Posts Tagged ‘Greek Greece bailout’

European Debt Crisis – how to invest ?

July 1st, 2011 Comments off

The imminent dangers of the Greek and the general European debt crisis are not reduced by 2 favorable votes of Greek Parliament. At best they bought some more time.

European politics still treats the problem more as a liquidity problem than a solvency problem. The Greek economy (if there is a serious one…) will slip deeper into recession at a rate of about – 4%. Public debt in relation to GDP will continue to rise.

So we know that one day Greek public debt has to be restructured we just do not know exactly when!

French and German Banks are more or less “forced” to  “voluntarily” ease the pain of Greek debt (interesting to watch whether the rating agencies will agree…)

Deutsche Bank apparently is in intensive talks with its auditors how to avoid depreciation of Greek public bond holdings.

But isn’t this already the beginning of restructuring Greek debt?

What about the balance sheet quality of European banks if they really do not need to depreciate bonds of a public entity which does not have access to capital markets anymore?

As investors we certainly have to keep away of European banks and insurance companies! Outside investors just cannot value the quality of their balance sheets well enough when insiders barely can!

Perhaps the need to recapitalize is already much bigger than we think, especially if other European periphery states get weak!

But on the other hand there are new forces in the world economy, globalization continues and a lot of European companies outside the financial sector are doing more and more business in emerging markets.

So avoid the European financial sector! Most probably there is already more toxic waste than we think!

Will the stock of European industrial and export companies decline if the debt crisis gets worse?

Yes, almost certainly.

Until which point? We just do not know.

But we do know that they will recover when savvy investors will step in and buy quality at interesting prices!

So why not start to open small positions in these days and average down when stock markets get weak?