Quick update - there's now been a hefty selloff in Greek stocks over the last few days on more default/bailout worries. Since the market has rallied so much from the lows earlier this year, it is quite possible that a correction will continue for a few weeks or even 2-3 months. Selloffs of 20-35% occurred in prior bull markets of this type, so it's quite likely we see the same again over the coming months and years. However, the historical record of bull markets after crushing bear markets like this, is that they shrug off such corrections after a few weeks or months, and eventually move to significant new highs. So, I would say that for anyone flat, now is a good time to make some investments - just be ready to see 20-30% corrections from time to time. I continue to view the best strategy as allocating a hefty chunk of long-term capital, then ignoring it for the next few years. By 2017 I am pretty confident that Greek assets will be selling for considerably higher prices. The news that is causing this selloff will not be news in 2013, 2014, 2015, or 2016+, when I plan to start selling. The price in those years will be determined by how Greek corporate earnings are doing in those years and prospects for the next few - and no matter what happens in the short-term, it is difficult to conceive of scenarios where prospects are not much better than they are today or have been in the last year. To make money investing after crushing bear markets, it is necessary to 'hold your nose' and ignore the bad news, and instead rely on very cheap valuations, the point of maximum pessimism having been reached, and the high probability that conditions will return to something more normal in forthcoming years. That is the essence of buying when - or after - there is 'blood in the streets'.
Regarding 'blood in the streets' - to what extent does a possible exit from the Eurozone factor into your viewpoint? Previously you said "The major factor inhibiting prices was the fear of a Euro exit - but that has now been practically eliminated by the introduction of the ECB backstop. And just as importantly, market prices responded very strongly after this news." Has the "news" in the last week changed your view on this? Also, given the amount of capital that Greek banks still have not raised, are you buying Greek stocks as a whole, or have you considered excluding bank stocks from your buying agenda?
I have a bank CD that pisses me off everytime I wake up, time to make a better decision. Can some investment instruments for Greece please be listed? Thank you
I'm not sure the risk of Grexit has been eliminated. I don't think it was significantly reduced either. ECB's OMT won't involve Greek bonds, I don't see any indication from the ECB that they will do that nor the political will is there to do that So the risk to this trade is to have the assets redominated. I like the idea of buying a heavily beaten down stock market that people call others stupid to buy, I think most of the time it will work and there are excess returns there But in this case the question has to be answered with regards stabilization of the debt to GDP ratio and how the country will achieve its sustainability inside the EUR. I just don't see it, they are on track to be Japan but worse. Japan has been a contrarian play for a long-time but it didn't work Tight fiscal policy for years + Tight monetary(or neutral) policy = stagnation Even if the ECB lossens up a little, they do it for the whole region so whats loose for most of the EUR zone is not loose enough for Greece A grexit ITOH would make me want to buy a ton of greek stocks
This stagnation might not even hurt stocks directly, it could perhaps be priced in. But it will blow up the country politically since years and years of economic problems will only make the riots worse and make it likely some crazy person will run the country and likely be forced to leave the EUR
http://www.alsosprachanalyst.com/markets/greek-stock-market-in-historical-context.html 'The realisation that Greek equities have somehow outperformed Chinese equities this year so far is quite comical. In fact, we are still laughing at it, as even Greeks cannot quite believe this has actually happened.'
The Greek stock market has now returned to the level at which GoC started this thread. Would anyone care to provide an update? Thanks in advance.
What's there to update? It's a sh1tshow again, IMF is threatening to pull out (and if they do, the whole deal falls apart). The implementation of austerity is not going according to plan (public sector layoffs not happening and health fund deficit mounting). If that happens, Greece might not get the next tranche of aid and we could be back to the PSI/OSI table again (although the Germans are firmly against the idea, which might make things rather disorderly). And then there's Portugal, which is experiencing something similar. It's all going a bit Pete Tong, so to speak...