Investing Overseas: Time to buy Greece?
There is a definite element of contrarianism to value investing. Not always of course, but sometimes the market’s negative reaction, to news that is of a temporary nature, prices the shares of a company as if the problem were permanent. Going against the tide in these cases can produce very satisfactory investment outcomes.
With that in mind, I thought it helpful to point out that many, if not the vast majority of investors, are currently very fearful about the implications of a Greek government determined to renegotiate their hitherto generously provided debts.
You can see this in the yields on Greek 10 year bonds, which are now trading at over ten per cent. This compares to Mexico on 3.10 per cent, Italy on 1.62 per cent and Spain on 1.48 per cent. You can also see it in the major stock market benchmark – the ASE – which is more than 40 per cent lower over the last six months.
Some experts however are now of the view that it is time to buy Greek assets. Robert Shiller, who won the Nobel Prize in Economics in 2013 for his modeling of asset-price fluctuations is one of those experts. Bloomberg has quoted Shiller; “Investing in Greece right now just might not feel right,” adding the price of Greek stocks is, “below anything I’ve seen in the U.S. and suggests a spectacular investment.”
We are aware that many of you are interested in investing overseas and Montgomery is doing some work towards an international fund, for now however you will have to find another path to investing in the land of Zorba, Souvlaki and Dolmades. You can begin your journey by reading the full Bloomberg article here: http://www.bloomberg.com/news/articles/2015-01-27/nobel-prize-winning-economist-says-it-s-time-to-buy-greek-stocks
Roger Montgomery is the founder and Chief Investment Officer of Montgomery Investment Management. To invest with Montgomery, find out more.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Kelvin Ng
:
Hi Roger, yes I think your headline could equally be “Investing Overseas: Time to buy US?” – the US market is already not cheap, but it could turn into a real bubble. International capital flows cause stock market bubbles, an interesting example being the French Indemnity 1871 – see Michael Pettis’ discussion of that event and the resultant German stock market bubble (in the context of a very interesting discussion on the whole Eurozone crisis at the moment):
http://blog.mpettis.com/2015/02/syriza-and-the-french-indemnity-of-1871-73/
So what is the international capital flow that will cause the US stock market bubble? Its the “euroglut” – see again Michael Pettis, in the context of (again) a very interesting discussion, this time about the Australian iron ore price and also the flight of capital from Europe into the US:
http://blog.mpettis.com/2014/10/how-to-link-australian-iron-with-marine-le-pen/
This will cause the US dollar to continue to rise and a US stock market bubble. At least that seems to me to be the most logical and likely outcome. Timing unknown, for a mere mortal like me. This thesis may well have started to play out already.
Kelvin
Roger Montgomery
:
Yes. Logical and illogical simultaneously.
Joe Rich
:
One of the main issues with investing overseas (especially when looking at countries like Greece) is currency risk.
What’s the ‘Valuable’ method for taking this into consideration when looking at investment risk and calculating intrinsic value?
Andrew Legget
:
An international fund sounds like a very exciting development, even if it is just in its very early stages of discussion. Look forward to hearing more. One of my fav overseas companies had another good result, wish i pulled the trigger when i thought about it.