Sunday, August 5, 2012

Time to bet on Greek long-term growth

by John Dizard

Financial Times

August 5, 2012

The consensus path for the institutional investor these days is to go to a combination of cash and very expensive (ie low yield) investment-grade bonds.

I understand the whole liquidity preference thing, but steady, long-term growth with low volatility just isn’t on offer at a reasonable price. Too many ageing pensioners, life insurance beneficiaries, and other savers are around, attacking you with their canes and walkers so as to grab away even 4 and 5 per cent returns.

And while most of you think that there will be some sort of a renewed world recession or a further decline in risk asset values, you (and I) don’t know when that will happen. After it does, there is also likely to be a recovery of some sort in economic growth and in at least some asset prices, but that timing is even less certain.

So alongside those Canadian dollars, Swiss franc notes and gold bars piling up in your version of Scrooge McDuck’s Money Bin, you should find a way to buy long-dated, out-of-the-money, cheap calls on future economic growth and risk investments.

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