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Affluent Christian Investor | October 19, 2017

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Looking at Greece

So all eyes were on Greece yesterday, only this is a June, 2015 blog entry, not a May 2010 one, nor a July 2011 one, nor a May 2012 one, nor a December 2014 one. Google any of those four months along with the search words, “Greece worries markets,” and see what comes up.

As I type the market is up 100 points, but down 450 points from recent all-time high. Is recent market volatility a by-product of Greek drama? It’s as good an explanation as any. And is Greek uncertainty the reason for the back-up in bond yields, pushing Germany back to 1% on their 10-year (from a negative yield) and pushing the U.S. 10-year above around 2.4%? I would say pretty confidently it is the largest reason. So yes there is fear, yes, there is volatility, and yes, there is uncertainty. But if Greece is potentially about to default or even leave the Euro, why are markets not in real freefall? Consider the following:

Greece-Chart_1-06-16-2015

The threat to the European banking system of a total collapse if Greece hit the fan was severe in 2012. Two years of monetary accommodation, bank recapitalizations, and other such preparatory work, and the bond market seems to be saying this is a low-contagion scenario.

Greece-Chart_2-06-16-2015-527x275

The European economy is fragile and not in the mood for a GREXIT drama, but that is quite different from saying it would create Armageddon. For many market participants, exhausted by this ongoing anti-reform charade, a GREXIT may be a cause for relief. I still doubt an actual GREXIT will happen because I believe the Greek voters would throw out the Marixst party leadership they elected earlier this year before that happens. However, I see no signs from the IMF, the ECB, or the general Eurozone leadership that they are going to capitulate.

My best guess is that Greece will default but not exit the Euro, and that summer 2015 will join the summer of 2010, 2011, and 2012 as a summer of can-kicking on the way to Greece eventually being out of the Euro. By the time it actually happens, I think the market might be begging for it.

David L. Bahnsen, CFP®, CIMA® is the founder, Managing Director, and Chief Investment Officer of The Bahnsen Group, a private wealth management boutique based in Newport Beach, managing over $1 billion in client assets. David has been named as one of Barron’s America’s Top 1,200 Advisors as well as On Wall Street’s Top 40 Advisors Under 40 and Financial Times Top 300 Advisors in America. He brought The Bahnsen Group independent through the elite boutique fiduciary, HighTower Advisors, in April 2015 after eight years as a Chairman’s Club Managing Director at Morgan Stanley and seven years as a First Vice President at UBS Financial Services. He is a frequent guest on CNBC and Fox Business and is a regular contributor to Forbes.

David serves on the Board of Directors for the National Review Institute and the Lincoln Club of Orange County, and is a founding Trustee for Pacifica Christian High School of Orange County.
David’s true passions include anything related to USC football, the financial markets, politics, and his house in the desert. His ultimate passions are his lovely wife of 15+ years, Joleen, their gorgeous and brilliant children, sons Mitchell and Graham, and daughter Sadie, and the life they’ve created together in Newport Beach, California.

 

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