Greek Tragedy Probably Will Be Averted

Includes: EU, EUO, FXE
by: Dana Blankenhorn

I spent two hours yesterday on the BBC News Service in a discussion on the Greek default.

Two Greek men, one in Athens and one in London, dominated the talk, sounding to my ears like typical debtors in bankruptcy. It was someone else's fault. We don't have the money. Let's talk about Europe.

Finally I'd had enough and called them out. You have a choice, I said, between losing income now or losing your savings later. There is no third choice. Either take the deal, which is half off on the current debt balance, or don't and leave the Euro. But make up your mind, we don't have time for your drama.

I felt like Mr. Potter in “It's a Wonderful Life.” But in fact all this dithering is hurting folks all around the world, as an investor in South Africa later reminded us. Uncertainty over Greece has made the markets into “Mr. Toad's Wild Ride” and we want to get off.

This morning, there are new indications the curtain will come down, and soon. (December 10 at the latest.) Even if the Greeks leave Europe, meanwhile, Europe is finally preparing to wave them goodbye.

The Greek government is revolting over the referendum plan of its leader and may soon KO both. (Good news, because from what I heard on the radio the referendum was headed for defeat.) The Germans began acting like bankers, telling Greece they get no more aid until they sign on the line which is dotted.

While Italy's Sylvio Berlusconi warms up in the wings the tough love shown Greece looks increasingly likely to cancel his act and perhaps lead to some socialist realism. (Greek Prime Minister Papandreaou, who has been fairly realistic in this, most of the time, is a Socialist.)

What does this mean for investors? Good news. Negotiators often have to stare into an abyss, long and hard, before doing a tough deal. (Ask the NFL.) Usually the worst outcome is avoided. Even when it isn't we find a way to get by. (Tell that to the NBA.)

Betting on Armageddon is always a long-shot bet, but in any emotional game you'll find suckers who want to play it.

Take their money.

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