Investing in Greek Banks
On the news the European Union finally agreed to bail out Greece if the occasion ever presents itself, the National Bank of Greece (NYSE:NBG) quickly surged by about 17 percent.
Without getting into the wisdom of providing this underpinning for Greece, the reality is that it's there, and if the results of the bailout of U.S. banks are mirrored by the National Bank of Greece, or other Greek banks, some investors should make a lot of money.
Just look at the lows the giant banks in America like Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C) reached, and in a relatively short time exploded in share price to see the potential related to bailed out financial institutions.
Add to that the inevitable pressure by countries like Portugal, Italy and Spain to receive their piece of the pie once Greece receives theirs, and you could have a rotating group of banks over the next several years from these countries that can make some huge gains for investors.
Don't get me wrong, I don't agree with any of this going on, but from an investors point of view, it's a tremendous opportunity that just about guarantees great returns.
As far as the rhetoric that this is only if Greece some day will need the money, forget about that, it was only a way of stating things to make it palatable to the citizens of other countries in the European Union which will have to pay the bill of Greece's outrageous and irresponsible behavior.
Nonetheless, it's going to happen, and to ignore it would be a huge mistake, as the banks in the countries getting the bailouts will enjoy success for some time, along with those who invest with them.
1 comment:
I agree there is a mess in Greece, but I am in favor of the bailout because the new government diagnosed the mess and reported it accurately and pledged to seriously undertake required reforms and austerity programs. Despite this, CDS spreads and mess increased, speculators attacked relentlessly and while the government program could have succeeded by itself to reduce deficit and redeem debt over time under normal market conditions, speculators betting for a default were just going to make it happen.
If there is a benefit of EU, it should be resilience against market attacks. EU/IMF would not put money on the table if Greek government was a joke as in Zimbabwe. Moreover, they get a good yield 3 to 5% on money they lend with good prospects of getting it back since it gives them power to pressurize Greece in case of skidding.
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