Greek Tragedy or Opportunity?

The vote in Greece gives new meaning to “Just Say NO!” The headlines started last night and have not stopped since the belief the outcome of the vote would be no to continue aide from the ECB and IMF under the current restrictions. What does it mean? From my view… more uncertainty and we know that translates to volatility in the markets. As we start the week with this event before us taking one more step towards no solution, the following are soneĀ ideas to track as the week progresses:

  1. Determine if this is already priced into the US markets following the initial reaction. Don’t be surprised if it gets pushed to the back burner and the focus shift to earnings and economic data in the US. After all, this is not the beginning of the Greece/ECB confrontation… it is actually the end.
  2. Watching the reaction in gold, oil and currency. It is important to point out that gold has not spiked as a safe haven trade against the euro and the fall out. It is in the process of testing support at the $1147 level… it is not rising at all? Oil has dropped on the news, but the drop has more to do with supply than Greece. The dollar has moved higher off recent tests lower, but not dramatically. All evidence the event is coming to an end relative to the effect on markets.
  3. Volatility spiked to 19.8 last week on the same news about Greece. Today it is approaching that level to start the week. Watch to see if it move higher or retreats back to the 15.5 level. If the latter happens it is more evidence the event is already priced into the markets for the most part.
  4. GREK is the ETF for Greece stocks. It rallied in hopes of a deal last week after falling near the $9.50 mark. Look for a retest of the low and then a possible bounce on optimism of a deal getting done for Greece to stay in the EU.
  5. When it is all said and done… this will create more opportunities around the globe for investing. Assets always swing to far in response to what is deemed to be a tragic event. Patience as it unfolds and then sift through the ashes of what is tossed into the fire.
  6. The greatest study from thisĀ will be theĀ social-economic impact of emotions driven by entitlements. There is not a country in the world that should not study how this unfolded over the years and how entitlements lead to the demise of balanced economics in Greece. You can not continue to give away what you don’t have. It is important to notĀ the US piles on nearly one trillion dollars of debt per year meeting obligations of entitlements it is not able to afford, but believes it can grow it’s way out of the debt… pure folly. Now is a good time to study the impact of small scale failure and extrapolate it to what happens if a country the size of the US fails to be able to pay its debt.

This promises to be a fun filled week. It is important to let it play out and then find the opportunities in the irrational reaction of investors as we move forward.