Every time I question the logic of having hedges even after the decline in August I just remind myself that the issues in Europe have not resolved themselves. Regardless of some decent economic readings in the US and moderating inflation in China we still have the overhang of Greece and lock step in Italy.
The markets are now pricing in a Greek default which Germany will probably make good on. However, what happens if Italy follows? Will Germany still back them as well? And Spain?
Personally I don’t have the guts to cover shorts on today’s decline. The Murphy’s Law of investing dictates that Greece will default this weekend if I cover today. Hence, I’d prefer to cover on the markets reaction to a Greek default, that would be the textbook preference.
As for Obama’s jobs plan: DOA IMO. The Republicans know killing that any proposal that could solve our predicaments increases the chance of a Republican victory next year despite the long term harm. Makes one pine for the back room poker deals between Reagan and Tip O’Neal in the 80’s, where compromise for the benefit of the country was the priority.