Friday, May 16, 2014

Another crisis in Greece?

Although Russia is no longer an imminent threat at disturbing global financial market equipoise (see “No War in Year Four”), there is a potential threat on the horizon.  I’m referring to the world’s most notorious red-headed step-child, a.k.a. Greece. 

The Greek 20 ETF (GREK) is a proxy for Greece’s stock market.  Note the plunge to new quarterly lows as of the last few days in the following chart.  As you can see, GREK has been spiraling downward of late, which calls to mind the state of the Greek financial market during the 2010 crisis. 

 A cursory search of news headlines emanating from Greece reveals virtually nothing that would qualify as tinder for another round of global market turmoil.  The only possible exception is this Reuters wire story involving Greece’s denial that it has instituted a retroactive tax on foreign holders of Greek bonds.  The rumor apparently caused yields on Greek bonds to spike to a 2-year high.

A web site called the “Greece Reporter” also published an article on Thursday which highlighted the fact that Greece’s economy was still shrinking with GDP down 1.1% in Q1 2014.  The country’s unemployment rate is currently 27.4% according to the article.

It has been some time since we’ve seen Greece in the news; you’ll recall the country dominated news headlines a couple of years ago as the Greek financial crisis spread volatility throughout the global market.  Could it be that a revived Greek crisis (or mini crisis) is imminent?  The stock market is the ultimate barometer of future business conditions and the GREK chart suggests that something is amiss in the so-called “land of gods.”  Stay tuned.