Trading in hindsight is easy, but to do it for real would have taken nerves of steel (yes.... let's call them nerves....)

Friday 11th September 2015

Trading in hindsight is easy, but to do it for real would have taken nerves of steel (yes.... let's call them nerves....)

Ref : "Greece, the World's Best Investment. No Joke." , Bloomberg View

What's really to be gained in analysing missed opportunities , apart from a mild dose of depression ? The world is full of "If I'd only known then what I know now" stories and they usually represent the most pointless form of hand-wringing. Well, if it helps to identify similar opportunities in the future it definitely serves a purpose. But what if the example given is so extreme that no one charged with any degree of responsibility could have contemplated getting involved, as in this case ? It's a very fair point, but it's an interesting academic exercise if nothing else ..... and let's face it, some people (just a few) will have had the nerve to climb aboard this particular gravy-train. Very well done to them, and we can only assume that they were playing with money that they could afford to lose.

So, to Greek debt and a particularly selective timeline :

Jan 31st, 2015 : Alexis Tsipras has just been elected Greece's Prime Minister on a seemingly impossible promise of both rejecting austerity and securing the final 7.2bn euro tranche of the bail-out package. Former Federal Reserve chairman and all-round guru (of sorts!) Alan Greenspan is saying that Greece will leave the Euro, which would itself probably collapse. GREEK 10yr BONDS ARE YIELDING 11.2%.

March 24th, 2015 : Billionaire George Soros, another of the markets' most high-profile sages, says that "Greece is going down the drain" and it's a "lose-lose game". GREEK 10yr BONDS ARE YIELDING 10.8%

July 8th, 2015 : Greece has voted to reject the austerity policies required by her creditors. President of the German Institute for Economic Research (and ex-head of policy research at the ECB) Marcel Fratzscher describes Greece as a "political and economic catastrophe" and predicts her exit from the Euro, GREEK 10yr BONDS ARE YIELDING 19.2%.

The present : GREEK BONDS ARE YIELDING 8.11%.

So what does this all mean in terms of returns ?

(Reminder to newcomers : yields move inversely to prices)

 If you had bought 10yr Greek bonds on Jan 31st, you would now be looking at a return of 26%. If you had bought the Eurozone benchmark equivalent, you would be wearing a loss of 1.8%

If you had bought 10yr Greek bonds on March 24th, you would be looking at a return of 21%. Eurozone bench mark equivalent ? A loss of 3.3%

If you had bought 10yr Greek bonds on July 8th, you would be looking at a profit of 101%.....yes, we'll say it again, 101%. The Eurozone benchmark equivalent is showing a profit too..... of just over 1%.

There are plenty of flaws in outlining scenarios such as this. For a start, trying to pick tops and bottoms in markets is totally unrealistic and a mug's game to boot. But still .....

It's possible that those who did get the right side of such a winning trade were encouraged by the fact that the Greek people were consistently and massively in favour of retaining the Euro, and that no European leader ever stated that the EU wanted Greece to leave the Eurozone. It's just that for most the saga a happy ending hasn't seemed likely.

It's not as though things are suddenly a bed of roses for Greece. Frankly, they're still in a mighty big hole. So if you were lucky (or clever, or brave) enough to be sitting on this particular jackpot, what would you do now ? Take profits ? Most of us would, surely.... but then most of us wouldn't have had the gumption to place the bet in the first place, or even the inclination.