Brace Yourselves

I checked the financial stats this Sunday evening (as I always do) and noted that US market futures are down some 200 points. The Shanghai market has fallen more than 20% in recent days, and Greek banks will be closed tomorrow to forestall bank runs.

Not a pretty picture.

Those of us with a wee bit o’ dry powder might find a few golden opportunities in the days ahead.

May we all live long and prosper.

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Those of us with a wee bit o’ dry powder might find a few golden opportunities in the days ahead.

Probably a good guess. Greek vote is not until July 5 so it is doubtful that there will be much positive news from Greece before then. If I do any buying it will likely be on Thursday.

Chris

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Can someone explain to me why people are so focused on Greece? Greek GDP is 1.3% of the European Union GDP. That’s it.

https://en.wikipedia.org/wiki/Economy_of_the_European_Union

I feel bad for the Greek people, but I don’t understand what it has to do with broader markets (especially U.S. markets). The idea that this could lead to disintegration of the Euro seems rather extreme to me.

Is anyone actually worried about this? And if so, what are your concerns?

Neil

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Is anyone actually worried about this? And if so, what are your concerns?

Neil,

I am not worried and I don’t think that any of this will affect any of my investments in the long run. However, some in Europe are very worried. The 18 EU finance ministers seem very worried, going so far as to place an article in the Greek newspaper.

Yes, Greece is small and a small percentage of the European economy. However, allowing Greece to exit sets a precedent that counters what was previously said; this is that the EU and the common currency is permanent. Greece exiting would change all of that. Going forward any financial crisis in any EU country would leave open the possibility for an exit.

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Don’t quote me on this, but I remember a long time ago I read articles on the Greece issue and the fear is that Greek banks have borrowed a lot of money from banks in other EU countries. If those banks default, it may set off a chain reaction on the other EU banks, causing the entire EU economy to tank further.

With that said, I am not worried. EU will sort themselves out.

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Puerto Rico saying they won’t be able to pay their debt adds to the issues.

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Couple of things. As stated, a Greek exit from the Euro puts pressure on Italy, Spain, etc. It isn’t Greece, it is the stability of the EU and the future of the Euro. Many have said for a number of years that the common currency without a common central bank and common fiscal policy is not a stable situation. This is the one thing you should be worried about.
Ben Hunt, Epsilon Theory, recently posted thoughts on the many games of chicken that are being played throughout the world right now. In game theory, a game of chicken is inherently unstable. He said, I believe, that this situation is not actionable from an investment standpoint right now. BUT, he said the danger point comes when both sides send the “I have no choice” message to the other. This seems to be exactly that message. The Greek referendum is the preamble to “I have no choice…” If the German message comes back (as I think it would) “I have no choice…” then Greece is out, there is a lot of bank debt outstanding. I think it is not overstating it to say that most countries in the EU have growing minority parties that are opposed to the EU, at least as is. The glue that holds the EU together is prosperity. The glue is dissolving. Germany has an unstable reliance on exports. Exports are financed by trading partners’ debts (i.e… EU countries debt).
I am just reviewing my options. As I have posted, I am still repositioning my portfolio and reducing the number of holdings. So, yes, I am considering selling those remaining positions that don’t fit my current plan.

Just saying,

KC

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If you are interested in the Greek situation and its investors' implications, google this: "Epsilon Theory Inherent Vice"  I recommend it.  

KC
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Is anyone actually worried about this? And if so, what are your concerns?
Yes I’m worried.
I’m worried about:

  1. What this means for Greeks human beings going through this
    as well as…
  2. What the repercussions are for EU and Euro Group
  3. What this means for Democracy
  4. What this means for capitalism vs socialism
  5. What this means for East vs West diplomacy & international relations
  6. What this means for the European and Global economies
  7. What this means for the sovereign debt and bond markets

It also worries me to look at the red haircut my portfolio is getting today.

Am I missing something?
Ant

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Is anyone actually worried about this? And if so, what are your concerns? - Neil

I try, as best I can, to minimize my emotional responses to Market fluctuations. I believe Benjamin Graham was correct in stating: ‘In the short run, the market is a voting machine but in the long run, it is a weighing machine.’

Unfortunately, the Market often “votes” irrationally, with actions exacerbated by machine trading, algo-trading, the proliferation of all manner of derivatives, “dark pools” and all sorts of big dollar bets placed all over the globe. No one can possibly understand the potential ramifications of even slight perturbations.

Here’s a timely article from Seeking Alpha:

http://tinyurl.com/ozabetk

Equity Market Performance Around Crisis Events

With Greece headlines dominating news stories over this past weekend, investors might be on edge regarding future equity market returns on Monday and the coming weeks. A number of headlines this evening are using the words plunge and slide as U.S. futures are down less than 1.5%. Yes, much can change before the U.S. markets open Monday morning, but it is the sensational headline that generates reader clicks and article views.

The chart embedded within the article is informative. It lists a number of “Market Shock Events” and their immediate and longer term impacts. The astute investor will note that the impacts are relatively short-lived. After all, in the long run, the Market is a weighing machine.

I tend to view “crisis” events as buying opportunities. Given that I’m retired and derive all my income from my portfolio, I routinely harvest profits (because it’s better to sell when I can rather than when I must) in order to have some dry powder to deploy in just such situations. But, hey, that’s just me. For young careerists with a steady cash inflow, that’s not a pressing concern.

Having said all that, one over-arching concern remains: We’ve enjoyed a great run up in the US Market. It wouldn’t take much to shift the Market into a “correction” mode. I can’t predict if that will happen now or later, but it will happen. Corrections certainly test every investor’s mettle. Best to stay calm and weigh matters soberly.

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It also worries me to look at the red haircut my portfolio is getting today.

Am I missing something?

Ant,

Remember…

  1. the debt ceiling crisis
  2. 9/11
  3. the other debt ceiling crisis
  4. even the financial crisis of 2008

Each time the market dropped and each time the market recovered. What’s to worry about? How low the drop goes and how long it will last no one can know.

Chris

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The main exposure to Greek debts now lies with the taxpayers of the other European countries which have bailed Greece out, rather than the banks.

So, don’t feel sorry for the Greek people,(whose crisis is of their own making), but instead feel sorry for those European taxpayers, some of whom have already taken extreme pain to deal with the issues in their own countries.

Alex

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So, don’t feel sorry for the Greek people,(whose crisis is of their own making), but instead feel sorry for those European taxpayers, some of whom have already taken extreme pain to deal with the issues in their own countries.

I feel sorry for what they are going through - staring anarchy in the face whether they asked for it or not. They have to queue up at banks to withdraw up to 60Euros a day. The ATM may swallow the cards. The banks are closed so then you have no form of payment. You then have nothing - no money and no electronic money. How would you like to be in that situation? Throw in some riots and yes I feel sorry for them.

Don’t get me wrong. The Greeks never lived within their means, dodged paying taxes, lived a life that was not sustainable, retired way to early on other people’s money vs a European and Global average and borrowed money they never intended/expected to repay. I get that. But you can still sympathise with human beings.

BTW I don’t think the European taxpayers have taken extreme pain to deal with it in their own countries whatsoever with the possible exception of Iceland. Many Northern European countries didn’t get into this situation. The rest that did have been voting for Christmas and anti-austerity all the way. No economy has got back to balancing their budget deficits (structural or otherwise) or living within their means whatsoever. The pain has come from mismanagement, uncompetitive economic reality together with out of control socialist policies combined with extremely complicated political self interest (domestic and international) that has coincided with an era of declining old world and an emerging new world in an era of globalization.

The victims in all of this will be tomorrow’s generation that has to inherit the debt that this generation so bravely bequeathed them.

Greece was given money not by European taxpayers but by the EuroGroup, EU and IMF machinery. They should not have been given the money and they were given money for mostly the wrong reasons but it was not by the European taxpayers.

Ant

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Thanks for your comments, everyone.

I still think the media is blowing this completely out of proportion (to their financial benefit, of course). Yes, politicians said the Euro couldn’t be exited, but I don’t think anybody really believed that (we’re talking about sovereign countries here, after all). And I don’t see that it’s a big deal if Greece does, given how tiny their economy is. As far as contagion goes, European banks have reduced holdings of Greek assets by 80% since the financial crisis began, from over $250 billion in 2008 to $50 billion today. I seriously doubt European finance leaders would have played hardball like they did if they truly thought a Greek exit would be disastrous for their own countries (and who knows, a deal may still be possible now that everyone has been shaken awake).

staring anarchy in the face

Anarchy, Ant? Really? :wink:

To me, this just looks like this year’s soap opera – people are always looking for something to fret over, and I’m sure the financial media is loving every second of it. Hopefully we’ll get some great opportunities over the upcoming days/weeks.

Neil

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Ant,

Where do you think the bailout funds provided by the EU and European institutions come from? They come from the taxpayers of the European countries that make up the Eurozone! Similarly, the funds provided by the IMF come from the taxpayers of the IMF member countries, some of which are considerably poorer than Greece.

I can also assure you that other countries in Europe have taken pain to sort out their individual situations - Ireland, Italy and Portugal to name a few. (By the way, Ireland had to borrow around 350m Euros to fund its portion of the Greek bailout.)

The Greeks need to take responsibility for their own situation and stop blaming (and abusing)their creditors.

Alex

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Hey guys, this is a board for discussion of stocks and investing, not political issues that aren’t actionable, like whether the Greeks deserve what is or isn’t happening to them. Please take this discussion to a different board. (Macroeconomics would be a good choice).

thanks for your cooperation.

Saul

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I listened to a whole Cramer podcast on Friday. Basically what he has said is that either Germany writes down the debt, or Greece will be helped out by Russia and China instead. Cramer prefers that Germany cut Greece a break as the best outcome.

Anyway, good investing to all and I feel for the people in Greece who may be struggling to eat and work and live.

Karen

This has been coming for a long time.

Watch this comedy video from 5 YEARS AGO. It helps explain the current situation with a smile.

https://www.youtube.com/watch?v=I5QwKEwo4Bc

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Deserving or non deserving is not actionable. But political actions can be actionable. I am sure Saul knows that.

When the Germans and Soviets invaded and dismembered Poland that was a political actionable event .No doubt it wasn’t good for whatever Polish stock market existed. When Hitler became Chancellor that was a political event that was actionable , think hard about selling your French stocks. When Castro looked likely to seize power in Cuba that was a good time to exit Cuban investments.

Personally I think Greece is just noise. It will be worked out someway, there will be winners and losers but we have no edge in figuring out who they will be.

The EU as a political union makes sense, but IMO the euro as a currency never did .Germany seems to be the big winner under the present system. But with or without the euro, Europe will survive .

The ultimate fate of the euro makes little difference to most of the companies considered on this board. So assuming this is just another scare and not the start of a bear market, it is a buying opportunity.

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So assuming this is just another scare and not the start of a bear market, it is a buying opportunity.

Now, Mauser, THAT’s actionable!

Saul