From the Frying Pan into the Fire

The German chancellor has been under a lot of criticism at home for supporting the debt of what many German voters see as their lazy cousins in Greece, Italy, Spain, and Portugal. On the other hand German industry has benefited significantly by including those nations in its economic zone. The original purpose of a European Union was to tie the nations together economically and then by governance in order to avoid the recurring wars that culminated in two global conflicts in the 20th century. Taking the long view Chancellor Merkel has stayed in power and championed a series of rescue packages for ailing nations in the Euro Zone. But, now she is coming to Greece to show support for Prime Minister Samaras. It remains to be seen how much clout the German chancellor will have in Greece where her arrival reawakens memories of Nazi occupation of the country during World War II. Looking past the political posturing investors will want to decide by fundamental analysis of the situation if the situation is heading towards a safer investment environment or one more fraught with danger. The relationship of the economic crisis in Greece and the Euro free fall may be such that investors can profit.

When Things Are a Mess Where Do You Invest?

Is a Greek financial collapse finally imminent? An economic crisis in Greece and the Euro devaluing and what else will happen? Will the Germans and the Greeks come to a workable and successful solution? This situation reminds us of the well known quote from Baron Rothschild that the best time to invest is when there is “blood in the streets.” The assumption, of course, is that things will get better and those that invest at the bottom will make healthy profits during a recovery. So, what are the best investment opportunities in debt plagued Europe? We alluded above to buying “junk bonds” in Europe. Because of the risk of default investors are demanding very high interest rates on Italian, Spanish, and, especially, Greek debt. If things come back together those 24% Greek bonds could become very valuable as interest rates fall. And, the ultimate solution to the European debt mess will likely include a healthy dose of printed Euros which will drive the value of the Euro down and make European exports more competitive. In this case think of European companies like Siemens that sell products across the globe and will find an economic advantage in a cheaper Euro. The relationship of the economic crisis in Greece and the Euro may be such that healthy profits are just around the corner.

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