Greek debt / Deutsche Bank exposure & Investment Implications

[MacGyverIt]

Team MMM,

I've read up a lot on the ongoing implosion of the Greek economy, likely removal from the E.U. and most importantly for Mustachians, the global financial implications.

My understanding is Deutsche Bank holds an enormous amount of Greek debt.
- In March DB stated they held 298 million euros in corporate, bank and public Greek debt.
- On 7 June 2015, the co-CEOs Juergen Fitschen and Anshu Jain resigned.
- Total assets = €1.709 trillion (in 2014)
- In 2009, Deutsche Bank was the largest foreign exchange dealer in the world with a market share of 21 percent.

If there's a major collapse headed, what are the buying implications for Mustachian investors?

BTW - I don't mean to imply the sky is falling (if you aren't Greek) -- I think opportunity awaits.

- Mac

[marty998]

298 million euros sounds like a small enough amount to be insignificant?

[forummm]

So you're saying that about 0.018% of their portfolio is potentially at risk of not receiving full repayment?

I'm not panicking about that.

[fb132]

Because of Greece, I have been buy my index funds on sale for the past 1-2 months.

[Heckler]

Because of Greece, I have been buy my index funds on sale for the past 1-2 months.

Have you?   Because my MCSI EAFE IMI index has been up 2.74/2.29/15.64,in the past 1/3/6.  Holding 9% Germany, 0% Greece.

That's a unhedged $Cad fund though - is a $Usd version going down?   Just curious.

[Paul der Krake]

The heads of DB resigned over regulatory and litigation pressures. Greece doesn't come into the picture.

[Financial.Velociraptor]

My quick calc of Greek to total assets of the bank yields some shit that normal humans can't read on the calculator because its scientific notation small.  Pass.

Euro?  Greece makes up less than 2% of Euro GDP.  The USA wouldn't panic if it suddenly lost South Dakato (Oh Noes@!  Not the Badlands?!?)

This is a non-event/buying opportunity.

[Lordy]

Greek bonds with a maturity of 2 years (mid-2017) currently trade at 65 to 70% of face value.
Given the price and the coupon, the potential return is 25% .

Has anybody been brave/stupid enough to take this opportunity?

[fb132]

Because of Greece, I have been buy my index funds on sale for the past 1-2 months.

Have you?   Because my MCSI EAFE IMI index has been up 2.74/2.29/15.64,in the past 1/3/6.  Holding 9% Germany, 0% Greece.

That's a unhedged $Cad fund though - is a $Usd version going down?   Just curious.

I have Vanguard's VXC (All world except Canada) which has had ups and downs for the past 1-2 month, but overall, it was down, so I made more purchases in the past 2 months so i could get it at bargain prices. Of course, since it has also US stocks, the problem with Greece wasn't the only reason the ETF was down.

[Indexer]

Greece has a smaller economy than most US 'states'.  I'm about as worried about a Greek default as I am Louisiana...  I take that back.  Louisiana actually has a bigger economy AND it is closer to me.

Greece is getting a lot of news attention. The only reason Greece got any attention in 2010/2011 was because everyone feared that if Europe let Greece go under Spain and Italy would be next.  Both countries have improved their situation since then.  If Greece defaults expect a short term OMG in the news.  Expect the markets to give a crap.  However expect world GDP and more importantly corporate dividends & growth to continue along as if nothing happened.  IE stocks might be on sale.

Long term Greece is actually probably better off if it leaves the Euro.  It will hurt in the short term, but then they can rebuild their economy.  Paying back this debt slowly overtime is a losing battle.  It is just unsustainable. 

[forummm]

Greece has a smaller economy than most US 'states'.  I'm about as worried about a Greek default as I am Louisiana...  I take that back.  Louisiana actually has a bigger economy AND it is closer to me.

Greece is getting a lot of news attention. The only reason Greece got any attention in 2010/2011 was because everyone feared that if Europe let Greece go under Spain and Italy would be next.  Both countries have improved their situation since then.  If Greece defaults expect a short term OMG in the news.  Expect the markets to give a crap.  However world GDP and more importantly corporate dividends & growth to continue along as if nothing happened.  IE stocks might be on sale.

Long term Greece is actually probably better off if you leaves the Euro.  It will hurt in the short term, but then they can rebuild their economy.  Paying back this debt slowly overtime is a losing battle.  It is just unsustainable. 

At this point, Greece is not only not "developed country" (for indexed investing purposes), it's also not even an emerging market or even a frontier market economy. It's bad news.

[Indexer]

Greece has a smaller economy than most US 'states'.  I'm about as worried about a Greek default as I am Louisiana...  I take that back.  Louisiana actually has a bigger economy AND it is closer to me.

Greece is getting a lot of news attention. The only reason Greece got any attention in 2010/2011 was because everyone feared that if Europe let Greece go under Spain and Italy would be next.  Both countries have improved their situation since then.  If Greece defaults expect a short term OMG in the news.  Expect the markets to give a crap.  However world GDP and more importantly corporate dividends & growth to continue along as if nothing happened.  IE stocks might be on sale.

Long term Greece is actually probably better off if you leaves the Euro.  It will hurt in the short term, but then they can rebuild their economy.  Paying back this debt slowly overtime is a losing battle.  It is just unsustainable. 

At this point, Greece is not only not "developed country" (for indexed investing purposes), it's also not even an emerging market or even a frontier market economy. It's bad news.

We need a classification for 'fading economies.'   ;)


My portfolio aside(which doesn't care about Greece); Greece is a nightmare.  The debt is going up.  Employment has been going down.  Revenues have been going down.  Every attempt to fix the debt means cutting things which makes the employment and revenue problem worse.  Any attempt to fix the latter will require more debt.  Well except one solution, but it's not financial, it's social... which means it won't happen until there is no alternative.  Get the people to disregard the entitlement state.  Companies should be able to fire bad workers without huge issues.  This improves hiring.  If I'm iffy about someone being able to fire them later greatly improves the odds I will hire them to give them a chance.  Companies need to be able to open new shops without miles of red tape.  People need to accept the idea of taking care of themselves.  Want to retire at 55?  Open a ^%#% %$#%# savings account! 

However most of this can't happen in the current environment.  The new leadership was elected because they promised to keep the entitlement state going full steam.  Businesses aren't going to touch Greece in its current state.  The people who do have money are trying to get it out of the country.  Let me repeat it to point out how BIG of a problem it is. Even with the current problems the people elected a new government that promised to take them back to the practices that got them here.  The people completely dismissed the actions they need to take in order to have any chance of pulling themselves out of this mess.  They want a happy perfect solution that saves their economy and lets them keep their insane entitlement state.  Reality obviously hasn't sunk in yet.  If you were a creditor of Greece would you take them seriously?  This is kind of the definition of throwing good money after bad.

I don't see a long term solution that doesn't first involve a rude awakening economic collapse.  When it is 100% clear their entitlement state can NOT survive and false promises from politicians to the contrary aren't even believable, when the economy is in the toilet and people are willing to work for anything, when the government openly welcomes any business with open arms.... when Greece is India..... then things might start to improve. 

[Heckler]

Funny the advert on the bottom of my screen says "Start Fresh" with a Capitol One Mastercard.  I wonder if the credit card companies look at Greece for a pile of new debtors.