I've been following the global economic situtation pretty closely over the past few weeks and the one thing that seems clear to me is that no one has any idea where we are headed. I think it's easy to just throw out a prediction that everyone will forget in fifteen minutes, but if you really want to see what people believe, check out where they've plopped their money. Last week I shifted 15 - 20% of my holdings from an S&P 500 tracking ETF to VXX, which tracks the VIX (in theory). Pretty much I'm paying 89 basis points for insurance against any future collapse, which I think is entirely possible.
My rationale for this move is for the most part the debt situation in Europe. Carment Reinhardt is not enthused by what is going on there. Arnold Kling reinforces her thoughts, though doesn't go into much substantive detail. The latest news is Greece will be bailed out by the EU, but what will this mean for the Euro? Already record shorting is being done on the currency.
A couple of months ago I bought gold anticipating some sort of situation like this. But the flight from the Euro has not gone to metals, and in particular gold as many anticipated, but instead to the dollar. This needless to say has adversely affected gold, driving it down during a time when all the fundamentals say it should be shooting up! I may looking at UUP to play and hedge off this development (I'm still long gold), but that party may soon be over too. I just don't know.
We live in strange times indeed.
No comments:
Post a Comment