Worried About Greece?

| May 15, 2012 | 0 Comments

Greece and the EuroI’ve gotten the call more than once over the past week…  “What the hell is happening in Greece?”

My initial reply is just one sentence.  “It looks bad right now… real bad.”

“Well can you explain what’s going on?”

After having enough people ask for my opinion on the matter, I figured our readers here at Penny Stock Research would be just as curious.   I’ll explain what’s going on and tell you where things may be headed.

First off, this renewed Greek crisis comes as no surprise to me.   You see, everything that’s been done to rescue the EuroZone from complete meltdown has revolved around getting Greek finances back under control.

And they’ve all been patchwork, last second deals that no doubt have taken lots of persuasion.  At the heart of the deals, it’s been about kicking the can down the road.

Well, you can’t kick the can down the road if the road doesn’t exist.

Simply put, if the Greeks can’t build an EU friendly government that wants to stay in the EuroZone, they’re going to leave the EuroZone and stop using the Euro.  At that point, all the endless negotiating, deal making, and sacrifice will have been for nothing.

The scary part is, the Radical Left Coalition leader Alexis Tsipras vows he’ll refuse to honor the current bailout agreement.   He wants Greece out of the current deal, as he feels it’s too harsh.

This is at the heart of the matter…

Even as other Greek political parties are ready to make a deal for a new EU-friendly government, the size of the party Tsipras controls would make a deal impossible without his participation.

If he continues to refuse past this Thursday, we could see Greece hold another election in June.    That increases the odds of EU leaders pulling the plug on Greece’s membership in the EuroZone – forcing Greece to give up the Euro as its currency and print Drachmas once again.

For Greeks, that’s a no-win situation considering the vast majority of citizens want to stay in the EuroZone.

And why do they want to stay in the EuroZone?  Well, some economists estimate Greece’s new currency will have roughly 25% the value of the Euro… sending inflation to epic levels!

So how does this impact US stocks?

Basically, if Greece is booted out of the EuroZone, they give up the privilege of using the Euro as a currency.  One of the results will be a major sell off in the Euro.   Another could be contagion spreading to other high debt-GDP EuroZone countries, such as Spain or Portugal for example.  And that could lead to even more Euro selling.

If the Euro sells off, the US Dollar will surge as a result of the exchange.   And assets valued in US Dollars, such as stocks and commodities, become more expensive on a relative basis. 

Bottom line…

A strong US Dollar is more likely to drag down the value of stocks and commodities… and a Greek departure from the EuroZone can force this very issue to happen.

Fortunately for penny stock investors, many of these macro issues affect penny stock companies less than big, multi-national global firms.   Owning penny stocks in this volatile market can actually offer a certain level of protection versus the mega cap stocks you see all over financial news media.

Even though penny stocks generally move faster than the overall market, most penny stocks move based on their own fundamental and technical catalysts… and less on global macro issues. 

Keep that in mind before you panic and sell every stock in your portfolio!

Editor’s Note:  It seems our own in-house penny stock guru has found companies that are ignoring the drama in Greece right now.  Discover his secret to uncovering winning penny stocks…

Until next time,

Brian Walker

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Category: Breaking News

About the Author ()

Brian joins the Penny Stock Research team as a seasoned independent trader and financial analyst. Brian graduated with a B.S. from the University of North Florida and now resides in Scottsdale, Arizona. With a background in economics and statistics, he has a keen ability to uncover profitable and growth-focused companies. He has years of real life know-how in analyzing fundamental and technical data that gives him an edge drilling down on companies and financial results. With over 15 years trading experience, Brian has become an expert in the ever-changing equities markets. Today, he scours the markets hunting for penny stocks that offer low risk and high reward.