Friday, May 29, 2015

Grexit ????

Western stock markets are again looking for clues which might tell investors whether or not Greece will stay with the Euro currency. I think there is special concern about the Greek banking system which has been losing deposits at a rapid rate. Should this deposit loss continue much longer and should the European Central Bank withdraw its support for the Greek banking system a major financial crisis will hit the Greek economy.

Given these potential economic dangers I think it is useful to see what the Greek stock market has to say about all this. The top chart shows the Athens general share index while the bottom chart shows the Greek stock market ETF with ticker symbol GREK.

What strikes me about these two charts is that during the political/economic crisis brought on by the change of government in January the Greek stock market has held steady at the bottom of a big decline (purple rectangles). I would think that if investors really thought that Greece would abandon the Euro or that the Greek banking system would collapse these two indexes would be rapidly on the way to zero. But this is not what we see in these two charts.  Despite all the anxiety and fears of imminent disaster these two indexes have held steady.

As hard as it may be to believe I think the Greek stock market is telling us that Greece and the EU will successfully muddle through this latest crisis phase. On an even more optimistic note, if these two indices can rally above the declining 200 day moving averages (red lines) I think much better times will be ahead for the Greek economy.

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