Short Greek Bonds vs Long Apple: No Contest

One may be surprised to learn that in the past 6 months NASDApple is not the best performing "asset class." Sure, it has generated a respectable 43% return since last September when the Greek 1 Year bond crossed a 100% yield for the first time ever (or a cash price of 54). That was also the time when many were saying to buy Greek bonds as there was no chance the yield could tumble much further (probably the same ones who said to buy AAPL). As it turns out, now that the saga of Greece is officially over, and its existing debt is being "retired" at a final price of about 19 cents of par, here is the final tally: shorting Greek bonds since September 2011 has generated 63%, while being long Apple returned 43%. And that's with virtually every hedge fund and their mother entering the Apple hedge fund hotel. So yes - sometimes going against the conventional groupthink does generate the best results. Now if only one could short the "new" Greek bonds at par, the return would be 80% in a millisecond as the bonds will break for trading under 20 cents.

There's more. All the banks that buy New "Fresh Start" Greek bonds at under 20 cents will be able to immediately turn around and repo them to the ECB. What cash equivalent will they get in return? Why just ask Jens Weidmann: he will be delighted to tell you. In other words, the ECB is about to provide another €25+ billion handout to Europe's insolvent banks, or an instantaneous 400% return, once again courtesy of the Greek "default" smokescreen, where the grand prize of course is the full confiscation of the Greek 100+ tons of gold.


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