What protection are you paying for? Marine Le Penâ€™s proposal to take France out of the euro is once again raising questions about whether CDS will â€œdo what it says on the tinâ€. As on previous occasions, we fear the answer is â€œnot necessarilyâ€
So what does any of this mean for average investors? Well, intuitively, it means there’s a chance for you to go out and find yourself some alpha by returning to your roots as an expert stock picker (boy, this post is just dripping with sarcasm).
“Yesterday, NY Fed President Dudley said it was very unusual to see stocks rising when thereâ€™s so much uncertainty. True, but theyâ€™re getting a lot of help on the regulatory and tax side. But thereâ€™s no evidence in other markets that everyone has a clear vision of the path ahead.”
So what gives? Well, probably not a lot. It could just be everyone is taking a breather. But, in a testament to Nassim Taleb’s “narrative fallacy” argument, we have an overwhelming tendency to ascribe “causes” where there are none.