Hedging PIIGS Risk with ETFs

Fri, 01/29/2010 - 01:44 EDT - Seeking Alpha

Tom Schumacher submits:Acronyms for blocs of countries are all the rage these days: BRIC, MAVENS, now PIIGS (Portugal, Italy, Ireland, Greece, and Spain). As the BRICs and MAVENS were created to group strong growth countries into an investable group, the PIIGS are the polar opposite: countries on the brink of disaster. We didn't coin the acronym "PIIGS", but we are the first out with a comprehensive way to "play" it.Europe's woes, particularly those in Greece have been well documented, as debt ratios and budget deficits are climbing. Sovereign risk is rising. Portugal just yesterday announced a budget deficit that was 9.3% of GDP vs. previous estimates of 8%. S&P and Moody's have downgraded or slapped negative watches on Spain, Greece, Portugal debt in recent weeks with Moody's going so far as to warn that Greece and Portugal's economies may suffer a "slow death." The IMF is estimating that Italian public debt will reach 120% of GDP next year. Ireland was forced to raise taxes and slash $3.6 billion government spending to help contain their annual budget deficit. In addition to a large budget deficit, Spain is battling the highest unemployment rate in Developed Europe and a Real Estate implosion worse than that of the United States.Complete Story »

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