Putting Out The Greece Fire!

It has been said that Shakespeare drew his inspiration for many plays from classic Greek dramas. If he were alive today, I don’t think there would be any shortage of inspiration for new projects!

Of course, the situation in Greece has been front page news this week and it has created some choppy waters for investors (it was another volatile day on the markets yesterday – but that was apparently caused by a trading error). Amid the headlines, and the increased market volatility, we thought it might be helpful to take a look at how the sovereign debt situation has evolved and why it is causing so much noise (and by extension, investor anxiety).

Each day, there seems to be a new take on the story and many of the headlines have been conflicting. For example, consider the following:

  • Two EU Ministers: No Bailout for Greece – Wall Street Journal (Jan 18)
  • Merkel Says Greece Doesn’t Need Financial Support – Dow Jones (Mar 22)
  • Fears rise that Greece is days from defaulting – Associated Press (Apr 12)
  • Greece begins talks on details of IMF aid deal – Reuters (Apr 22)
  • EU: Greece loan package coming soon but worries persist – Globe (Apr 30)
  • Greece swallows tough medicine in bailout – Globe (May 3)
  • Analysts like Greek bank despite nation’s woes – Bloomberg (May 4)

However, as is often the case when it comes to complex issues, there’s usually more to the story than meets the eye. The situation in Europe is complicated and very volatile and many investment management teams are monitoring new developments closely.

Also, amid the noise, it should be noted that there have been other developments that, while not front page news, are noteworthy nonetheless from an investment standpoint.

For example, the U.S. dollar has strengthened which has benefited U.S. dollar denominated investments, and global bond spreads have widened, creating potential investment opportunities.

Another important note is that many of our favorite dividend growth stocks have returned to profitability. Regardless of the happenings in the world economy, when our dividend growth stocks are making money, we will be rewarded accordingly… But, it will take faith in our philosophy and time for the markets to catch up to us 😉 .

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