The Fear Trade

• Posted by DynamicHedge
• on June 14th, 2012

As Greeks head the the polls this weekend there’s a huge absence of positive vision in the market.  Fear is driving every discussion.

• Germans are afraid to print money or guarantee debt because they’re don’t want to repeat the past.
• Greek voters are afraid to stick it out with the Euro because things feel so bad they can’t get any worse.
• Bulls are afraid that the data isn’t bad enough to lure Bernanke and Co back into the QE game.
• Bears are too afraid to short stocks because Bernanke and Co might crush them with QE.
• Banks are afraid that they’re going to have to walk away from Greece.
• Investors are afraid of the volatility of stocks and bid up treasuries.
• Journalists are afraid of getting it wrong and sometimes invent narratives that fit.
• Traders area afraid to be without a seat when the music stops because panic, fear and contagion move faster now than ever.
• Counterparties in EZ sovereign debt?  Forget fear, there’s nothing that can save them if this thing unravels.
• Even Drake is afraid that Rihanna is going get back together with Chris Brown.

FOREX brokers are super afraid.  This one is worth throwing bottles over (Via zerohedge):

Due to the extreme volatility some market analysts foresee could result in the coming days, OANDA fxTrade will not accept any trading activity from 6:00 AM EST until approximately 3:00 PM EST, on Sunday, June 17, 2012. OANDA believes the convergence of a major market event during off-market hours represents a potential trading risk and has taken this rare step to protect traders from excessive rate fluctuations.

Please note that during this halt in trading, you can still access your account details but no trading activity will be accepted. For this reason, OANDA strongly recommends that all traders consider minimizing currency exposures prior to the trading halt.

If you do intend to maintain open positions during this period, be aware that OANDA will hold exchange rates steady during the trading halt. However, when trading resumes, rates will immediately adjust to the current market rate and it is possible that the updated rate could result in a margin closeout if the price has moved significantly against your positions.

Therefore, it is your responsibility to ensure you have adequate funds in your account to prevent a margin closeout.

OANDA apologizes for any inconvenience this may cause.

For more information, please contact a Customer Service representative.

Best regards,

The OANDA team

You have a couple options.  You can stare the fear in the face and dive right in.  Embrace your inner “Event Fund” and position yourself for the black death.  Stand aside.

My personal view is that we’re right to be afraid because there’s a lot at stake.  Call me an optimist, but I think somehow someway we dodge the bullet.