About two years ago the situation in Greece was at a flashpoint. It was at the top of the list of investor worries.
Leading that argument was John Mauldin, who had written over thirty posts tagged Greece culminating with aggressive statements in June, 2012. He also has a book on the impending collapse of Europe using Greece as the poster country for a debt-ridden collapse. Mr. Mauldin has noted in his interesting and lively weekly reports that he has met with Congressional leaders who were influenced by his reasoning.
At the same time, I suggested to readers that the Greek situation was overblown. Investors could achieve a significant edge by taking a contrary position. Here is what I wrote in June, 2012:
I have a long-term forecasting record on this which has been pretty accurate on general European developments. It is dragging out longer than even I expected, but I still see the following conclusions:
- Some sort of deposit insurance for Europe, ending the bank run worries that have dominated the stories for the last several weeks. Do you really think that European leaders have no plan for this? This will be the first news.
- More powers for the ESM — either direct lending to banks, or giving bank powers and leverage to the ESM.
- Expanding the war chest — this will happen gradually.
- Concerted action by G8 powers — quite possible, and already rumored.
- Political and fiscal integration — probably happening since most countries will benefit. I do not know about Greece, but I will note that an exit now is much less painful than it would have been a year ago. This illustrates why it is useful for leaders to buy time.
The Interim Update
US stocks are up about 40% since June of 2012. The European situation has not collapsed. It was (yet another) scary thing for the average investor, who was told to fear Greece, Europe, and world-wide debt.
Those who made these predictions are doing their own version of “kicking the can” by insisting on the same old themes and saying “Not yet…but eventually.”
