My portfolio has a significant allocation to Euro-zone investments*. This includes equities, fixed income, and cash. But, better late than never, I am wondering what, if anything, to do to protect myself against a likely Greek sovereign default.
My read on the Grexit situation is as follows:
- Worst case, all hell breaks loose. Dominos start to fall. Chaos erupts. Nothing is safe. This scenario will have me worrying about much bigger things than the thin sliver of my portfolio that is in Euros.
- Best case, the Greeks exist the Euro pretty painlessly (for everybody apart from the Greeks and maybe some stranded tourists). Under this scenario I think it is possible that after a brief hiatus the Euro starts to appreciate, as the weight of worry on its shoulders would have lifted a little. This view is probably unrealistically optimistic because attention is likely to turn to Italy, Spain and France next, and that weight of worry will make the Greeks seem like a feather.
- Central case, the Greeks exit the Euro and there is some significant market volatility for some time to come. In particular it is possible that the Euro depreciates out of stress/panic; that consumer spending drops causing GDP to fall in the Euro-zone; that there is an investor flight to safety; and that probably you’ll see an increase in reform activity in Italy, France etc as the public starts to ‘get it’ about the need to avoid a similar fate befalling them.
Continue reading “Where to put Euros to protect against Grexit?”
FIRE v London 