Greek T-bills: If I Had Enough Wealth...

I'd be really tempted to put at least 10% of it in Greek short-term debt. From Mahalanobis,

 

I'd be betting that Germany, the ECB, and possibly even the IMF will bail out not the Greek economy but Greece's creditors. Let's face it, Goldman made a bundle with a similar bet wrt AIG.

Comments

[JH]

If it was such a sure thing everyone would be doing it.

The efficient markets hypothesis would hold that the only reason the interest rates are so high is that they have the increased risk factored in already.

[KipEsquire]

You need to short the other euro-denominated sovereigns as a source of funds, otherwise the pending collapse of the euro would negate those yields.

[EclectEcon]

Jeff's comment (#1 above) is surely right. Of course it is not a sure thing; I'm just guessing that the market, on average, is over-adjusting for the risk, especially in the short-run, of default on Greek short-term gubmnt debt.

Kip's comment (#2 above) reflects several important points. First, it helps explain why I do NOT have the wealth to do this type of investing: I'm just not smart enough. Second, if shorting the Euro is necessary for investing in Greek debt, surely it is at least as important for purchasing debt from the other PIIGS. But even if one doesn't short the Euro, buying PIIGS debt would most likely be reasonable for someone as risk-averse as me only if there were an offsetting hedge in the forward market between Loonies and Euros; I don't think I'd have to short the Euro to cover this hedge, would I?