Will Greece Leave the Eurozone?

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 |  Includes: DRR, EUO, ULE, URR, UUP, YCL
by: Glen Bradford

Well, I could be wrong. Instead of defaulting, Greece might just decide to leave the eurozone. Greece is by far the worst off of the group of misfits. But first, who are the misfits? Spain, Portugal, Ireland, and Italy also fit the bill. Greece is paying nearly 16% interest on its five-year government bonds. This is rather ridiculous. Ireland and Portugal are paying near 10% on their government bonds. Compare this to 2 years ago when they all were paying less than 4% on their government bonds.

Instability Persists:
Previously, I cautioned that this whole situation was relatively unsustainable. What you have effectively locked into place are agreements that try to hold the unaccountable accountable. This is fun and games for a while, but although you can pretend that maybe the people that owe you will start making good on their promises, but you begin to see things getting out of control --- a point of no return, if you will.

The trend to Turbulence:
Taking a look at Greece. As a country, it is still a net importer to the tune of 10% of their GDP. It was only last year that the people of Greece started rioting in the streets against their government. As I see it, there are really two choices that Greece has.

Choice 1:
Fake it till you make it. This is what they've been doing. Unfortunately, you can't tax people when they have a tendency to run things under the table and when you have 1 out of every 4 exchanges going on under the table, decreasing GDP, increasing deficits, and a growing pressure for accountability at higher interest rates.

Choice 2:
Exit the eurozone. Take an economic beating. Decrease your standard of living such that you actually live within your means and spend less than you make.

The Breaking Point:
Both choices don't look very good for the euro. I think that once Greece cracks due to the pressure, it will make it easier for the other countries that I mentioned earlier to slip through the cracks. In my opinion, we are at --- or very near- the breaking point. Don't get too excited though, because things can and will persist the way they are throughout periods of unsustainability for longer than you might anticipate.

Feel Like Betting?
What can you do about this as an investor? If you don't believe in the euro, you can bet against it by purchasing ETFs like ProShares UltraShort Euro (NYSE: EUO) or the Market Vectors Double Short Euro Exchange Traded Notes (NYSE: DRR).


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.