The old saying goes: “in the stock market you go up the stairs and down the window”. And the proverb, fruit of popular wisdom, runs the risk of becoming topical once again in the face of internal and international news that threatens to darken the skies of finance, which were clear until a few days ago. Even too serene, given that the Vix, the notorious fear index that measures the volatility of price lists, had slipped to levels not seen since the beginning of the millennium. Now, thanks to the Spanish scandals that rock the Rajoy government and, even more, Silvio Berlusconi's media offensive to the sound of populist and anti-European gusts (“Silvio's reveng” headline Business Insider in the morning, one of the voices most listened to by US traders) the picture changes. And the wallets of savers could be the first to pay the price, i.e. those Bot people who, in moments of the most dramatic crisis, returned to buying Bots and BTPs sold with both hands by international investors. It is precisely the Bot people who, without realizing it, have seen the alleged advantages of the alleged return of the Imu on the first home fade away with the drop in government bonds...
In such an agitated situation it is difficult to give advice on how to move. Suffice it to say that the news of the last few days, from Monday onwards, has practically overturned all the forecasts of experts and analysts, with the exception of those who (see the AIAF panel startegist) suggested prudence on the euro area given the high volatility recorded during 2012. But some indication of the course, in the short term, is possible.
THE SPREAD COMPASS
First tip: pay close attention to the spread. It is useless to waste time looking at other indicators (price/earnings ratio, dividend, trend for the year, etc.) even if they are essential in a long-term logic. A drastic judgment but which is confirmed by the facts: over the last six months, before the correction underway since the beginning of February, Piazza Affari had recovered 36% despite the fact that the consensus on 2013 profits on listed companies dropped by 14%. The "mystery" can only be explained by resorting to the spread which practically halved from July to the end of January. It is not difficult to predict that the almost mechanical link between spreads and share prices is destined to continue in the next few months, in the absence (as is, alas, probable) of a trend reversal in the economic situation.
For this reason, the analysis by Piazza Affari must take into account two factors: a) the evolution of the spread; b) the search for securities most sensitive to fluctuations, in both directions, of the gap between Btp and Bund.
THE ELECTION BET
The spread, in the coming weeks, is directly correlated, in equal measure, to the political tensions in Italy and Spain. In fact, each of the two countries could blow up the ingenious but fragile mechanism based on the moral suasion of the ECB without however implementing the purchases of the EMS fund. What will happen if Italy or Spain were to ask for European help? It is the question that startles the markets, already on the alert due to the disasters of the banking world, starting with Mps.
In this context, without wishing to go into political analyses, observers agree that:
a) In case of affirmation of the centre-left with a subsequent certain alliance in the Chamber and in the Senate with Mario Monti's centre, one could imagine a legislature government, committed to continuing along the tracks of convergence with the EU. In this case, the spread could narrow, leaving room for a further rise in the price list. First of all, bank stocks would be favored (Intesa, Unicredit and Ubi in the lead) and insurance. A similar upward push would be ensured by the drop in rates for the most indebted companies (Enel, for example). It deserves a special note Ps, a risky bet but which could prove to be as fruitful as the investment in Hellenic bonds in 2012.
b) Opposite scenario if a poisonous tie between the center right and center left emerges from the polls. In this case, the Greek scenario at the beginning of 2012 could emerge, ie the impossibility of appointing a stable government and recourse to the polls within a short time. In this case, the spike in the spread will have to be taken into account. To weather the storm, it is better to focus on shares that are more resilient in terms of interest rates and less exposed to the euro area market: luxury stocks, to be Salvatore Ferragamo a cucinelli a Luxottica; counter-cyclical stocks such as Campari e Recordati. A bet deserves Yoox, a title already well evaluated but with great prospects related to the expansion of e-commerce in Asia.
THE WEAPON OF ETFs
It is never wise to put all your eggs in one basket, the English proverb warns. Much less in a season in which bullets and buckshot are pouring from everywhere. Therefore, it is better to exploit the tools available, whether in a speculative or protective key. In Piazza Affari there are various tools available to specialists:
a) put options on individual securities or, better still, options put linked to the stock market indexS&P Mib. How do they work? If upon expiry of the option the index has fallen below a given level (the exercise value), you get a payment equal to the difference between the exercise value and the value of the index; otherwise, you get nothing Options are listed in Piazza Affari put on the index S&P Mib, with different expiration dates and different exercise values. Their cost can vary considerably: the price is higher for those that have a exercise value higher (because they protect you more from falls) and for those that have a longer maturity (because it is more probable that the stock market index has time to fall below the exercise value), a rule which, however, does not apply in a situation such as the current one dominated by the risk of high volatility.
b) Other "protection" tools are i futures on the stock market index. But, unlike options, in fact, these instruments do not only provide for an initial cost, but a day-to-day "adjustment" based on the performance of the index: if the Stock Exchange does not go in the expected direction, you may find yourself having to pay even much higher than the initial outlay.
c) ETFs are more efficient shorts that they have the characteristic of replicating the stock market index, but in reverse: it rises when the index falls, and vice versa. More than a hedging instrument, in any case too expensive to protect one's assets from the downturn, however, they are the ideal weapon for those who want to speculate in the prospect of a decrease, perhaps temporary, conditioned by electoral uncertainty. There is no shortage of instruments, given that the countervalues traded on ETFs now exceed the volumes of the stock market. There is no shortage of leveraged products such asEtfx Ftse Mib super short strategy, which doubles (with the opposite sign) the ups and downs of Piazza Affari. But there are also real "bombs" such as 5X long/short leveraged certificates that multiply the upward or downward effects by 5. A kamikaze system on which you can also bet a chip, in the awareness that even losses (not just gains) can be multiplied by 5. Be careful, because the fear index doesn't give discounts.
