by dkeviv

Created on: May 06, 2010

After the first leg of financial recovery, we are spiraling towards another deep trouble. The debt crisis of Greece is growing bigger and fast engulfing all the countries around it and the contagion is spreading to all the world markets. German Chancellor Merkel after realizing the bigger problem, that is the contagion that would spread from Greece and bring the entire world market to a standstill decided to bail out Greece with a few Billion dollars requiring financial austerity from Greece. But the opposition party in Germany with a narrow economic view has struck down the bill to bail out Greece. Apart from that, Greek citizens are in rage, up in arms because the word "austerity" is totally foreign to them.

So how will this Greece contagion work out?

- Greece will bring down PIGS along with it.

- Euro has to be devaluated.

- Entire Europe market goes down.

- Russia depends on Europe for their Oil/Natural gas revenues on which it entirely depends - So Russian Market goes down.

- China's policy towards Yuan and property inflation - Supposedly needed but now it seems there is no need for the governement policy, the property value would have adjusted on its own. - So mistimed - Chinese market goes down.

- American market goes down -  financial market coupling with European financial market.

- Japanese Market - well it never goes up - so it is a given!

- Indian Market - I expect Indian market to perform better than other markets during the race of world markets towards the next dip.

 There is high possibility that DOW would go below 10000 points or stabilize around that level. Hopefully, European Central Bank (ECB) takes some concrete actions instead of just a verbal support!

For people like me who have been long, buying some short ETFs to hedge will be a good idea. 

These are some short ETFs to consider:

EUO - Short Euro

DXD - Short DOW

RWM - Short Russian index.

These are double x shorts. So you would have to adjust your hedging ratio accordingly.

Also consider FXP - Short Chinese market. - Is already up more than 4% for the day when I am writing this.

For people on the sidelines, good for you, pounce on the value stocks on the coming next big dip!

For people with hope that we will have a V shaped recovery, please jettison your hope. Greece just decimated it!

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