As the contagion from Greece spread, money has rapidly flown out of Italian stocks. On the surface, it seems justified. Italy owes 25% of euro zone debt. Italy has long been called sick man of Europe. Few days ago , some Italian stocks seem to be pricing in possibility of a sovereign debt default.

The other side is that Italian economy is growing , budget deficits in proportion to GDP are likely to shrink and unemployment is likely to remain relatively low. Italy also did not see the bubble to the extent witnessed in some other parts of euro zone.

Change in perceptions regarding Italy is not justified based on fundamentals. We will patiently await next big bad news regarding sovereign debt from the likes of Spain, Portugal, Ireland and Greece, and will start accumulating Italian shares in the down spike.

For the purpose of tracking our performance, we will use $EWI , iShares MSCI Italy Index . Long term conservative accounts may consider scaling in $EWI below $15.50. Short term aggressive accounts may consider lightly scaling in below $17.