How will the Greek drama play out?

The Greek drama is ongoing, intensifying and becoming more interesting. As it stands now, Greece for sure will miss its first scheduled payment tomorrow, which means Greece is heading to a default. Needless to say, the market is getting really nervous now and the stock markets are falling around the globe. So what does that mean? Will this default automatically drive Greece out of the euro? Well, the short answer is no. And I stick to my guns that Greece will not leave the euro and at the end it will be the same drama all over again for the next year or so. Why am I thinking this way? Well, if you follow my blogs longer enough, you know I have been calling Euro a defective currency and will eventually kaput for sure for many years now. Including a country like Greece that has no financial discipline at all and will spend the money they don’t have like crazy will never make the euro a sound currency over the long run. However, I really don’t think Greece will be forced to leave the euro this time. There are many reasons for this bold call but one most critical reason is that Germany is not yet ready for this move. Believe or not, among the countries in the Euro or broadly in the EU, only Germany is virtually supporting everything floating economically and financially. One thing that very much benefits Germany with the current situation is a weak Euro. After all, Germany is a very much export-oriented economy and it needs a weak Euro to keep its competitiveness. If Greece is out of the euro, while initially the reaction to Euro may be very negative, I think over time when the dust settles down, Euro will become much stronger, which will hurt Germany dearly economically. This is last thing Germany wants given how weak their economies in EU and Germany are shaping up at the moment. For that reason, I think Germany will try everything it can to keep Greece in the Euro in the next few days/weeks. At the end it will be another kicking the can down the road drama and the Greek crisis will be resolved with a last minute deal. Then we will start to see another drama all over again when the next round of payments by Greece are approaching. This will be another story of course.

So believe or not, if anyone who has the gut and brave enough to buy the Greek stocks now (e.g. GREK), they may be rewarded handisomely if the Greek drama indeed plays out per my scripts. Of course, it is a high risk speculation and you may lose everything if I’m wrong. Greece will hold a referendum on Jul 5. So the market will likely be very fluid and volatile prior to that. If it drops significantly by Friday, I will attempt to buy to bet for a sharp rebound next week. But please never overplay. Only bet with the money you can lose!