If Greece should exit the EU

This is not for a long term, monthly investors. This post is aimed at those investors who sit on a pile of cash and want to make a quick buck. Be warned, if your timing is out and you invest into equities before a Greek default or even exit from the EU, you will see a 10% to 15% loss of capital.

Although the markets price shares on a forward looking basis, the actualization of an anticipated event will give journalists something to exaggerate about and blow the event out of all proportion, giving rise to an investor over reaction! Not only does the speculator sell (or buy on good news) regardless of the fundamentals, but the automated institutional trading desks get a "sell" or "buy" trigger and PRESTO!


The uncertainty in the markets, fuelled by the comments financial commentators and journalists have been making over the last 5 months, have kept the JSE Top 40 index in a trading range of  between 29 500 and 30 500 points, that is a 15% difference and for day traders this is heaven because when the TOP 40 gets to 29 500 points, they buy the index, and after a day or two, when it gets back to 30 500, they sell the index and buy a "Put" (sell the market using a warrant or other derivative instrument), and enjoy the ride back down, making 15% on their capital every couple of days.

I know this because I have been doing it myself (with a very small amount of money). The problem is that at some point the cycle will be broken and the market will re-rate out of the trading range, either up or down, and then the day trader (speculator) will lose big.

So, the morale of the story is either invest properly, over the longer term and forget about the short term volatility, or wait for a major correction and hope you don't miss the boat.

JUST remember, we live in dangerous times for making predictions. If you are sure about something, you are probably wrong!