In last weekend’s commentary I suggested that neither side in the Greek saga had the political will to risk a crash. As of this moment, that opinion appears to be seriously in question.
Last night I wrote that the Greek government was either secretly hoping that—in the referendum scheduled for next Sunday—the Greek people vote to accept the latest round of creditor conditions (affording them political cover [or an opportunity to resign with dignity]) or, was hoping that they can convince their people to vote no, leaving the Eurozone authorities with the option of returning to the table with less onerous proposals.
Looking at the latest headline commentary coming from Eurozone officials (they’re worried!), I can see where Tsipras (Greece’s Prime Minister) may indeed be betting that a no vote could yield a much better deal for his country. So, therefore, it could very well be the latter. Although I am not entirely sure that, in the event of a thumbs down vote, the other side won’t indeed fold up their tents and leave Greece to itself.
Now, all this short-term prognosticating aside, I’ve maintained from the start that the ultimate best long-term solution would likely be the most frightening in the short-term. That would be Greece exiting the Euro and reestablishing its own currency. While I’m not ready to bet the farm on that one just yet (although I never bet ‘the farm’ on any one thing), it is fast becoming a distinct possibility—and, again, that would be a good thing!
If you’re our client and you’re worried about how markets will trade next week in response to the present chaos, well, we need to chat! I.e., investing in the suppliers of goods and services the world over can never be a one-week affair. Or, more simply put, you should never ever invest (as opposed to trade) with a one-week time horizon.
And, FYI, I’ll be amazed if, come tomorrow morning, markets across the globe aren’t trading firmly in the red (although don’t be surprised if the Athens market [along with Greek banks] stays closed tomorrow). Hedge fund titans—like David Einhorn and John Paulson—who recently poured billions into Greece in anticipation of a deal—will be scrambling big time (yes, they were investing trading with a one-week time horizon)!
As for the longer-term implications of a Greek default, as I suggested yesterday, the Eurozone powers believe they have a ring fence around any contagion risk, and, well, frankly, Greece’s economy falls somewhere in size between that of Minneapolis and Miami.