In this podcast we speak with Laurence Wormald, the Head of Research for SunGard APT. In the episode, we ask how investors can gauge expected results from a possible Euro breakup, default of one of the GIIPS countries, and other scenarios for the troubled eurozone.
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To listen to the podcast, press play below.
Highlights from our episode:
APT helps investors understand and guard against a Euro breakup by looking at most-likely scenarios, for example, one possible scenario is that only Greece leaves the eurozone, another is that all five GIIPS countries leave the eurozone, or that the eurozone collapses entirely
The crisis has broad implications for investors the world over, banks have been at the center of the crisis from the beginning; the wider corporate debt markets are already impacted and when the financial sector suffers we see impacts across many other sectors as well
It's clear from the earlier phases of this crisis that the real economy effects would lead to enormous pressures on global equities markets, such as large exporters like China; for example, APT's model shows double-digit losses for these markets in the event that five countries leave the Euro
Assuming Greece leaves the Euro, all assets would have to be re-priced in the Drachma which would likely result in heavy losses
There isn't a truly effective hedge against the Euro breakup scenario; it is probably more useful to emphasize liquidity, and buy German bonds and U.S. treasuries
