We came across a very interesting piece of news regarding changes to the military hierarchy in Greece that seems like it should be getting way more attention in the mainstream media than it is. According to the Athens News, the Chiefs of the Army, Navy, Air Force and General Staff have all been replaced in a single day.
I should caveat any commentary on this by noting that we are a boutique farmland and forestry investment advisor and certainly not geo-political experts. However, the implications of this move are certainly dramatic enough for investors to at least consider what they may mean. While the Greek Government claims that these military leadership changes had been planned for some time, it sure seems like more than just a coincidence that they are occurring now.
Just Wednesday, in response to Greek Prime Minister George Papandreou's surprise decision just five days after last week's Eurozone summit to call for a national referendum on the EU's bailout deal for Greece (scheduled tentatively for December 4th), France and Germany both bluntly demanded that Greece give a clear answer on whether it wanted to stay in the Eurozone or exit. The EU also announced that it was withholding €8bn in aid to the debt-stricken nation.
If you put these two items together, it seems possible - not definite, but at least within the realm of possibility - that the decision to replace the Greek military hierarchy was driven by one of two possibilities:
1) The Greek Civilian Government led by Prime Minister Papandreou is worried that the situation is spiralling enough out of control that the Greek military might have been tempted to step in. While this sounds farfetched at first glance for an EU country, keep in mind that Greece experienced a multi-year period of military dictatorship from 1967 - 1974 known as the "Regime of the Colonels". Perhaps Mr. Papandreou is worried enough about Greek historical precedent that he decided a change throughout the top military brass was simply a way to err on the side of caution.
2) The second possibility - which frankly seems at least somewhat more likely than the first - is that Greece may well be preparing to leave the Eurozone pending the outcome of the national referendum. In that scenario, we can assume the old Greek Drachma would be reinstated, and that it would immediately plunge by some very large amount against the Euro, the dollar and other currencies. There would probably have to be a bank holiday of several days to a week whilst the currency conversion took place. With citizens' savings devalued, if not wiped out - imagine one day you have a Euro bank account and the next week you have an account in a new currency worth, say, 60% less - there would almost certainly be riots, widespread violence, and the imposition of national capital controls.
It's difficult to imagine controlling a situation like this without some kind of assistance from the military. Remember, the country is already in an economic depression with 16% unemployment and widespread protests and riots have already occurred. So, perhaps Mr. Papandreou is simply preparing for the possibility of a Eurozone exit and all it would entail by replacing the current top brass with all new faces.
Again, this is merely conjecture, but the timing of the decision to replace the entire military leadership at this point in time sure seems like an interesting coincidence. On top of all that, an investment firm Neptune Capital Management just came out with an estimate that European banks would need to raise an astounding €400bn in new capital to provide a cushion against losses on European sovereign bonds. This is FOUR times the original estimates that had been bandied about, and it seems quite difficult to figure out from who are where this €400bn might come from.
While none of this is any indication of what global markets may do next, it does seem like investors who ignore the overall geo-political and macro-economic implications of the Eurozone crisis in favor of a purely bottom-up analysis of individual stocks or other assets are making a mistake. Certainly for myself, it is when I read news like this that I am thankful I have a significant amount of my personal savings in such "boring" assets as farmland and forestry.
Than again, as the great Warren Buffett once said, “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”, and certainly there is fear in the air these days.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
