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Greece Stock Market, The Real Contrarian Investing Play?

Stock-Markets / European Stock Markets Jun 11, 2012 - 04:52 AM GMT

By: Willem_Weytjens

It might sound CRAZY when I say that Greek stocks could become a good LONG TERM investment soon.

However, from a real contrarian point of view, it might not be that crazy.

Here’s why.

The Greek stock market has lost 93.3% from its top in late 2007 to its recent low. Yes that’s correct: 93.3%!

Chart: Prorealtime.com

When we look at the Dow Jones in 1929, we can see a similar move: From the top in 1929 to the bottom in 1932, the Dow Jones lost 89.48%… So Greece has declined even more than the Dow Jones in the GREAT DEPRESSION!

Chart: Prorealtime.com

When we overlay both charts, we see striking similarities between the two indices:

Chart: Prorealtime.com

So if this pattern holds, we could expect the Greek market to drop another 30% before a MAJOR turn takes place (perhaps a “GREXIT” (referring to a Greek Exit of the Eurozone) combined with a huge devaluation of the new “Drachma”? This would boost Greek exports and could be the beginning of the end of the Greek mess…

Greece’s unemployment shot up to 21.9 per cent in March, rising sharply from the 15.7 per cent rate in March 2011 and up from 21.4 per cent in February.
So yes, it looks like “Hellas” is going to “Hell”

However, when we have a look at the Unemployment in the US during the Great Depression, we can – again – see striking similarities:

Let’s think positive: How much worse can it get than during the Great Depression?!?

Greece is missing €60 Billion in taxes. Is that good news No, Maybe not the fact that it is MISSING it, but imagine if Greece could suddenly collect all (or part of) these taxes and invest it in the Economy!

Now how “badly” did Greek stocks perform actually?

Let’s have a look at some ratios:

“Greece” measured in Gold shows us that in 1999, people were willing to give 25 ounces of Gold for 1 “Greece” stock. Now they are only willing to give 0.31 ounces for that same stock. Clearly times have changed…

Chart: stockcharts.com

Greece vs the SP500: only 0.37 shares of the SP500 needed to buy 1 “Greece” stock, versus an historical average of around 1.5-2 stocks…

Chart: stockcharts.com

Greece vs the MSCI World index (excl. USA): showing a dramatic underperformance:

Chart: stockcharts.com

Now let’s have a look at Greece vs the other “PIIGS”:

Greece vs Spain: 0.075 “Spain” shares needed to buy 1 “Greece” stock vs an historical average of 0.3 shares…

Chart: stockcharts.com

Greece vs Italy: 50% below the historical average:

Chart: stockcharts.com

Now let’s have a look at Greece’s neighboring country Turkey:

This looks like a “Pennystock” doesn’t it?

Chart: stockcharts.com

Speaking about neighboring countries, please have a look at this stunning chart of Spain vs Portugal:

Looks like a lot of money has been made going Long Spain, Short Portugal:

Chart: stockcharts.com

One thing is sure, Greece won’t “disappear”. There will always be people living in Greece. This means that there will always be a Greek Economy. Sure it can change dramatically, and will unlikely be the same as it was 10 years ago, but one day or another Greece will start to grow again.

When that day comes, the Greek market will have rallied by several %. It’s always hard to catch a falling knife as you never know where the bottom will be, but one thing is sure: compared to the rest of the world, Greece looks like a nice opportunity to me for contrarians.

There’s only one catch here: If you buy stocks now and Greece devaluates its currency (after exiting the Eurozone), you could lose sh*tloads of money due to the currency devaluation.
Therefore, I will wait until the moment that that happens. That day, I will buy the HELL out of HELLAS stocks…

I wonder if there will be other “contrarians” (the John Templeton-likes) who will follow me…

I have decided to only accept new subscribers until June 30th. From then on my services will be open to existing subscribers ONLY. To secure your membership now, visit www.profitimes.com and subscribe now!

Willem Weytjens

www.profitimes.com

© 2012 Copyright Willem Weytjens - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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Comments

g kaiser 11 Jun 12, 14:40	Greek stockmarket investment? Maybe investing in the Greek stock market could be a good long term investment. But the problem is: what are the stocks in Greece seeing, that have caused them to drop so low? A re-introduction of a local currency could be one factor. That could cause a devaluation of maybe 60 to 70 per cent. An exit from the EURO would also affect production and output negatively in the start with an exception of maybe tourism. In short we might well see deflation of assets and investments. In that situation the stock market would not be the first investment that springs to mind. And finally, that something has dropped a lot, does not mean that it cannot drop further, it can drop until there is nothing left. If the rest of the world is heading for Armageddon, shares in Greece would take very long to recover. The comparison with the drop in the DOW in the thirties is a case in point. That "recovery" in nominal terms took approximately 25 years. Federal reserve banking is a funny thing, for those on the take. The house almost always wins! Thus gold for me.
Papavasiliou Stathis 17 Jun 12, 09:59	Tip of the hat to you sir You are the only analyst that has it right. Look at the monthly bars chart of the Athens Stock Exchange Index. See the huge ending diagonal triangle in its late stages of development forming over the past three years? Now look at the daily bars chart and observe the price action of the previous few days? Dead cat bounce? Maybe not. May be ending diagonal triangle breakout!! If the Elliott Wave Principle is worth its salt, and I have every reason to believe that it is, this makes for the following predictions. 1. SYRIZA the radical left party will not win the elections. 2. Very few people will make huge amounts of money in the ASE Index, over the next year to a year and a half, as the Index corrects back to where the triangle started forming, which is in the neighborhood of 2500 units, with the current price at 560. 3. Rumors of the death of Greece are largely exaggerated. 4. Some form or other of a political solution to the national debt problem of the Eurozone as a whole is in the offing.
Michael McGaughy 04 Jul 12, 04:15	Great Stuff. Thanks for posting! Greece reminds me of Indonesia in 1997 - 2000. I suspect most, if not all negatives are in the price. Any tips on how to buy shares in Greece?