Our Thoughts On The Greek Debt Crisis

As I write this, we are awaiting the Nonfarm Payroll numbers coming out of the United States for the month of June, as the world looks at whether or not the Federal Reserve is going to continue to push towards raising interest rates, or more importantly, raise interest rates more aggressively than initially thought.

On the other side of the Atlantic Ocean, we have the Greek drama going on. The reality is that from a purely technical standpoint, the Greeks have already defaulted on a very large IMF payment. Because of this, we are essentially looking at the end game of the situation in Athens, and as a result a lot of people are very concerned.

With this being the case, a lot of people on forums around the Internet are absolutely freaking out. For example, I happen to know that several people started shorting the EUR/USD pair rather aggressively as soon as the IMF announced that the payment had been missed. However, although that trade eventually worked out a bit in their favor, the reality is that the Euro hasn’t collapsed. The real question at this point in time: “Why not?”

Most new traders have no idea how the market tends to look into the future. Quite frankly, the Euro has sold off so drastically over the last year or so of that there aren’t that many people left to start selling. This is a classic scenario in which the “dumb money” starts getting involved again. Think about it this way, if you had any type of insight as to where the markets may go, wouldn’t you have already sold the EUR/USD pair, as well as any particular securities that would be vulnerable to Greece leaving the European Union?

And that’s my point. I think even if the Greeks leave the European Union at this point in time, any selloff in both the Euro and the European equity markets will end up being one hell of a trade. This will be almost like when the S&P 500 reached the 666 level, and we bounced so massively from there. As I look around Europe, there are several companies that are getting battered in the stock markets due to this nonsense going on in Athens. Sanofi (PARIS:SASY) is a perfect example. This is a global company that certainly has no issues pushing its pharmaceuticals around the world. Just because Athens is a mess doesn’t mean that this company is going anywhere. In fact, this is one of the best times to start picking up assets: when everybody else terrified.

Remember, the larger players in the market use a lot less leverage than you do, and can tolerate quite a bit more in the way of volatility. This is why the so-called “smart money” enters the market the quickest. It is risking substantially less than you are in relation to the account size. I personally am going to be looking to buy the EUR/USD when it pulls back, as well as several European stocks and European related ETFs. One thing is for certain, when hysteria reaches its peak, that’s when the smart people come in and make a lot of money.

Don’t believe me? I remember hearing a story about ATMs been put out in the public to dispense gold a couple of years ago. This was literally within 30 days of the absolute highs in the gold market. Another example is the sudden rise of models and rappers demanding Euros. In fact, there was a very famous rap video that featured an artist holding fistfuls of euros, and that was about 2 months before we reach the absolute top. You could go back farther and find other things such as the tech bubble in the 1990s, the housing market just a few years ago, and even as far back as the Tulip bubble centuries ago.

In other words, you can’t trade on a motion. That’s what people to give their money to other people do. I believe that Europe is representing value in general right now, and as a result I am more than willing to place my money into the European Union. I’m not doing it with high amounts of leverage, quite frankly this is more of an investment than a trade, but I think we will look back at this time several months from now, or maybe even years, and think how obvious it was we had reached the top of the mania. At this point in time, I hope the Euro crashes 6 or 7 handles. I will be more than willing to buy. You have to think that getting rid of Greece is ultimately a very good thing for the European Union. And that’s just assuming that Athens is really ready to sever its ties.