short term (3-6mth) UST, Bunds, Gilts or JGB.

-sell, respectively avoid high yield currencies such as (BRL, TRY, ZAR, AUD, NZD) which are always hammered in a crisis.

-if you can afford it, compensate your frustration of being only partly invested by spending a fistful million Baht on that car you wanted to own since you were a schoolboy.

If inflation spikes and bond yields spike, the value of the held bonds will be very seriously degraded. Possibly down to historic levels. As the various governments keep interest artificially low and are devaluating currencies in a race to the bottom, the spike of inflation will be that much higher and last longer.

Add huge uncertainty in the various economies and governments and it's one scary time.

[Naam]

If inflation spikes and bond yields spike, the value of the held bonds will be very seriously degraded. Possibly down to historic levels. As the various governments keep interest artificially low and are devaluating currencies in a race to the bottom, the spike of inflation will be that much higher and last longer.

Add huge uncertainty in the various economies and governments and it's one scary time.

thanks for this valuable advice, i had no idea that bonds could be seriously degraded... possibly even to historic levels

[gk10002000]

I am far from convinced that there is a Greek/Euro crisis. An issue, yes, a crisis no.

[yoshiwara]

If these HY currencies are falling against the USD, I always feel that this does not concern me much, because I currently have no interest in USD, I won't need USD in the future and I have no connection to the USA or any country that uses the USD either. Is this ignorant considering that the USD is one of the world's dominant reserve currencies? I am holding "some" USD in one of my accounts, but only a small percentage of my total cash, probably about 5%.

If they are falling against the USD, are they falling against the THB, too?

I have thought about converting some of my AUD to SGD for diversification but I have been unsure of the right time and hesitant because the loss of income from interest.

Now is probably not a good time to make the switch in this pair. Some recent big losses already in. Stay with the interest return for now.

[bendix]

I am far from convinced that there is a Greek/Euro crisis. An issue, yes, a crisis no.

This.

There is a problem, but this is not armageddon as some people are suggesting. One of the problems of 24hour television coverage and an online world is that problems get magnified through chatter and hyperbole. A few months ago the prospect of Greece leaving the eurozone was portrayed as the end of the world; now that it's becoming more likely, commentators and banks and governments are saying that the impact can be easily contained.

Frankly, I'm doing nothing. An investment strategy is an investment strategy; you stay with the longgame and don't get distracted by short-term noise.

[geriatrickid]

I think Greece leaving the EU and the Euro is actually potentially good news for the community as it is likely Cyprus will follow suit and also leave.

As there will then be no objectors to Turkey joining the EU which will be beneficial to the EU both financially and militarily and a couple of the deadweights will be out of the way.

Cyprus would be hobbled if its relationship with the EU is reduced. There is a very profitable sector of the economy that depends upon that EU ease of access. What do you think all those pharma and international trading houses would do if they lost access to the EU?

Greece was the bag boy against Turkish membership. Many EU countries don't want Tukjey anywhere near the EU, and they are silently encouraged by Germany and Italy. In case you forgot, there is some real hatred for the Turks due to the past Ottoman experience. The Turks had expanded right up to the Austrian and Hungarian borders. Do you honestly think the European population is going to welcome the prospect of unfettered access by more muslims?

[geriatrickid]

I have thought about converting some of my AUD to SGD for diversification but I have been unsure of the right time and hesitant because the loss of income from interest.

Your money is more secure in AUD. Think about it. Australia is a vast country with resources. It has the capacity to avoid a collapse in its currency. Singapore is a small city state with limited financial means. Keep in mind that Australia is considered a pillar for the west in Asia Pacific. Singapore is expendable.

[yoshiwara]

I have thought about converting some of my AUD to SGD for diversification but I have been unsure of the right time and hesitant because the loss of income from interest.

Your money is more secure in AUD. Think about it. Australia is a vast country with resources. It has the capacity to avoid a collapse in its currency. Singapore is a small city state with limited financial means. Keep in mind that Australia is considered a pillar for the west in Asia Pacific. Singapore is expendable.

Brazil and Russia are also vast countries with resources, but I wouldn't be leaping into their currencies right now.

Australia has a clueless Labour Government leadership over-reliant on pushing up taxes on the commodity companies.

Would I jump out of AUD right now? No. Would I jump into AUD right now? No. So its a hold.

Singapore 'expendable'? Well that's meaningless. More the Switzerland of the Far East. However it is an export play and is weakening recently against the $US, so in this pair an opportunity to buy in if you consider that the $US will weaken going forward. For the AUD too expensive to come out.

[personchester]

most people in the "Know" are liquidating everything; there are some mind blowing events coming along and electronic trading or property will be the last thing on peoples minds if it will even be possible (trading that is)

Just look over the past 3 months how many seriously wealthy people have sold their houses.. not to buy another..the sheep need to wake up & realize we are going thro a serious time that will change the World totally, i am not talking about prophesy.

All the Games in Europe/US and middle East are just diversions the real serious stuff is happening in plain sight, most people are so chemically dumbed down their brains are just about working or they just aint bothered

Before I really worry, who exactly are these people in the "Know"? And if they have sold their houses without replacing them, does this mean they have joined the Occupied movement in camping out in town squares? Or maybe I am one of the chemically downed down in need of enlightenment, so please do offer a few more details.

In view of the disastrous economical, financial (banking) and social disasters that began in 2008 it is impossible for people to be in the ... KNOW.

The economical, financial, social, and political problems are changing daily, left to right, up and down, nobody knows the current outcome, thus we have to hang-on and wait.

As a matter of fact to sell one's house know would be unwise, the housing valuation has dropped heavily and in some countries up to 70%, in such a decline rich people (and poor people) would not sell houses, rich people would now buy houses, keep them for a few years and use them for rental income, and when they eventually sell the houses they will make substantial profits.

Rich people are fully aware of this, they don't sell their house "now" at a loss, they buy "now" and sell at a profit later.

[brit1984]

Maybe now would be a good time to set up a menu printing business in Greece

[geriatrickid]

Maybe now would be a good time to set up a menu printing business in Greece

It's called a chalkboard.

Prudent business owners will invest in one.

[Naam]

I have thought about converting some of my AUD to SGD for diversification but I have been unsure of the right time and hesitant because the loss of income from interest.

Your money is more secure in AUD. Think about it. Australia is a vast country with resources. It has the capacity to avoid a collapse in its currency. Singapore is a small city state with limited financial means. Keep in mind that Australia is considered a pillar for the west in Asia Pacific. Singapore is expendable.

i question the "wisdom" that money is secure (meaning value preserved) in a currency, such as AUD which has a history of huge fluctuations. not only vs. major currencies but also vs. a Mickey Mouse currency like the Thai Baht which "g00dgirl" needs to pay for most of her expenses as she lives in Thailand.

AUD is a currency which is, as history proves, not only commodity driven but also by its continous high yields. let China's economy cool down considerably thereby importing less Aussie coal and iron ore and/or let the current crisis deepen (crises are killers of high yield currencies) and the Australian Emperor will be exposed down to his underwear.

here's what happened during the last decade of AUD/THB and USD/AUD 2001>date (minus 52.5%) :

[Naam]

In view of the disastrous economical, financial (banking) and social disasters that began in 2008 it is impossible for people to be in the ... KNOW.

The economical, financial, social, and political problems are changing daily, left to right, up and down, nobody knows the current outcome, thus we have to hang-on and wait.

As a matter of fact to sell one's house know would be unwise, the housing valuation has dropped heavily and in some countries up to 70%, in such a decline rich people (and poor people) would not sell houses, rich people would now buy houses, keep them for a few years and use them for rental income, and when they eventually sell the houses they will make substantial profits.

Rich people are fully aware of this, they don't sell their house "now" at a loss, they buy "now" and sell at a profit later.

[jsflynn603]

I'm waiting for the dominos to fall. Greece, then Spain, then Ireland, then possibly Italy... I'm not sure about the outcome but I'm inclined to believe that it'll be a form of Quantative Easing (QE) with massive amount of fiat money printing.

The US will be there supporting the Euro at some level, but fear may well bring a mirror of 2008 when everyone piled their funds into 'ol US$. If that happens I'll be changing my US$ into Canadian, Australian, and Singaporean dollars and will buy gold, silver and uranium stock. (Between 2008-2009 at one point US$100 bought Canadian $140, and later, US100 bought $Aus160. Simple transfer from US$ into Can returned 38% and simple US$ to Oz$ returned about 58%. This may happen again this summer. Fear is a great mover. The US$ stinks...but if all the boats are sinking, the biggest one looks the safest.

From 1964 to 1980 American went through a huge period of QE (fiat money printing). It was followed with high inflation (In 1982 a good house loan rate was about 17%.

What most do not know is that the money supply (then M2) doubled over those years. Guess who got most of that money?

The answer is in a book called the Penniless Billionaires. It would become a best seller today...but is pretty much unavailable, unless you can find a copy for about $35+ on half or ebay.

Most think that the book is about the Weimar hyperinflation and other hyperinflation and it is. But what is really fascinating is that Max Shapiro presents and substantiates that like the '64-'80 fiat money increase, and the resulting inflation--that these are done purposefully. He documents, quite well, how the monetary elite from '64 to '80 got ahold of about half of the new fiat (that is 1/4 of all mony in the US) at extremely (and often using fraudulent collateral) good (low) rates. Then the elite used the money to purchase "real goods" (metals, apartment buildings, agricultural lands, ect.) The resulting inflation created this sort of scenario:

Borrow 10 million buy 10 million in quality apartment buildings in the '70's--then as inflation created a doubling of the underlying value--sell into this. Thus $10 million borrowed at 2% became $20 million. Sell half and voila--you just maid $10 million. This is not my theory--Shapiro documents it very, very well in this book.

Now look at today: Trillions--printed, unimaginable amount of money and where is it going? Can you or I get $10 million loans at 2 or 3%? No, but the elite can and JP Morgan, Goldman Sachs et all are getting huge amounts at 1%. Repeat the scenario, let time bring in an inflationary period which I believe will come--and the same scenario occurs as it did in '64-'80. (Remember silver hit the highest price in history in Jan, 1980).

Shapiro looks at the Weimar republic hyperinflationary event--and documents how it benefited the wealthy and how the elite actually pushed the process, to their benefit.

Peaple laugh at me sometimes when I say: "watch the dollar lose 90% of it's value." Impossibe they say. Hmmm....4 quartes from 1964 (90% silver) sell today for $20. 1/20=5% thus compared to those 4 quarters (relating to silve which has dropped from close to $50 to ~$28, the purchasing power of todays dollar is down 95%. It's already happened. Can it happen again? I believe it will, but not over 15 years but this time over perhaps 5. In 1963 gasoline was 39 cents, today $3.50 thus todays dollar measured in gas has dropped in gasoline purchasing power by 89%.

The price of gold, oil, gasoline, and rice do not, (other than major disasters like war, drought, or floods) really rise in price over time--the underlying currency drops.

Very interesting times. Who knows...but the amount of fiat money out there is beyond belief. And JP Morgan, Chase, Citibank et al, have in total about 60 trillion in derivatives. Should those derivatives be called and sold or valued at true sale values--to prevent enormous systemic banking failures, assuming a 33% drop in derivative values will require a bail-out of 29 trillion! Impossible? Indeed.

Look in your pocket--the nickel (5 cent american piece) is worth infinately more than the $100 bill "IF" the dollar collapses. Is this possible? Yes.

Note: For you Canadians, in the future, your nickels will not have much nickel in them and in 5 years neither will American nickels.

These are truly extraordinary times.

To hedge, dump all debt. Become self-sufficient. I like gold/silver/uranium/fertilizer/agricultural stocks. Buy some junk (90% silver) if the Westers world somehow manages to pay off its debt then the silver will drop in value by half--but the social system (including jobs and welfare) will remain intact. If it does not then there is only one way to get out of the hole we are in and that is print, print, print, and the resulting currency cost-push inflation will decimate you. (But one junk silver dollar will hold its value). Just my opinion.

Edited June 16, 2012 by jsflynn603

[manarak]

How Are You Hedging Against The Euro/Greek Crisis?

sort of.

I still hold aussie dollars, and for next week's special occasion I have even bet against the EUR.

If the Greek vote turns bad, it will also be a good test of the CHF peg to the EUR.

If the CHF peg breaks, then this will be an early sign that all hell breaks loose.

addendum:

and, err... before I get crucified for holding AUD - I am actively trading the currency, meaning when it went up for 0.92 CHF to 0.98 I held mostly more AUD, because I borrowed CHF and bought AUD, and then sold at 0.98. Bought back a couple of weeks ago @0.945.

Did the same thing on the USD against CHF (which is basically EUR until the peg breaks - maybe soon).

high yield usually get hammered,yes, but I believe the current situation is very different from situations seen before. The industry is already at its lowest, so demand for raw materials and minerals isn't going to drop much more, and the currencies of supplying countries haven't dropped (canada, russia, australia, brazil), so there is no reason for the AUD to suddenly fall. Investors are more interest in sound fundamental financials than positive growth, methinks. Look at JPY...

and I have asked this question before, I'll ask again:

Who knows how I can get access to BRL money markets, which broker does non-deliverable swaps on BRL?

Edited June 16, 2012 by manarak

[Naam]

Who knows how I can get access to BRL money markets, which broker does non-deliverable swaps on BRL?

not sure but if Oanda doesn't do BRL denominated NDFs no other broker will and you have to resort using a "real" full fledged bank.

p.s. i just checked Oanda. no sign of BRL anywhere.

[letitbe]

since crisis in 2008 weve been hedging in increasing amounts in gold and silver. Since red shirts tried to burn down all of BKK weve been hedging against a return of Taksin and possible Civil war by moving 60-70% of our assets here to other Asian countries.

IMO in this madness you can only hedge in real physical stuff and avoid all derivatives and anything that has counter party risk. So it has to be Gold, silver, property or and possibly some stocks in oil companies, mining and utilities.

I am amazed anyone still leaves much money in banks anywhere and even more amazed they seen to be happy with government bonds. Our only aim at moment is to try and preserve the value off our limited wealth and not be concerned about return yield or gain.

[yoshiwara]

Peaple laugh at me sometimes ......

[Chivas]

I personally suspect that todays Greek vote will go in favour of the anti austerity party and that stocks across the board will gap well down on opening.....

Of course if the Pro austerity party gains the vote then just as likely we will see stocks gap upwards......

My idea of hedging is to be out of the market completely and wait to see which way the wind blows !!

[Naam]

Peaple laugh at me sometimes .....

informed people do not necessary laugh at those who claim

Trillions--printed, unimaginable amount of money and where is it going?

it's more likely they pity them

[jaysg]

I'm buying Greek debt, as it has a truly fantastic interest rate.

care to share how do you buy the greek debt as an individual as usually they deals in hundreds of thousands.

I am interested in greedk debts too

[yoshiwara]

I personally suspect that todays Greek vote will go in favour of the anti austerity party and that stocks across the board will gap well down on opening.....

Of course if the Pro austerity party gains the vote then just as likely we will see stocks gap upwards......

My idea of hedging is to be out of the market completely and wait to see which way the wind blows !!

You are hedged against a drop but not a bounce.