UPDATE: Rebound Alert: Buy Greek Sovereign Bonds Today
[UPDATE] — Everybody loves a comeback story.
This year, that story has been Greek sovereign bonds. Through November 5, those bonds have delivered returns more than double the S&P 500.
This comes after several years of fiscal recklessness that saw the Greek economy near the point of ruin.
The recovery of the Greek economy was something I saw back when I penned this article in June. As you read this, you’ll see I was bullish on the Greek economy then, and I am now.
Make sure to follow me on Twitter @TedBaumanGuru for my latest insights.
– ARTICLE HIGHLIGHTS –
- The world’s best-performing stock market might surprise you.
- It’s in a country hit hard by the 2008 to 2009 global meltdown.
- I have the perfect investment vehicle for you to profit.
The inside of one of the pouches in my suitcase was covered in fine white powder.
I was immediately paranoid.
Had someone snuck an illicit substance into my suitcase in Greece? Then I realized what it really was: the dust of ages.
The day before we left Athens, my family and I had gone up to the Acropolis to see the Parthenon, the Erechtheum and the Odeon of Herodes Atticus on the slopes below.
The dust in my bag was from the shoes I’d worn that day. It was a mixture of the limestone that makes up the Acropolis and the granite dust produced by ongoing restoration work.
For a history nut like me, the thought of a tiny bit of the cradle of Western civilization in my bag was profound.
Modern Greece is very different from the ancient society that produced Socrates, my favorite philosopher.
For one thing, they don’t sentence free thinkers to death anymore, as they did to Socrates.
For another, Greece is no longer the most prosperous country in its neighborhood.
In its financial disaster that followed the 2008 to 2009 global meltdown, “Greece” became shorthand for fiscal recklessness. There was talk of leaving the eurozone and massive bank failures.
But none of that happened.
Instead, Greece did what it has done for over 3,000 years … it survived, adapted and moved on.
The hardy Greeks have been so successful, in fact, that the once-benighted Greek economy is now the hottest investment destination in Europe … and I have the perfect way for you to profit.
The World’s Best-Performing Stock Market
Over the last few weeks, Greece’s benchmark stock exchange has outpaced every major stock index in the world.
The Athens Stock Exchange (ASE) has now surged more than 40% year to date. Much of that has occurred in the last three weeks.
You can see the recent price action in the chart below.
Even more remarkable, bond market investors are piling into once-hated Greek government debt. The yield spread between 10-year Greek government debt and its German equivalent has fallen to just 0.3%.
The reason for this recent burst of enthusiasm is the massive defeat suffered by Prime Minister Alexis Tsipras’ left-wing Syriza party in European Parliament elections on May 26.
Tsipras called for snap elections by June 30. The market accordingly went on a tear, expecting Syriza to be replaced by an investor-friendly, center-right government.
6 Reasons for Greece’s Resilience
As all investors know, the stock market isn’t the economy.
The ASE’s world-beating performance this year reflects a low base and anticipated policy changes. To sustain that run, the Greek economy will have to perform too.
I fully expect it to do so.
The Greek economy enjoys certain features that make it a lot more resilient than others, including the United States:
- Healthy competition. It is significantly less concentrated than the U.S. Most economic sectors enjoy healthy competition by many firms. The only sectors that exhibit significant concentration are banking, retail trade and water transportation. The services sector, which is dominated by tourism and associated industries, is marked by tens of thousands of small firms. Restaurants, tourism agencies, tourist accommodation and similar subsectors are vibrant and operate at a much lower cost than in much of Europe.
- Can absorb unemployment. Because their capital intensity is low, these sectors have absorbed a lot of unemployment over the past few years.
- Owners must be invested. Because the average Greek company is significantly smaller than in the U.S. and the rest of Europe, business owners must maintain investment levels to remain competitive.
- Profits are recycled into the economy. Unlike massive U.S. companies, which often sit on the mountains of unused cash that they don’t invest in job creation, Greek companies recycle their profits back into the economy, further stimulating activity in downstream sectors.
- Light regulation. The Greek services sector is lightly regulated, and barriers to entry are low. It’s much easier to start a new business in the tourism or hospitality industry, for example, than in most other advanced economies. Admittedly, that’s not necessarily by choice — the government just doesn’t have the capacity to impose its will on its citizenry, whose culture favors entrepreneurialism and sharp dealing.
- Better public support. Despite significant budget cuts after 2008, the Greek public support system is much more robust than in the United States. Universal basic health care and uncomplicated unemployment benefits allow Greeks to change employment or start new businesses without concerns about loss of insurance coverage.
Much of this, in turn, facilitates small-business growth and employment.
I’m Bullish on Greece
My background in economics and economic history tells me that despite its recent financial problems and a bad rap in the press, Greece is poised for a big comeback.
But with an election coming up, there’s no reason to wait to make money from this unique country’s economy.
The Global X FTSE Greece 20 ETF (NYSE: GREK) covers the top 20 firms in the Greek economy.
Its performance this year has been double that of the S&P 500, and I predict that its value will spike strongly after Greek elections on June 30.
Buying into Greece with an ETF is easy, and it’s going to be profitable!
Editor, The Bauman Letter
P.S. For decades, I’ve been on a mission to help you achieve endless income with bold thinking. The Bauman Letter uses my commonsense approach to help you grow your wealth and live the life you’ve always dreamed of. I use four simple criteria to help you make smart investment decisions that are driven less by emotion and more on earning endless profits. To learn more, click here.