Yet plenty of strategists say there's a way to make money off the next phase of the sovereign debt crisis.
Strategies range from the obvious -- trimming holdings of long-term U.S. Treasurys and buying gold -- to the esoteric -- buying Brazilian reals while shorting the Czech koruna.
But the concept behind all of the approaches is that the current turmoil will last a long time.For the debt crisis, "we're in the middle innings of that game," said Max Bublitz, chief investment strategist at SCM Advisors.
Investors should prepare to wait and perhaps suffer some pain along the way, money managers say. Many suspect the U.S. economy could suffer low growth and bouts with deflation before high debt levels give rise to an upturn in interest rates.
"If you put these trades on, you have to be in it for the long term," added Russ Koesterich, head of investment strategy for scientific equities at BlackRock.
Here are five ways to play the next phase of the debt crisis.
Japan
Bet on a drop in Japanese bonds or the yen. The safest of safe-haven currencies may not be all it's supposed to be.
Japanese government debt as a percentage of gross domestic product this year is estimated at more than 200%, compared to 99% for the U.S. and 22% for Australia, according to Moody's Investors Service.
A contracting economy has made it tough for the Japanese government to pay off its debt burden.The clincher is demographics. The Japanese population is aging and shrinking, suggesting these savers will start selling their Japanese bonds as they retire. That will force the government to borrow more, at higher yields, from abroad.
"On a relative basis, how close is Japan to Greece than the U.S.? Japan is much closer," said Jason Brady, a managing director and bond fund manager at Thornburg Investment Management.
For the retail investor, betting against the Japanese yen, say through a currency exchange-traded fund or mutual fund, could bring about a similar reward as shorting bonds. One such vehicle is the ProShares UltraShort Yen ETF, which lets investors bet against the unit.
The problem with the "sell Japan" trade, note analysts, is that it hasn't really worked yet. Yields have continued to fall, to about 1.4% currently from more than 6% in 1990, as investor demand pushed up prices.
"People have bled money on trying to short them for 20 years," Brady said.
Emerging market
Buy stocks, bonds and currencies in fast-growing emerging or commodities markets. Conversely, sell emerging markets that have wide relative budget deficits or public debt levels.
For Brazil, Moody's estimates total government debt will amount to about 60% of GDP this year, far smaller than the U.S., U.K. and Japan. Brazil's budget gap as a proportion of GDP is expected to end the year at 2.5%, estimates BNP Paribas.
Smaller, developed countries that export a lot of commodities also may come out ahead. Australia, for one, recently said it expected to have a budget surplus in two years.
"The market is moving toward differentiating between winners and losers," said Imran Ahmad, emerging markets strategist with RBS Securities.
On a regional basis, "Asia and Latin America look to outperform" Central and Eastern Europe, the Middle East and Africa, he said.
Hungary's economy shrank more than 6% last year. Brazil's economy fell a shallower 0.2% and one estimate forecasts growth could rebound to 7% this year.
RBS is recommending buying Brazilian reals and Mexican pesos and shorting the Hungarian forint, Polish zloty and Czech koruna.
Caveat: Some of these markets are relatively small, exacerbating the impact of too many investment dollars chasing, say, too few reals or Australian dollars. Plus, investors have already been busy placing these bets: The real has jumped about 30% against the U.S. dollar since March 2009, while the Australian dollar has gained about 40% against the euro.
Get out of U.S. Treasurys
Consider buying into other types of U.S. debt, such as securities backed by consumer loans.
With more than 50% of its borrowing held by foreign investors, the U.S. is on the hook if investors start to demand higher Treasury yields to protect themselves against a possible U.S. debt default.
Rising deficits and high levels of Treasury issuance have bought those concerns to the fore. The U.S. budget deficit, at more than 11% of GDP, was roughly in line with that of Spain's last year, according to Citigroup.
Getting out of longer-dated Treasurys, such as the 10-year note and the 30-year bond, is the "low-hanging fruit," said BlackRock's Koesterich.
Moving into shorter-term Treasurys, such as 3-month bills, protects an investor from locking up savings.
Investment vehicles such as Pimco 1-3 Year U.S. Treasury Index ETF and a range of mutual funds buy just shorter-term U.S. public debt.
The U.S. bond story doesn't stop with Treasurys, however.
If the market starts to doubt the creditworthiness of the U.S. government, bonds backed by consumer borrowings, such as credit cards or mortgages, may start to look relatively more valuable compared to Treasurys. Inflation could even help the holders of fixed-rate mortgages.
"Asset-backed securities and mortgage-backed securities are another way to lend money to consumers, another way to get private-sector cash flow" as opposed to the public sector, said Jay Mueller, senior portfolio manager at Wells Capital Management.
Caveat: U.S. and Japanese government bond and currencies have long served as safe havens. The U.S. has an added advantage. The U.S. dollar is currently the world's reserve currency, and unlike some countries, it borrows in its own currency. Any further shocks in developed markets -- say, a downgrade of France's sovereign debt rating -- could send investors again into Treasurys as well as yen and dollars.
Hunt for relative value in stocks
The ones to avoid include consumer discretionary, financials and utilities, says BlackRock's Koesterich. Consumer stocks often have high debt-to-capital ratios. And financials often have large bond portfolios.
Utility stocks often attract investors because they pay high dividends, which carry some of the same income characteristics as bonds. If bond yields rise, those dividend yields may not look so hot.
Instead, strategists say, look for stocks with low relative debt levels. And pricing power doesn't hurt.
Buy gold as a currencies alternate
Gold's certainly been living up to its reputation as the favored investment when paper currencies falter. It hit a record price in euros as that currency shuddered under Greece's mounting debt problems, and then last week started to carve out records in U.S. dollars. It recently had toted up a 12% year-to-date gain.
Besides bullion-oriented ETFs such as SPDR Gold Trust, investors can buy mutual funds and ETFs to gain exposure to the sector via companies that mine the precious metal.
"What investors are starting to realize is that fiat currencies around the globe are dangerous currencies to own," said Justin Golden, strategist at Macro Risk Advisors.
Even while the dollar has benefited from the flight from the euro, "it doesn't mean the dollar is a long-term place to hide."
"The gold story is starting to make a lot more sense."
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