Cheap Vintage Port

Posted by Jeff Carter
on March 23rd, 2011

I don’t know much about Portugal, except their system of entitlements were untenable. They have proven the Margaret Thatcher adage. Portugal has run out of other people’s money.

I do know Portugal makes some awesome vintage port wines. If you haven’t had one, wait. They are going to get cheaper. The Euro ($EURUSD) is getting crushed after hours since the Portuguese government rejected austerity measures. Who is next? I know a bunch of bond vigilantes that are frothing at the mouth hoping they cross the line. If they all do, hell will break loose.

The best place to hedge yourself is at the CME($CME). Just short the Euro. Commissions are cheap. The product is liquid. You’ll get the most bang for your buck. They have two ways to do it. E-Micro, which is a tenth of the size of the big contract, or take a shot on the big one. Tick value is $12.50 per tick.

Portugal can get a bailout from the EU. The question is, how many times do the Germans want to bail out everyone else? Because it is the Germans. Virtually everyone else is relatively unproductive. France has a lot of untapped potential, but is mired in socialism as well. No doubt, the Portuguese will try to keep the game going with a bail out.

The question about Germany remains. Why not just let the euro implode?

One reason is that everyone owns everyone else’s debt. No doubt, at some point and time they are going to have to accept their loss as a sunk cost, but at this point it’s too early to fold their cards. They must figure euro is still just ten years old, and they can chalk this up to experience and move on.

The other is they can turn to other organizations to help. First stop, the International Monetary Fund. They’ll get the cash but my guess is the IMF advice will be to raise taxes. Raising taxes never spurred economic growth. The EU had recommended more tax hikes in this austerity package. That’s what caused the deal to fall through. Plus, I think that socialists feel that they are playing a game of chicken and if they squawk the loudest they will win.

Portugal has had an anemic economy for what seems like a century. If a country speaks a “romance” language you can pretty much guarantee that it has a pretty dismal economy. They have a system that rewards sitting around and doing nothing. Their entire tax code, regulatory code, land ownership rights and regulations has to be overturned.

We are seeing the failure of socialism through out Europe. In 1989, we witnessed the fall of communism. Apparently, communists go through other people’s money faster than socialists. Capitalism is the way to go. Not managed capitalism, but pure unbridled, pedal to the metal capitalism.

Let’s hope some of the states in our United States are paying attention.

Thanks for the link Doug Ross! Welcome to his readers.

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