No, I haven't lost my mind. I'm well aware that Greek sovereign debt is likely to be repaid at around 50 Eurocents on the Euro according to the current bailout talks. And that sucks for those who made the initial loans. However, in the past few months, Greek debt has been selling on the open market for as little as 30-40 Eurocents on the Euro meaning that those who were smart enough to buy it up while debt negotiations were ongoing stand to reap a tidy profit for having taken a chance.
It's Not Just Greece
Of course, the bad debt which banks hold isn't just Greek debt. A number of other countries have already received bailouts or have been threatened with needing bailouts recently. Ireland and Portugal come to mind for example as countries where debts have been shaky and bailouts were either needed or at least proposed.
Ireland and Portugal Are Still a Little Too Risky
However, while Irish and Portuguese debt may also be selling at a discount off the face value, I'm not going to tell you to risk your money on those countries. The debt problems they have accrued are not nearly as acute as those of Greece and that means that you could still lose money by buying their debt, even at a discount (to be fair, you could lose money even with my suggestions – I'm not a prophet, just a financial writer, but my suggestions at least have the virtue of being safer while still offering good chances for return on investment).
Reasonably Safe Sovereign Debt
Instead of these, I'd suggest looking into relatively safe sovereign debt if you're looking to take home a nice profit without a tremendous amount of risk. Specifically, I like Spanish and Italian sovereign debt (possibly even French sovereign debt, though the rate of return isn't as good) because they're offering good rates of return right now but they have relatively low risk compared with Greek debt. Here's why:
Too Big To Fail
Spain and Italy represent two of the biggest economies in the Euro zone, however they also represent countries which have taken on way more debt than they should have taken on. This means that they're being forced to pay higher interest rates for their money and that means good returns for you on your investment in their sovereign debt.
Now while nothing is guaranteed in life, I am convinced that these economies are considered by the rest of Europe to be "?too big to fail." That means that they're reasonably safe investments which can show you a healthy return for your money.
Shorting the Euro
The other possible way to make money in the midst of the Greek debt restructuring crisis is to consider the possibility of shorting the Euro in the Forex market. Personally, I think this is a much riskier proposal only because I believe that Germany and other stronger Euro Zone economies will do whatever it takes to keep the Euro from crashing, however given the ever expanding sovereign debt problem in the Euro Zone, there is at least a reasonable chance that if you short the Euro against the currency of a country which is growing nicely (Brazil for example), you could make some good money on the Forex market too. However, I wouldn't suggest shorting against the dollar, which is likely to experience its own problems"¦