This is a fast afternoon post showing two not too much developed ideas to hedge the portfolio.
So, the title says it all, that’s my hedge strategy for the remainder of the year. Let’s see why.
First of all, we have Deutsche Bank (from now ‘DBK’), that’s in my opinion, more dangerous than any Italian bank. The problem with DBK is that, despite all their efforts to restructure the bank and reduce costs profit is sinking. We also have the derivatives hole, that as Morgan Stanley analysts have calculated is at around €9B.
But what worries me the most is the thing that, despite the massive injection of capital conducted by the ECB, the bank has not been able to solve any of his problems. And, to the existing ones, we have to sum the fines that the bank will probably receive from many regulators.
So, in a weak banking environment, I think that one of the best shorts if the thing goes wrong is DBK. That’s the reason why I’m buying DBK 9.00 16DEC16 Puts.
On the other hand, we have the VIX. Many companies are having flat revenues growth or are directly descending. In the medium term I expect earnings to be lower due to fore volatility, negative interest rates and deflation, so actual valuation doesn’t make sense for a great number of companies. The problem is, as I will explain in an other post, that there’re not too much alternatives so that’s the reason why we’re seeing those nonsense levels in equities.
We also have a sovereign debt bubble, but that’s a thing that’s impossible to calculate (I mean the timing).
There’s also China, with its problems, with its scamming accountancy. And the Brexit, that has started to affect the UK and Europe as we could see a few days ago with the UK PMI under 50.