Tuesday, February 7, 2012

Trade ideas ahead of Greek debt deals

Investors are on a 24-hour watch for Greek PSI and Troika deals to be announced. Yet another Kool-Aid will be served to those riding on the train of central bank-induced "hopium", while they are pretending to avoid and completely ignore the inevitable outcome. Is this a baseless rant of mine? Hardly. The latest development is that ECB is about to get involved in "creative" Greek bond exchange using EFSF as a middle man. Can this pyramid madness ever stop?!! After all, who cares what EU institution holds worthless piece of paper? Greece can't repay any of it, ever. By the way, it is thought that the word pyramid is derived from the Greek word Pyramidos, which means "Fire in the middle". How funny... Many have been worried that ECB, which is buying PIIGS bonds hand over fist, may be bankrupt in the end.
With enormous cash infusion (through cheap loans) into some insolvent EU banks, which hold bonds of insolvent Eurozone governments, ECB has created the biggest and most clever financial ponzi  scheme ever known to mankind. "LTRO is working", says the investment community. Of course it is! As Michael Farr once said about Fed's QE: "even a dead horse will get up and make a few laps around the race track, if you inject it with that much cash". The race will eventually come to an end, and somehow I think a few horses will not make it to the finish line... Place your bets wisely, ladies and gentlemen.

Warren Buffett once said that "successful investors go through long periods of inactivity". I realize that he meant those words in totally different context, but I would like to use them here for my own gain. I would like to argue that traders go through the same periods of inactivity. While obviously less lengthy, they occur in the time of trader's expectation for all parameters of the trade to be matched. I am currently in the middle of such time. The trade I am waiting for was originally based solely on technical parameters, but now is also dependent on Greek deal(s) announcement, as a contrarian signal. I will short trading vehicles of risk in the middle of ensuing jubilation, perhaps within 24-48 hours from now.

Here is my plan:

Wait for Greek deal(s)-based exhaustion push higher and short the following:

SPX
EUR
HG
GC
DAX
GOOG

Go long the following:

USD (against all risk currencies)
ZN

24-hour Greek headlines watch continues...

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