The Greek debt saga is once again looming large among investors’ concerns as the rate of capital flight has picked up.
So where does one go from here? It is always hard to reduce such complex issues into soundbites. But reliable pointers are still possible. We have the following base-case scenario:
- Greece will sooner or later default on some of its debt
- But it will remain in the eurozone to avoid a systemic shutdown
- Financial markets will come under pressure but will by and large cheer what is a reasonable outcome
However, if the politicians in control pushed Greek out the door, investors would have to shield portfolios as quickly as possible using bonds, long-short funds, the dollar but especially cash and physical assets such as gold, until the eurozone revisits its decision (as happened after Lehman).
In the end, it is always a question of risk aversion and investment horizon. Do you prefer protecting investments in the short term or gaining exposure to the long term?
Read the detailed comments of Bruno Jacquier (above).