Watching last weeks events in Greece, I was curious to find out origins of following three words and to my amusement all of these three words have Greek origins.
- Democracy - δημοκρατία – (dēmokratía) "rule of the people
- Drama - Classical Greek: δρᾶμα, drama
- Tragedy - (Ancient Greek: τραγῳδία, tragōidia, "the-goat-song") is a form of art based on human suffering that offers its audience pleasure
No wonder these three words represent what is happening in Greece in particular and in Europe in larger context. It all started when Greece joined Eurozone in 2001 by falsifying its government debts and lost control of its financial destiny. While people of Greece benefited in last 10 years by joining the Euro club, they started living lavishly without paying proper dues which comes with this membership. Finally in started catching up with them in 2009 and continue to muddle thru one crisis after another. Eurozone being motley crew of 17 nations cannot and did not move fast to take control of situation and now Greece, Europe and world is paying for this in form of uncertain times. Most of the western world had one lost decade and if things don't come under control soon, we are looking at another lost decade.
So what should an average investor do in such uncertain times. One thing is for sure - forget buy-n-hold strategy. This did not work for last decade and it won't work for this decade unless you can find gem like Apple in 2001. Since there may be 1 Apple in 1000 or 2000 companies and most likely we won't be able to find that company, it's best to make new friend called volatility! With so much drama around (wait for Super committee recommendations and drama in US congress in next few weeks), markets are going to be volatile for next few weeks. In such times, best to monitor trends/momentum and make appropriate bets using ETFs. Best vehicles for such short-term bets are ERX/ERY, DRN/DRV, EDC/EDZ, FAS/FAZ, TNA/TZA. These are extremely volatile bets so be very very careful.
If you want some steady 6-12 month horizon, check out some of the energy stocks like PCX ($12), ANR ($26), RIG ($48), ICO ($46), SD ($7). World is not falling into double-dip recession. This means world is going to need lot of energy and hence these stocks should be good best for 12 month horizon.