Summer is almost here, and that means a relative lull in the financial world.  Following earnings season over the next few weeks, we are going to be faced with a relatively stable market with no massive fundamental shifts being undertaken by companies.  That being said, as always, there is a massive move we saw taken by OPEC and oil producers over the past week.

As I discussed in earlier blogs, Saudi Arabia, the leader of OPEC, basically started a game of chicken with the United States to see who would cut production first.  The pressure was induced through the lowered oil prices created by both player’s refusal to cut production.  We finally started to see that relent a bit this past month when the US began halting drilling and exploration activities for expansion, however the two most important developments in this story took place this prior week.

This week, Saudi Arabia raised prices on exports to Asia for the second straight month.  As a result of this, oil saw anew 10% gain over the last month and a half.  Due to the massive amount of oil that Saudi Arabi shoots into the market, this increase in prices for them will have a somewhat trickle down affect to the entire industry. Moving forward, if this is the only affect on oil for a while, I expect it to make oil stabilize around 55.

However, I do not feel that it will stabilize due to the economic struggles countries in OPEC not within the Middle East are currently facing.  Members of OPEC who don’t enjoy the same super cheap production cost oil as Saudi Arabia have been virtually driven to recession.  Venezuela, a major contributor to OPEC’s production, stated that their profits were down almost 60% versus last year; being a major portion of the country’s economy, this decrease in revenue has had obvious detrimental effects on their society.  A major indication of this was the movement of wealthy individuals in these countries moving out of “Oil asset purchases”.  Due to the ridiculous amount of money oil entrepreneurs in these countries have made in the past, they traditionally invest in obscure investments, like US stadiums and similar random items in order to utilize their money.  However, recently they have began selling these assets while simultaneously decreasing purchases of standardized securities in the current secondary market.  This is a major sign that these countries have lost the game of Chicken that I discussed earlier, and as a result I feel that this past week was a major turning point in the world’s oil industry.

Moving forward, I expect oil to end the year around $60 from it’s current position at around $53.  This is a somewhat bold prediction, however I feel that this growth will occur, assuming a massive market shock doesn’t occur over the next few months.  In the end though, the market will be the market, and while I feel confident in my prediction, no one really knows; however, I am excited to ride the commodity industry for the next few months and see where this crazy year will take us in the future.

In this week’s post I’m going to talk about the implications of the framework Iran nuclear deal.  For those of you who haven’t been following the news, last Iran and world leaders agreed to a framework of a finalized compromise on Iran’s nuclear program.  The deadline for this final deal is currently June 30th, but reaching the framework is incredibly significant on the world’s oil supply and hence the price.

Iran currently has been under heavy UN sanctions due to continuing to develop their nuclear program despite resistance from most of the world.  As a result of this a major sanction was to severely limit the countries crude exports.  This resulted in 1 million barrels of oil a day being removed from the world economy.  As we know from econ, decrease in supply means increase in prices.  However, these sanctions have been on the country for quite some time, therefore this decrease has been priced in since before oil even began to drop last year.

This moves us to the present.  Due to the framework of the deal being reached, it’s generally expected that a full deal will be reached at some point around the deadline (Most likely a month later, because Iran get’s a weird twisted joy out of standoff negotiations).  This means that the sanctions will be lifted, and there are two major ways that these sanctions will be removed.

SCENARIO 1: Sanctions are removed in a short time-span

The first scenario for the removal of these sanctions would be that the sanctions are lifted in a relatively short time span, virtually all at once.  This means that after about a one month ramp up of production by Iran, they would be producing at virtually full capacity again.  The impact of Iran’s production is around 1 million barrels of oil a day at full production capabilities.  That seems relatively insignificant until you realize that OPEC as a whole produces 30 million barrels of oil a day.  This means that Iran’s entrance to the market would increase the overall supply by >1%.  This would be a massive market shock, and we would see the price of oil drop like a rock in response.  To put the impact of the actual re-entry into perspective, oil dropped 6% when the deal, with zero specifics, was SIMPLY ANNOUNCED.  Imagine the reaction on a release of full removal of sanctions/reentry into the market.

SCENARIO 2: Sanctions are removed gradually over a year+

This second scenario basically have the sanctions being removed in phases over a relatively long period.  In this situation the market shock would be relatively minute, but it would ultimately result in the price of oil stabilizing around 50, where it is now, despite economic growth around the globe.  In this scenario, oil would once again be projected to stay low for even longer than it already is.  Most growth in demand increasing price across world economies over the next year would pretty much be canceled out by this development.

The real question is which one is to be expected?  Thankfully Iran informed us that the sanctions would be lifted IMMEDIATELY… Until the US then came out the next day and said the sanctions would be lifted IN PHASES.  Who doesn’t love global politics?

Welcome back to this week’s edition of the stock pick of the week.  This week’s choice is basically any stock in the consumer discretionary sector of the US economy.  What is the consumer discretionary sector you may ask?  It’s basically any consumer good that isn’t required to live.  That is, these stocks are marketed to the US consumer and see ups when there’s free cash lying around, and drops when consumers are keeping tight wallets.

The first major point behind this investment thesis is, like always, oil.  With lower gas prices, consumers are willing to spend much more on pointless things that they honestly don’t need.  This makes any consumer discretionary company fill with joy.  However, these increases in sales are typically not noticed for a while and there is a delay in the spike in sales.  With earning season coming up, many companies are filing their 10Q earning report (The report that releases how much money/profit the company made during the first quarter of 2015).  I expect the vast majority of consumer discretionary stocks to exceed expectations and analyst projections, assuming there is nothing that fundamentally has gone wrong with the company during this past quarter.

Another major driver behind this investment is the continued decrease in unemployment and overall health of the US economy.  Within the United States we have seen unemployment final reach the Fed’s target of “Full Employment” (The rate at which the economy starts to become hurt by further decreases in unemployment).  We know this because the Fed, as I discussed last week, is finally attempting to pull back in the economy by increasing rates over the next few months.  However, at the current time these rates are not dragging the economy back, therefore the consumer is still able to spend freely.

One note I do have to say about this investment thesis however, is that if one does invest in this sector, it is key that the stock for the most part or completely has sales in the United States.  Due to the relative strength of the US economy compared to the rest of the world, the US dollar is currently worth a fortune in other countries’ currencies, but that makes our exports extremely expensive in other countries.  Hence, a company that is receiving payment in Euro due to having operations in Europe is actually seeing minimal increases in revenue due to the fact that the euros that they pay in that country are worth much less to US centered companies who operate mainly in the US with divisions in Europe.  To put it in perspective, months ago the exchange rate was 1.2 dollars per euro.  The current rate is closer to 1, but overall costs of goods in euros have not changes.  This means US company’s European earnings basically dropped by 16% as a result of simple changes in the currency exchange rate.

The final piece of advise I have for the risk prone, is now would also be the time to invest in a consumer discretionary low market cap, high growth stock.  High growth stocks thrive in a booming economy like we are currently in, and a consumer discretionary focus would amplify this even further.  Therefore a consumer discretionary high growth stock would have the most upside potential at this point in time, but logically also the most downside.

Hopefully this made sense to you guys!  Let me know in the comments if there was anything that I didn’t explain adequately!

Preface: This is not going to be a traditional investment thesis but rather discussing a topic who’s significance people do not understand as well and is big news today.

At the fed’s annual meeting today, they finally decided that the US economy has sufficiently recovered for rate hikes to be considered.  Did they explicitly state this?  No, but obviously traders and bankers are over reacting to this.  Over the course of the day, the DOW dropped 200 then proceeded to go up 400 from there.  This happened, because the Fed was projected to change their rhetoric to no longer use the phrase “patient” which they defined as rates would not go up within the next two meetings.  This meant that the Fed will most likely raise rates from their current near zero point.  However, the market spiked up again when they said in their meeting that rate hikes would be very gradual, and not an abrupt shift.

This change marks a drastic shift from prior rhetoric which stated that rates would “remain near zero for the foreseeable future”.  However, most of you are probably questioning why this rate is important.

From a financial and economic perspective, there exist a ridiculous amount of models which basically derive an assets present value based on its current value and all future cash flows the asset will generate.  For example, a company’s stock value is the sum of all of it’s future cash flows (Future net profit).  However, there is the concept of opportunity cost.  A dollar today is not worth a dollar tomorrow.  This is not simply due to inflation, but also opportunity cost.  If I have a bag of money in my couch, my opportunity cost is the money I am not receiving from returns on investment.  The base line for opportunity cost in every financial model, seen in some aspect within the model, is the US bond’s yield rate, which is considered the world’s standard for the “Risk Free Rate”, aka if you invest there is ZERO chance that you lose your money, hence “Risk Free”.  To account for this time value of money(opportunity cost), most assets with cash flows over a period of time are discounted by the Risk Free Rate^n, where n is the period the cash flow is projected to be generated.  Calculating the present value of an asset therefore is for the most part a geometric series of future cash flows with a function of the risk-free rate as the numerator (For all you fellow math majors out there!).  To put this in simpler mathematic terms, if say current risk free rate is 2 (For our example, we’re using 2 instead of realistic .02), the numerators for year 1-5 are 2, 4, 8, 16, 32.   Now say we increase the rate to 3.  The numerators for year 1-5 are 3, 9, 27, 81, 243.  As one can see, a number divided by 32 is going to be much more than a number divided by 243 in year five.  Therefore a mere 1% increase in bond yields causes a MASSIVE rippling effect throughout the security market, artificially lowering security present values.

Hopefully this was relatively easy to understand!  The main impression I’m trying to impart is that the risk free rate is used in virtually all aspects of financial asset pricing, and therefore a change in the rate creates a massive amount of uncertainty in where the market will go (Which already is quite uncertain).

This week’s stock pitch is going to be Asian e-commerce giant Alibaba (NYSE: BABA).  If anyone was watching the news back in the fall, you would know that the initial public offering (IPO) of Alibaba was the most hyped IPO in history, and generated a ridiculous amount of money for both stockholders and the company itself.  The company IPO’ed at $68 and shot up to $92 in the first day of trading.  This IPO raised 25 billion in capital for the company.  Since then, however, the company has fluctuated between 85-95.

Now before this pitch starts, it’s natural to inform you about what exactly Alibaba is.   BABA is  basically an e-commerce company facilitating sales between buyers and sellers in the same way as Ebay.  Except it’s bigger than Ebay and Amazon combined.  The company did face scrutiny a while back due to their lack of verification of seller’s postings, in addition to not caring about seller’s posting illegal automatic and anti-tank weapons, but that’s been taken care of since.

The main driver of this stock’s future profitably is there recent acquisition of data center’s in Silicon valley.  While this does not necessarily facilitate an expansion into the US market, it does hint at the high likelyhood of it in the future.  If the company were to become exposed to the US markets, I foresee the company’s overall revenue and hence profitability shooting up.  One of the big problem’s it currently faces in Asia is that due to it’s already massive market share, it will naturally struggle to grow, but a power-play expansion to the US would allow the company to get a higher return on expansion investments.

In addition to the stock being poised to make the swan-dive into the US markets, the company is also a relatively safe buy.  Due to the company’s virtual monopolization of the Asian e-commerce market, it’s very unlikely the stock dips below $80 anytime soon.  As such it would decrease the overall volatility of a portfolio while offering high growth potential.

Finally, the stock has tanked significantly since it’s high of $120 in November of last year, but this was due to a variety of issues with the Chinese commerce department and counterfeit/illegal goods as I mentioned before.  However, this issue is behind them at this time, and as such it means that the company should see a massive rebound in share price over the upcoming months and year as they can move their focus back to the company’s internal operations rather than waging legal battles.

Overall, this stock right now in my opinion is a good buy, and in the best case scenario we would see the stock break through the $100 dollar barrier over the upcoming months as the company moves into the US market and is able to recover from the earlier legal litigations.  Worst case scenario, the company tries and fails to break into the US markets and more legal actions are taken against the company as more issues arise in the future.  However, in even this worst case scenario I don’t see the stock dropping below 70 and most likely not even breaking 75.

So as I hinted at in my last blog post, this weeks investment is once again oil…  Or I guess that is to say a derivative of oil.  Before I get to the meat of this post though, I want to first explain what an Options contract is, as it is what I am pitching today.

An option is a type of security traded on a different exchange than stocks; traditionally the Chicago Mercantile Exchange is the biggest one most US citizens make use of.  Now, an option is a contract that says one can buy or sell an asset throughout a certain period of time for a predetermined price.  “Buying” the stock at a certain price represents a short, and in this context it is called a Put Option.  It is virtually the same premise as shorting a stock; that is one borrows a stock, sells it at the current price, and then gives the stock back to the lender after buying it at a lesser price.  An example of a put would be that you believe stock XYZ is going to fall in the next 20 days.  It’s current price is $10 a share.  The strike price is $9 a share.  The strike price means that you make a profit if the stock drops below $9, but the option can only be exercised if the price drops below $9.  The contract specifies it gives the owner the right to short 100 shares of company XYZ at the price of $9 over the next 30 day period.  In this example, the buyer would pay $100 for the options contract (Representative of the 100 shares times the 1 dollar change in value).  If the stock drops below $9 within the next 30 days, the owner can execute the trade (Profit being (9 – price)x100).  If the stock doesn’t drop below $9, the owner of the option loses the money paid, and the contract is worthless.

The benefit of options is the high profitability linked with the contract.  Basically if the contract is “In the money” as the say (able to be executed for a profit), the gains in comparison to investing in the underlying asset are exponentially higher.  However, since you aren’t investing in an actual asset, and simply a right to buy an asset for a short period of time, if the contract expires you lose all of your money.

This weeks idea is to purchase 40-60 day put options on oil.  That is, oil is the underlying asset and we expect it to go down significantly.  Hence, I feel that options are the current best investment to get maximal profits, despite the risk.  The main reason of this is the current disassociation investors seem to have with regards to oil supplies and the price.

Over the past few weeks, reiterations of the same message have been blowing up my phone from various news sources, in addition to just information seen online in general; Crude oil inventories are still increasing, and production is going to continue to outperform demand for a while.  Yet, the price of oil has stabilized at 50ish despite these reports.  This to me indicates that investors are in a psychological lull of sorts; everyone wants oil to go back up, still living in the world of last year’s 100$ barrel prices, and can’t see that it’s staying down, and going to go even lower.  Oil at this point after all these reports should, in my opinion, be downwards of 46$ in price, but it isn’t.  From a strictly fundamentals standpoint this is quite perplexing.  I expect the broader market to realize this over the coming weeks, but not within the next week or two, and that is why I chose options with around an April exercise date.  I believe that when E&P companies produce their Q1 2015 earning reports, investors are going to see both the massive inventories they have, and also the massive oversupplies they are creating, and the price of oil is going to drop down significantly following this at the latest.  Most likely though, it will happen much sooner.

As you have seen from my recent posts, oil is on the mind of much of the economy lately.  That being said, as I hinted at in an earlier article, due to the abundance of cheap oil currently available, US citizens are purchasing low-end fuel economy cars.  Now, this makes mid to large vehicle centered company a good investment, but ford is the best because of the introduction of their new aluminum ford F-150, with eco-boost engine.

Unlike cars of similar sizes, fuel’s F-150 possesses not only the intangable brand name that the F-150 has built within the country, but also an engine competitive with small cars.  Their newest truck gets 25 MPG, an unheard of metric for a vehicle of that size.  This gives the company a massive competitive advantage over their peers.  That means that when consumers are going to the lots to select their truck, they are going to be choosing between Ford’s massive F-150 at 25 MPG and similar competitors cars coming in at ~18 MPG.  That’s a massive deal.

Furthermore, the financial health of Ford over the past year has been quite deceiving.  Due to the creation of the F-150 out of aluminum instead of steel, the first truck manufacturer to do this, the company had to shut down the vast majority of it’s F150 facilities to retool them.  This appeared to destroy their sales, as the F150 was basically out of production for the second half of 2014, and as a result the stock price plummeted because from a financials statement perspective, their company posted two awful quarters.  But if one considers the reasoning for this, the stock price drop was unwarranted; one can see since the F150 has come back online in early January, their sales have hit all time highs.  This is why I expect Ford to rise at a rapid rate over this quarter, accentuated by the nose dive oil is about to take again (I’ll talk about this next week).

The culmination of these different factors make me make the following prediction:

FORD WILL HIT $18.00 A SHARE AT THE LATEST FOLLOWING THEIR Q1, 2015 EARNINGS REPORT

Ford is currently trading around $16 for comparison.  I feel that the company will either become valued at this point when people see their sales are ridiculous, or if no one realizes this their earnings report will spike the stock after outperforming estimates significantly.

IN THE LONG TERM

Ford has also been gaining market share in both Europe and Asia, as the company has put massive investments within the continent of Europe, where the country has never made a profit actually.  However, with the aggressive quantitative easing and monetary policy that the European Central Bank is putting into place, I expect the European investment to begin to pay off by the end of the year as European consumer spending increases significantly as the economy recovers.

Furthermore, with the current strength of the dollar relative to depreciating currencies across the board, Ford can easily begin invest more heavily in both Europe and Asia and see massive long term results.  The US dollar is trading at an all time high vs all other currencies (generally) and as such to invest in other domiciles will mean the company will get comparatively more on a per dollar basis than if they wait until economic conditions are good.  This can easily be done, as the company can utilize the free cash flow that is about to be created within the US to expand their market share in other continents.

This week’s investment is going to be the company everyone knows and loves.  Virtually everyone owns one of their products and they possess what can be described as a monopoly in the tech market.  This is kind of reflected in their “We make more money than your entire country” level success (300 billion projected revenue for 2015…) and their 700 billion market cap.  Suffice is to say that the company’s wealth is beyond the imagination, and the company lives by the mantra “The rich get richer”.

With the release of the recent Iphone 6, being sold at near $100 more than past models, sentiment for the company was negative a few months ago…And then they sold 21 million in the first two weeks of opening…oh ya and that doesn’t include China… These guys sold 74.5 million Iphones in the fourth quarter, around 40% more than the year prior with the Iphone 5.

And that’s why this stock is shooting up, and you need to buy in now; the cult mentality of apple is at an all time high.  All of Apple’s products are designed to work together, and as a result you see people start out with “Oh, I’m just getting an Iphone” when their contracts come up, which turns into a mac, ipad, itv, and most likely an iwatch when they’re released.  The amount of loyalty people have to this brand is amazing, and one should expect 2015 Q1 sales to also impress.

However, the main driver behind the purchase of Apple lies within China.  Over recent years, the country has seen a surge in the growth of the middle class as the country switches from an industrial economy to a retail economy.  That being said, the prime target of the iphone is the middle class.  This is the perfect storm of events for Apple to take advantage of.  Apple during this last period has reached a point in China where the same consumer awareness of the brand seen in the US has developed in China.  Their sales in the country for 2014 Q4 outdid US sales; this has never been done before by the company.  Apple has enthralled the average Chinese citizen, and as a result, Apple has managed to tap into the massive market that is China, a feat most US companies fail miserably at.

Now combine these two ideas I just put into place.  Apple creates a cult mentality where people come back to buy more products after only a single sale.  Apple just created a massive following in China as millions of Chinese citizens buy their first I-product, the Iphone.  Combine these facts together, and you can see what the growth potential is for this already massive company.  This is the reason that this week I am going to put forward this very bold prediction.

Apple will hit $140 a share by the end of March.

That is almost inconceivable for a company of Apple’s size, but as I said I’m feeling bold and confident with this call.  The company will continue to see massive growth over the period, and expect the price to spike even higher if their 2015 Q1 sales are above expectations.  Also, it helps my prediction when Carl Icahn, a man respected enough to move the entire market based on his actions, says the intrinsic value of the stock is $210.  Basically, now is the time to buy buy buy!

This week’s investment opportunity is in oil!  Looking at the past year, oil’s had a rough time to say the least, dropping more than 50% in value since August.  Now the saying with commodities is “what goes down must come up”…Ok I just made that up, but you get the point.  It is my perspective that oil is below its equilibrium price, and current actions taken by energy companies has improved investor confidence to the point where they are beginning to invest back in the black gold

The catalyst of the sudden rise in oil over the past few days is the announcement by multiple companies, including BP, ConoccoPhillips, Exxon, Petrabros, Chevron, etc. that they will be decreasing exploration and the creation of new rigs in order to retain profits, and keep their dividend constant (A dividend is what a company will pay to the shareholder on a yearly basis per share; sudden declines in the dividend spark investor fear and drive down stock price, therefore the companies are trying to avoid this situation by cutting expenditures in order to keep their dividend constant rather than continue operations and simply nuke their dividends).  Seeing a decrease in future growth and production prospects, investors are beginning to nervously invest back into the commodity.  This has started to drive up prices, and S&P energy sector growth over the past week has been astounding.

That being said, one must also be wary investing into oil now.  This could simply be an upward spike that is going to be followed by a massive downward drop after investors realize that oil has been driven too high.  My investment strategy is this; invest in oil now ($47.81), sell once it hits the $52-55 range, depending on your tolerance for risk, and then repurchase and hold if it breaks $60 relatively soon after.  I feel that this strategy allows for one to benefit on the short term movements of oil even if the price is inflated, and then allow for greater profits reinvesting later as the upward trend past $60 reinvigorates consumer optimism.

But what if one doesn’t want to deal with the volatile energy commodity market, but still reap some profits on these movements?  Instead of investing in oil, one could also invest in energy companies whose prices have a positive correlation with the price of oil.  That is to say as oil goes up, these stock prices also go up.  If one wishes to take this route, I would advice investing in a purely energy and production company (Basically a company that strictly pumps oil out of the ground and then sells it to a transporting company) like ConoccoPhillips rather than a major integrated oil and gas company (Basically a company that produces, transports, and retails oil) like Exxon Mobile.  This will expose you to the most volatile stock possible, and result in the most capital gains (Increases in stock price past one’s purchase price).  However, if one wants the less risky investment, go with the integrated major route as this will see movements up and down that are not as severe.  However, if you do decide to invest in a stock over oil DO YOUR RESEARCH.  *Don’t invest in Conocco or Exxon just because I said there names.  Companies are not strictly effected by the price of oil, so one must also take into account performance and similar items when investing.  You wouldn’t invest in an energy stock that just reported defaulting, would you?

THIS WEEK’S RECOMMENDATION: BUY OIL COMMODITIES/FUTURES AND/OR ENERGY STOCKS*

So let’s talk about Greece. A few years back Greece suffered what was virtually a sovereign debt crisis (Linky: http://en.wikipedia.org/wiki/Greek_government-debt_crisis) during which the country almost defaulted on their bonds (Was unable to pay coupon payments/face value). I say almost because instead of actually defaulting, the country restructured the current bonds into longer term bonds, but it was basically a default. As a result, the European Central Bank (ECB) basically was required to swoop in and bailout the country, pouring billions of dollars into the country ending the final quarter of 2014. Since, Greece has become the red-headed stepchild of the European Union (EU).

Moving back towards present day, as of this week the Syriza party within Greece, a strongly left wing party within the country, has taken control. Their campaign involved running on an anti-austerity platform. Austerity is a form of budget utilized within countries where the country minimizes government spending and raises funds through increased taxes. In Greece’s case, their current austerity policy is in place in order to repay the bailouts the country received during their debt crisis. However, the country is currently in an economic slump, and has been since the 2009.

Normally governments can utilize expansionary fiscal and monetary policy in order to get out of these economic slumps. However, Greece can’t use monetary policy due to their involvement within the EU; the central bank that controls the euro, Greece’s currency, is independent from the country. This means that the only asset available to them is expansionary fiscal policy, which involves increased government spending and decreased taxes.

This is where Greece faces a vicious cycle. The country can’t create a deficit without not being able to pay its debt, and the country cannot foster economic recovery without implementing a deficit. Currently the country is barely able to pay off the portions of its debt owed every period, and the only way it will be able to pay it off quicker is with a stronger economy.

Now as I said before, the Syriza party believes in anti-austerity measures and wishes to implement these within Greece itself through increased spending. In order to allow this, the country is attempting to renegotiate their current debt, and more alarmingly write off a significant portion of it (Writing off means they will never pay it, but without actually “defaulting” as they are attempting to negotiate the write off). This is very alarming to bondholders and the ECB in general because it means a massive portion of their debt will never be paid (Greece’s debt is equivalent to 175% of their GDP). As a result, bonds are risky and could possibly be defaulted or never paid back.

THIS WEEK’S RECOMMENDATION: BUY GREECE BONDS

               Now, all of you are probably looking at me like I’m crazy after seeing all the uncertainty within the country, and how bonds could end up losing everything. But my investment thesis for this is that the policies Syriza believes in will never be implemented. If one looks at current yields, they have skyrocketed since the party took control due to a mass selling and decrease in demand (Chart: http://www.bloomberg.com/quote/GGGB10YR:IND/chart). Bond prices and yields are inversely proportional, which means that the massive increase in yields means prices for Greece bonds are quite low relative to their standard equilibrium. I feel that over the next few weeks the yield will drop back down as the radical ideas of Syriza fail to be implemented. Basically this is one of those “Buy low sell high” investments. Greece bonds are junk level, so they trade quickly and aren’t held to maturity, unlike US bonds which are long term investments for most.

Now I’m going to begin to discuss why exactly I feel that Syriza’s policies will NOT be implemented. This can be summed up in the following three ideas:

1. German Pressure
   1. Basically the Germans are in charge of the ECB possessing currently most powerful economy in the EU. Germany is applying too much pressure on Greece not to do this, that any refusal on Greece’s part would most likely end in a “Grexit” as it is being referred to. This would be a Greece departure from the EU. However, realistically this won’t happen, as Greece’s economy is in such a bad state, that to introduce a new currency to replace the Euro would be disastrous, and to keep the Euro while leaving the EU would be stupid.
2. Idea vs Action
   1. Syriza made all these political promises, but take a moment to question the validity of them. Politicians continuously make promises during campaigns and end up implementing very few if any. Just look at any US politician.
3. The Composition of Syriza
   1. Syriza is not made up of career politicians. Tsipra, the leader, was an economics teacher turned politician. Virtually everyone in upper level positions within the party has a similar, not political background. As such, the campaign went well, sealing them a victory, but to now be thrust into negotiations with all the European powers when in reality the leader can be described as a novice politician at best. Do you really think they’ll be able to even come close to implementing their radical ideas?

*UPDATE: As of 1/29 9:30 AM, yields went from being +8.32% 1/27 to -18.55% 1/29.  Basically if you invested before today’s plunge in yield you would have made bank selling them currently.