Moderator: Global Moderator
End of EURO - Exit of EUROZone - Solution
How would bonds work in a euro-collapse scenario? Will German bonds pay out in marks instead of Euro? And how will the rate be determined? Also, frugal would need to exchange marks for escudos, so there's currency risk too.koekebakker wrote:The good thing is, you are already pretty well protected.
One of that advantages of the Eurozone is that you, as a Portuguese, can own much higher quality bonds (compared to Portugese bond) WITHOUT any currency risk. That's pretty amazing. German/Dutch/Austrian bonds are great for 'flight to quality' scenarios and in the unlikely scenario that the Eurozone blows up completely, those bonds are the least likely to suffer from devaluation.
Eurozone stocks carry some political risk. Whenever there's a euro-crisis (every other year) Eurostocks can suffer so it might make sense to divide your stock holdings between a eurozone ETF and a global stock ETF. Ishares core MSCI World is a very good choice for this.
With globally diversified stocks, AA+ bonds and gold, I wouldn't worry too much about a possible Eurozone break up.
koekebakker wrote:No idea. Do they need to be paid out? Won't they be converted straight away to the new currency? I guess it's quite likely though that Germany and some other northern countries will continue with the euro in one way or another, and that the southern countries will be cut loose at some point. But who knows...
The currency risk is likely to be in Frugal's favour. I'm guessing he would be more than happy to exchange his escudos for marks...
Hello!Xan wrote:How would bonds work in a euro-collapse scenario? Will German bonds pay out in marks instead of Euro? And how will the rate be determined? Also, frugal would need to exchange marks for escudos, so there's currency risk too.koekebakker wrote:The good thing is, you are already pretty well protected.
One of that advantages of the Eurozone is that you, as a Portuguese, can own much higher quality bonds (compared to Portugese bond) WITHOUT any currency risk. That's pretty amazing. German/Dutch/Austrian bonds are great for 'flight to quality' scenarios and in the unlikely scenario that the Eurozone blows up completely, those bonds are the least likely to suffer from devaluation.
Eurozone stocks carry some political risk. Whenever there's a euro-crisis (every other year) Eurostocks can suffer so it might make sense to divide your stock holdings between a eurozone ETF and a global stock ETF. Ishares core MSCI World is a very good choice for this.
With globally diversified stocks, AA+ bonds and gold, I wouldn't worry too much about a possible Eurozone break up.
