Greece is defaulting. Clients, the portfolios we manage for you have very little (if any) direct exposure to Greece’s economy. That’s the good news.
Here is the bad news: The Greek government is financially irresponsible. This is news?
Would you like a peek at our investment analysts who are thinking Greek? E-mail your financial advisor and we will be happy to send you some links. Scott Minerd at Guggenheim and Jeffrey Gundlach at Doubleline, among others, have heavy insights.
All of this drama over the drachma and whether Greece will stay in the Eurozone is ephemeral to your financial plan, unless you are Greek. And even if you are, I might argue it may not be relevant. After all, how long has it been since Greece was solvent?
The answer, of course, is the day before Greece dumped the drachma: December 31, 2001. This news is not new.
So here is a prediction and then some perspective:
My prediction: I believe we’ve seen the endgame. Europe’s international finance experiment is like a school project. Different kids (countries) with different agendas, economies, politics, languages, and cultures adopt a common currency. And what happens when the hard-working kids stop carrying the load of the least responsible? The Greeks will likely be expelled. The creativity of the financial engineers and politicians may postpone the inevitable “Grexit.” Greece must go.
My perspective: Two truths persist. Free markets are the cure for free markets. You should not change your portfolios unless your financial plans have changed. Let me tell you why.
Many years ago, the $50 million company I worked for lost $1 million overnight with an Argentina default; this was almost all our profits. We all thought we would lose our jobs, but we didn’t. Instead, that firm was gobbled up at a discount. The currency crisis, plus the dot-com crash, plus a scandal at the C-level of that company seemed terrible, but they were a catalyst. In fact, it prompted me join the financial services profession and become a business owner. Now I help a good number of families just like yours weather storms like these.
Let’s not panic over this. Let Mr. Market, or in this case, Mr. Marketstantinos, work his magic. This Greek drama may plot the exits of other irresponsible European countries. Deus ex machina!