Greece is only one piece of the broken chain within the EU nations. So, once shouldn’t sigh with relief once Greece’s problems blow over. Once their situation is resolved, all attention will refocus itself onto those other problematic countries. There has been a lot of speculation, and let’s just say that things aren’t looking well for the Euro.
Hedge Fund Trouble
Big institutional traders are looming in the background like a vulture waiting for its prey to fall. The subjects of all the scrutiny belong to PIIGS: Portugal, Italy, Ireland, Greece, and Spain. This well spread-out debt crisis may reveal that the Euro is indeed overvalued. Hedge funds and big traders see it as an opportunity to short the Euro.
In fact, the wager against the Euro has gone beyond just talk. The Globe and Mail reports that many banks, institutions, and hedge funds might have already made moves against the Euro and the British Pound. The moves have become so controversial that the US Justice Department have asked four hedge funds to turn in their trading reports. They aren’t just your average hedge fund either. They are THE hedge funds of the hedge fund world: Greenlight Capital, SAC Capitol Advisors, Paulson & Co. and Soros Fund Management. Soros Fund Management is operated by George Soros himself, the man who single-handedly brought down the British Pound and earned $1 billion dollars in one day. It’s safe to say that there’s a lot for these indebted European countries to worry over.
Stronger European countries like Germany and France are hoping to soften the impact by taking on the debt for these five countries. Their contribution could result in a stronger political and economic role within these countries. However, Greece currently holds a debt of 6.3% of its GDP and France holds 7.5%. The question becomes, can they really afford this debt?
Bigger scrutiny should be put on the situations that got these countries in this predicament in the first place, which we speculate greedy institutions and politicians. Otherwise, a bailout will be pointless if the money goes into these same hands. The US bailout of big institutions reveal that money remains in the hands of the elite, while the average citizen suffers. Perhaps these countries just need to face the music and let the markets correct themselves.
Opportunity: In the oncoming months, the dollar could be closer to the value to the Euro and British Pound. That spells an opportunity for travel, sales, importing, exporting, etc. For seasoned investors, it could also mean an opportunity to profit from the Euro’s potential devaluation. Furthermore, it could also present a buying opportunity once the Euro sinks to a lower value. So, there just may be a silver lining in this European cloud afterall.
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