They'll Cry "Black Swan" While You Book Double-Digit Gains

According to the Fed, in retrospect, the mortgage crisis of 2007 was a black swan, an unknowable and unpredictable negative outlier event that triggered financial panic and chaos around the world.

Eight years later, these "rare birds" remain as elusive as ever to central bankers and policymakers everywhere.

Over the same time frame, worldwide debt has ballooned by 40%.

It's a bubble - inflated by the European Central Bank, of course - that's floating in a room filled with pins; that room just happens to be Greece.

And that situation has just handed us an unlikely opportunity to profit and defend ourselves at the same time.

Remember, by their very definition, black swans simply disappear when you see them coming...

It's So Simple, a Child Could See It

If you asked any fifth grader what to do about too much debt (or anything else), she'd probably say "Just pay it back, or get rid of some."

Which of course is perfectly logical.

But for Greece that would mean paying the piper, or for lenders it would mean booking gargantuan losses.

Which is exactly why it won't happen.

Instead, within just seven short years, the world's total debt has gone from $142 trillion to $200 trillion.

Greece is easily the problem's poster child. Although its economy is just 1.4% of the EU's, it's the most indebted nation in the entire union, owing 323 billion euros, an amount it can never hope to repay.

But if you dig a little deeper, you'll see why Brussels is doing whatever it takes to keep Greece in the club.

Greece Isn't the One Being "Saved" Here

I've said numerous times that bailouts for Greece are really about saving French, German, and other banks which hold tons of toxic Greek debt.

Now a top official from the IMF has come out and confirmed this.

Paulo Batista, an executive director of the IMF, told Greek private Alpha TV in a recent interview: "They gave money to save German and French banks, not Greece."

Batista is a weighty voice, representing eleven Central and South American nations at the IMF. He criticized the Fund meant to help poorer nations, saying outsized help is given to Europe over developing nation members.

To be sure, the "help" doesn't end there, either.

Fresh Quarry in the Great Yield Hunt

ECB president Draghi's 1 trillion euro bond-buying bazooka began firing last month.

Odds are good it will have an effect similar, if muted, to the Fed's, which has levitated stocks for the past several years.

We've already seen that start to happen in European stocks, which have entered rally mode since early January.

The ECB's QE program will only target the debt of sovereigns and certain quasi-governmental financial institutions.

But with the questionable health of the European Union, I expect investors will quickly realize there's an alternative bond sector with better yields, which at least pays positive yields.

I think quality European corporate bonds are the next bond subsector to get bid up as investors chase yields. Right now, you still have a chance to get in.

Here's the Profit Play

Interestingly, consumer confidence in Europe has reversed dramatically of late with renewed optimism.

Europe's mega-QE program will put a premium on higher quality corporate debt for better yields and capital gains.

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In February, Royal Dutch Shell Plc. (NYSE ADR: RDS.A), Procter & Gamble Co. (NYSE: PG), Nestle SA (VTX: NESN), Novartis AG (NYSE ADR: NVS), and Sanofi SA (NYSE ADR: SNY) saw their borrowing costs head into negative territory. I believe this is a sign of more to come for corporate bonds in Europe.

An attractive way to target this opportunity is with the SPDR Barclays International Corporate Bond ETF (NYSE Arca: IBND).

This ETF's holdings consist of 52% corporate finance, 40% corporate industrial, and 8% utilities.  In terms of quality, 27% of bonds are rated Baa, 53% are rated A, 19% are rated Aa, and 1% is Aaa. 83% of these bonds mature anywhere between 1 and 10 years, with an average maturity of 5.65 years.

Geographically, 22% of holdings are actually in the United States, but 76% are European, and the 2% balance includes issues from Japan, Hong Kong, Mexico, India, and Israel.

The ETF's current yield is about 1.57% and has net assets of $246 million, an expense ratio of 0.55%, and trades on average 113,000 shares daily.

The International Corporate Bond ETF currently sits about 3% above its 52-week low. If the shares return to their previous high of $38.05, and I think that's a realistic target, we're looking at a 22% gain from here, on top of any yield.

The best way to play it: use two trailing stops.

First is a hard stop of $30.34 (its recent low) on a closing basis, which if reached is just a 3% loss.

The second is a 7% trailing stop which is narrow because of the lack of volatility. So you have a potential 3% downside with a possible 22% upside, providing a great risk-reward setup.

Some decent profit remains yet to be squeezed out. With a disciplined strategy, you can share in those gains with little risk.

Of course, when the bottom drops out, the central bankers will call it another black swan - but markets can remain irrational for a pretty long time.