EU Bailout: TARP on Steroids (Fool TV)

The world markets rebounded in a huge way today when the European Union unveiled a nearly $1 trillion bailout for Greece, Spain, and Portugal -- and any other European nation that may be skidding into default these days. But is it a matter of throwing good money after bad?

Motley Fool Global Gains Advisor Tim Hanson says the size and scope of this package -- which will allow traditionally stable countries like Germany and France to borrow money at low rates so they can turn around and loan it out to their withering neighbors -- makes the U.S. TARP bank-rescue fund look like chump-change in comparison. Sure, it's good news today, and international investors should be cheered that outfits like Telefonica (NYSE: TEF  ) , National Bank of Greece (NYSE: NBG  ) and Portugal Telecom (NYSE: PT  ) exploded with the announcement, but there may be a cloud inside this silver casing.

Over time, says Hanson, the inextricable linkage of Europe's strongest and weakest economies might well drag down the lot. And it certainly calls into question the long-term viability of the euro as a currency investment. Watch the video here:

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Tim Hanson owns shares of Portugal Telecom. The Motley Fool has a disclosure policy.


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  • Report this Comment On May 11, 2010, at 2:16 AM, jameskkk wrote:

    Hi guys, I'm sorry for leaving a seemingly irrelevent question here, but I don't know where else to ask a general question on Motley Fools. I encountered a question today and I would really like to get an answer to it. Basically what happened was I had 10 call option contracts of Ford that is due on June 19, and I bought this option on last Monday. I'm people have been following the market last week pretty close, and you should know that I lost quite a big percentage of that entire 10 contracts value. I think I had about 250 left in 10 contracts. However, today, when the market recovered and Ford went up 5%, my option value decreased even further !!! I was so confused. Same thing happened to my other options as well, even put options. Can anyone answer me why is it happening? Does this have something to do with the VIX index?

  • Report this Comment On May 12, 2010, at 10:49 AM, aparedesg wrote:

    Yeah. Part of the value of an option contract is correlated with the stock's volatility. If you see options as "insurance" against a stock's rise/drop, naturally an insurance will be priced higher if the price of the object being insured is more volatile.

    After last thursday's action, volatility went through the roof and so did option prices... they have been settling in the last few days.

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