Why Greece Matters?

While the intervening three weeks have seen the market retrace most of its upside progress, the decline is still somewhat shallow relative to previous instances.  Blaming such a clearing event on a particular piece of news is not particularly useful. Once market conditions become as over done and complacent as they have become in recent weeks, a thousand events can act as triggers for dramatic weakness. Indeed, our main concern here – that of significant "second wave" credit losses – is not presently a significant part of analyst conversation (where attention is centered on Greece and a few regulatory concerns).

The market is down a little over 5% YTD. A reminder on what’s “normal” for the market: In general, the market corrects at least 3-4x per year (5%); and corrects 10% about 1.2x per year. Each correction is caused for a different reason, but a pull-back none the less.  

Why does Greece matter?  There are 250 – 300 billion Euros of Greek debt is in international bond funds, pension and insurance companies, and above all at banks (already undercapitalized banks). What should be a simple, if sad, matter for the Greeks, becomes a problem for the world, just as subprime debt in the US caused a world credit crisis. At the end of the day, it may be the bond market which forces the Greek government and its people to take some very bitter medicine. Stay tuned

When the correction becomes greater, more dramatic than “normal” is when we should be concerned as investors. We are keeping a close eye on that; if the situation dictates, we will make adjustments to client’s portfolios & do our best to protect the downside.  We’re only a phone call away to discuss your situation in more detail. We appreciate your Trust.