Tales From The Crypt – Greek Blood On The Streets

Bargain hunting – I like this investment style, but I’m also trying to avoid “value traps”: buying very cheap investments but without real promising growth chances. Can be a whole country a bargain? Can be a relatively developed country, a whole stock exchange without real value or a future?

Fifty shapes of blood

One of the most “bloody” investing stories was those of Greece some years ago: becoming bankrupt, needed several rescue operations, a series of heavy austerity measures. Private Greek bondholders lost the large part of their money, many Greeks their jobs or part of their income, and many Greek share buyers, a lot of money.

I like investments on 10-15 years lows – if they still have a real value. Greek shares main index, the Athex General Composite fell to 471 points on the lowest point of June 2012 – that was 91.2 percent from the highs of November 2007 of 5346 points. (Just like cryptocurrencies lately?) And it seems that was a low of more than 22 years!

Doomsday tales

But, did have Greek stocks any value? In those times it was hard to believe. The press was roughly pessimistic, one main theme was if, with the Greek crisis, the whole Eurozone could have fallen apart. Memories of the crisis in 2008-2009 were very vivid, and doomsday scenarios, very common.

Whatever it takes

A greater change may have happened with the “Draghi put”, when the president of the ECB said, he was “ready to do whatever it takes to preserve the Euro. And believe me, it will be enough”, in July 2012. (Wikipedia)

Companies that have been trading at low multiples of earnings, cash flow or book value for an extended period of time are sometimes doing so for good reason – because they have little promise – and possibly no future
– wrote Investopedia.

Poor bank shareholders

The edifying question, for me, is, whether there were enough value and enough hope in Geek stocks to buy them or not. I was sure the Eurozone will be saved, there are too many European interests to maintain it safe and sound. (The British can’t even leave EU, with the Euro it should be even much more difficult.)

On the Greek stock exchange, many titles were bank shares, and banks are bailed out mostly with their shares strongly diluted. It means, the new capital comes at very low share prices and older stockholders are losing the great part of their investment.

People must eat

Other companies like retail, consumer services, industries, tourism, suffered less. People always have to eat, tourism can do well if prices are low in some country due to a crisis – like in Turkey this year. Prices of real estate can fall really deep in crisis but almost never to zero (excepting communism and other heavy dictatorships).

Allegedly Nathan Mayer Rothschild said, “Buy when there’s blood in the streets”, other sources are not sure where this quote comes from. But there was blood on the streets of Greece in this years, also literally:

The government enacted 12 rounds of tax increases, spending cuts, and reforms from 2010 to 2016, which at times triggered local riots and nationwide protests. Despite these efforts, the country required bailout loans in 2010, 2012, and 2015 from the International Monetary Fund, Eurogroup, and European Central Bank, and negotiated a 50% "haircut" on debt owed to private banks in 2011, which amounted to a €100bn debt relief. Wikipedia

But optimists did have right at the end: Greece was bailed out, the whole Eurozone was bailed out (in different moments, also Ireland, Portugal, Spain). Greek shares were up about 200-250 percent in approximately two years, to 1200-1300 index points in 2014. If somebody succeeded in buying shares really low, like near 500 index points, could have made a nice yield.

Although catching the bottom in this cases is very hard, and selling at the right moment, another issue. Between 2014 and February 2016, the Greek stock market suffered a big fall, again. With weeks of bank office closures in Summer 2015 and capital controls, even the stock exchange in Athens was closed.

Who’s next? Turkey? Italy? Brazil? What do you think?

Motto:

Bottoms in the investment world don't end with four-year lows; they end with 10- or 15-year lows. Jim Rogers in Investopedia

Other posts in this series:

• Deadly Coffee, With Cocoa Flavour
• 8 Reasons Why Gold Mines Can Rally Again
• Buying At Prices Of 2009? – Turkey
• The Curse Of The Disaster – Uranium mining

Disclaimer:

I am not a financial advisor and this content in this article is not a financial or investment advice. It is for informative purposes only, or simply to make you think, entertain, increase testosterone and adrenaline level. Consult your advisers before making any decision.

Info:

You can message me in Discord.

(Photo: Pixabay.com, chart data: Investing.com and Stooq.com)