Wednesday, April 28, 2010

Stimulus, Strikes, Restructuring and Stability? - Go Long Volatility

This looks like an absolute no brainer.

We are at the top of the stimulus, 70% of the money will have been spent by September. Stimulus programs are fading out all over the world (except maybe China).

On the other hand, Spain, Portugal, and Greece have all been downgraded and face further market pressures on their debt this year. According to NakedCapitalism, Greece is going to face the most stringent economic constraints ever placed on a sovereign nation to receive their IMF alottment. That will just delay the problem for six months to a year. Once they blow through the first set of conditions, the market will be bigger questions to address.

I don't care if the IMF (a.k.a. US) and it's european friends bailout all of these PIIGS. They won't do it until it is the final option. That guarantees volatility before we get there.

Long VXX at 20.06.

Deleveraging is in effect and it is ugly.


Lockstep said...

Entered a market stop loss at $29 tonight. Let's see if the author gets stopped out in the morning.

Lockstep said...

Great entry, position, timing, and a horrible dismount.

When the bailout was announced I put an order in to sell at the open on Monday. Apparently a lot of people were trying to get out at the same time and the value of the ETN was depressed when it executed. Thus the exit price was $23.7.

This position is a very good one for the next few months with Greece and other Euro Zone members facing fiscal austerity in a declining economic climate. I will look for another entry point later.


Nice take