Three Total Wealth Tactics You’ll Need Because Greece Isn’t Over

Keith Fitz-Gerald Jul 01, 2015
19 

Greece actually missed its payment last night, exactly as we thought it would. And in doing so, it became the first Eurozone country to ever default on its debt. Some say that the country is in “arrears,” but that’s splitting hairs.

At this point, “everybody” wants quick resolution.

Things are so bad that nearly 14,000 people have contributed to a crowdfunding page started by a 29 year old Londoner, Thom Feeney, on Indiegogo.com. As of yesterday, donations totaled $245,000.

There’s a joke making the rounds on trading floors that Apple is going to buy Greece using some of the $230 billion in cash it’s got socked away… and that the Cupertino giant will have change left over.

If you’re so inclined, you can make a €3 donation and get a postcard from none other than Greek Prime Minister Alexis Tsipris himself. So far 2,652 people have done so, according to CNBC.

One person even proposed giving away a private Greek island if a wealthy benefactor wanted to pony up the entire €1.6 billion… but subsequently had to withdraw the offer because the Greek government didn’t sanction the deal.

All joshing aside, though, the Greek Crisis isn’t over. Not by a long shot.

And that means you need these three Total Wealth Tactics to ensure your money doesn’t get “Greece-wacked.”

Here’s what you need to know to keep your money safe.

Would Markets Panic if Dunkin’ Donuts Went Out of Business?

There’s no question that headlines are scary. With every new bit of posturing, there’s a corresponding gasp from the global trading community that sends major indices reeling.

Now that Greece actually missed its payment, things are going to get rougher. Pension rationing has started, capital controls are beginning, and the banking system is running out of cash. Greek bank deposits have tanked by €44 billion since November. Defiance is turning to desperation.

These are the kinds of things that happen when you run out of money. Contrary to what people believe and Alexis Tsipras is discovering, the Greek situation has nothing to do with politics and everything to do with basic math. If you spend more than you take in, eventually the math catches up with you.

Closer to home it’s hard to watch because fears are that it will happen here. That may ultimately be true.

Still, it’s worth noting that this isn’t the first capital crisis, nor will it be the last. We’ve lived through worse.

Here’s just a short list dating back 26 years that includes events that many people have forgotten about in the heat of the moment:

  • 1989 – the U.S. Savings and Loan Crisis
  • 1990 – the Japanese asset bubble collapsed
  • 1991 – the Scandinavian banking crisis
  • 1992 – speculative currency attacks on the European Exchange Rate mechanism that predates the euro
  • 1997 – the Asian banking crisis and devaluations
  • 1998 – the Russian financial crisis
  • 2001 – the Turkish economic crisis
  • 2001 – the Dot.bomb crisis
  • 2002 – the Argentinian debt crisis
  • 2008-2009 – the Global Financial Crisis
  • 2014 – the Russian financial crisis

As bad as Greece seems, you owe it to yourself to put this crisis in perspective.

Global investors hold roughly $300 billion in Greek debt. For an economy like Greece’s, that’s comparable to the entire state debt of Illinois being held by a state with a GDP the size of Connecticut.

According to Bloomberg, U.S. equity investments in Greece totaled around $5.7 billion as of June 21. That amount is roughly equivalent to the entire market cap of Dunkin’ Brands Group Inc., of Dunkin’ Donuts fame.

My point is that Greece isn’t too big to fail.

The country has been functionally bankrupt for years – and the global community knows it. Investments and EU policy have been planned accordingly.

It’s not like this is a surprise to anybody. The country has long been a bug in search of a windshield, to speak very bluntly about the situation.

If anything, I’m surprised that things haven’t disintegrated sooner.

I’m reminded of the ignored warnings of the late economist Milton Friedman. Most famous for being a pioneer of free-market principles, he also made important contributions to monetary policy – perhaps no more so than in 1997, when he predicted the euro would be a disaster.

Watching it in formation, I agreed at the time and still agree today. The euro is political fantasy absent a single central bank.

The relationship between Greece and Europe seems a lot like a polyamorous marriage in which all parties agree to the idea of a union but remain able to take on as much debt as they want, completely ignoring the “pre-nup.”

Nothing will change unless European leaders – all of them – acknowledge the fundamental weaknesses that come from the complete absence of a central authority capable of stopping profligate spending.

Given that “they” don’t want to do that anytime soon, Greece will be back like a bad soap opera, and so will the market volatility that goes with each new episode.

Government Dysfunction Can Be Great for Gimlet-Eyed Investors

It’s easy to believe that this kind of government madness is bad for your money and even worse for your psyche. In reality, though, government indecision, posturing, and rhetoric can be great for your money.

Take Obamacare, for example.

Doomsayers were out in force claiming that the health care act would destroy the $3 trillion U.S. healthcare industry.

What’s actually happened, though, is that the formerly staid and boring industry is now acting more like the growth stocks of yore. The S&P 500 Health Care Index is up more than 160% over the past five years, far outstripping the 102% gains the S&P 500 posted in the same time frame.

I recommended Becton, Dickinson and Co. (NYSE:BDX) as a way to play this because it’s backed by the Unstoppable Trend we call Demographics. The stock has returned 100.43% since I recommended it to Money Map Report subscribers who followed along, versus the S&P 500’s 54% over the same time frame.

Or, how about the defense industry?

It was left for dead back in August 2011 when Washington had to put emergency sequestration measures in place to compensate for its own “Greek-style” budget battle.

I recommended Raytheon Co. (NYSE:RTN) as a means of getting around this knowing that it was backed by another of our Unstoppable Trends – War, Terrorism & Ugliness. Readers who followed along as directed have enjoyed total returns of 126% since, versus only 84% in the S&P 500 over the same time frame.

My point is that every crisis produces its own set of opportunities, especially when they’re backed by the Unstoppable Trends.

Greece is no different in that sense if you have the right approach, understand the Unstoppable Trends, and keep the correct tactics top drawer.

Three Total Wealth Tactics to Preserve and Protect Your Profits As the Greek Saga Evolves

As you and I have discussed so many times… from chaos comes opportunity.

Here are three ways to make the most of it and potentially laugh all the way to the bank, too. Just make sure it’s not a Greek bank… at least for now, anyway.

Total Wealth Grexit Tactic No. 1: Look for Openings in Must-Have Companies

Every new bit of posturing and counter posturing is going to produce market angst accompanied by panicked selling by the weak money.

That means some great companies are going to be on “sale” as part of a short-term move that has nothing to do with longer-term potential and upside.

So get your buy list ready.

The best companies will be those like Becton, Dickinson and Co., Apple Inc. (NasdaqGS:AAPL), and Raytheon Co. (NYSE:RTN) – all of which are tapped into Unstoppable Trends and trillions of dollars in spending down the line.

Total Wealth Grexit Tactic No. 2: Don’t Tighten Trailing Stops

I know this is counter intuitive, but the last thing you want to do is tighten trailing stops on a day when the markets are already pitching a fit. That’s because professional traders will “run the stops,” meaning they will hunt down the weak money players and force you out of the game very deliberately.

That way they can turn stocks on a dime while being perfectly positioned for an upside run. They know that you’ll chase ’em, which only adds to their returns.

To be clear, I am not saying that you abandon your stops. Just don’t tighten them based on emotion or some sort of knee-jerk reaction when volatility rises.

Total Wealth Tactic No. 3: Remember that a Correction Is No Excuse to Time the Markets

Millions of investors try to time the markets when things get tough and, in the process, doom themselves to poor returns.

How poor?

Try this on for size: DALBAR research suggests that 81% of Buy/Sell decisions based on market timing are wrong. That means, to be perfectly blunt, you’d have better luck flipping a coin.

Instead, capitalize on big down days and market chaos by using the opportunity to dollar cost average into positions you want.

If you’re not familiar with the term, what I mean is that you’re going to set aside a fixed amount of capital every month and invest it at regularly timed intervals regardless of market conditions. Doing so not only helps you avoid things like Greece, but also harness the overwhelming upward bias that markets have shown for more than a century:

 

Get these right, and Greece chaos will seem like nothing more than a minor speed bump.

Until next time,

Keith Fitz-Gerald

19 Responses to Three Total Wealth Tactics You’ll Need Because Greece Isn’t Over

  1. Rashmi Patel says:

    Hello Mr. Keith,
    This is the best advice a market expert has ever given to me ! I will try to follow it with my small amount of investment for rest of my life !
    Thank you,
    Rashmi.

    • Keith says:

      Dear Rashmi,

      Thank you for the kind words. I will do the best I can to ensure that your trust in me is well placed. I stand humbled.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  2. rob says:

    great advice , especially for the young investor who has the time to wait for results; but unfortunatly not the PATIENCE to wait it out

    • Keith says:

      Hi Rob.

      Thanks for the kind words. You’re not alone. In fact, patience was a trait I had to learn, too, It was all the more difficult because, as a younger man, I thought I was in a hurry.

      Funny how a little mileage changes things…and for the better.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  3. rob BAUTERS says:

    LOVE YOUR IDEAS– KEEP UP THE GOOD WORK

    • Keith says:

      Thanks for the kind words, Rob.

      I will do my very best!

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  4. H. Craig Bradley says:

    FOR THE RECORD

    Keith, in your brief history, you forgot to mention one of many Mexican Peso devaluations, especially in 1995. A lot of U.S. Expatriates living in places like Ensenada, Mexico got whacked. Just because Donald Trump thought our immigration policies are broken does not mean other things don’t have “problems” across the border and here at home, as well. Anyone remember Orange County, CA also went into arrears about the same time? Heads rolled too.

    With all the easy money and credit issued abound the world in the past ten years, we should expect a number of bad loans, sometimes to whole jurisdictions or sovereigns, to go bust. The press loves to cover the latest train wreck and dissect the resulting carnage. However, from a long term point of view, its not so important and as you say, definitely not unprecedented. So, discount the catch phrases: ” The Biggest Ever” or ” Never Happened Before”.

    • Keith says:

      Hi Craig.

      You’re right…I totally forgot about the Mexican Peso and Orange County both. Those were both pivotal events at the time and I recall the angst clearly now that you’ve mentioned them.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  5. John R Stockhausen says:

    RE: Keith Fitz Gerald, I really do appreciate ALL the Emails you’ve sent us. I really do appreciate every one of them more than you know. Would you use the same stocks if & when the (U.S. Markets crash) as for the problems Greece is having at this time ????
    Keith, I really don’t like to be a pest about asking you (Important Questions) but I have been holding off for a while to ask you the following question; I know when a person looks up a stock, some where they tell us about the (P/E & I know there are many other financial objects on each stock. Is there any way you could tell me just what all these objects are, what each one means & probably the most important, what numbers are (Good & NOT good)??? I can’t find this information any where. Could you PLEASE help me with this problem???? I really would appreciate this more than you know.
    Sincerely Yours, John R Stockhausen

    • Keith says:

      Hello John and thanks for the kind words.

      You’ve asked some great questions that are also very important. If it’s okay with you, I’m going to dedicate an entire column to this in the next few weeks that should help you separate the stuff you need to know from the stuff you don’t.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

    • DENDY COUCH says:

      John, If I remember correctly, there should be a GLOSSARY OF TERMS heading on the Total Wealth or Money Map home pages. Also, your brokerage should have a dictionary of investing terms available to you for free. If not, try an internet search for the term you want to know about and many sites with answers and examples should appear. Hope this helps. Regards, Dendy Couch

    • Houyhnhnm says:

      This article will get you started. As it points out, there is no way to define a “good” P/E without any context.

      http://www.forbes.com/sites/johndobosz/2013/09/25/10-ratios-to-make-you-money-in-stocks/

      Houyhnhnm

  6. Khaled Al-Rashidi says:

    In the case of not defaulting debt Aalionanah Is the European system and the disintegration will slimming

  7. Syd says:

    Keith, your analysis of the Greek situation is opjective and accurate. It would be good if you are wrong about the outcome, but I’m afraid there again you are right on the money. The European creditors will continue to throw good money after the bad just for the mistaken sake of unity.
    It would be interesting to know if a state like Illinois became bankrupt what action would the federal government
    be likely to take?

  8. Leslie Kaluzny says:

    Keith
    Great article & advice.
    One of my concerns with Obama Health Care is that this unprecedented level of government involvement in what was mostly a non-governmental industry will kill the ‘Golden Goose’ of innovation that was always a hallmark of private health care – sure the INSURERS are way up – but at what price to future innovation which made American Health Care a world class leader?
    Forcing free citizens to pay for a service that they may never require meant a violation of constitutional freedom’s – what price can be attached to citizens who are losing faith in politicians & judges who trample democratic hard fought rights?
    We can balance the equation by making money of these follies (at least someone other than politics makes a gain) – while we are enjoying ourselves maybe we can try to predict where other gains may be from the ‘FALL OUT’ of political momentary advantage – these gains may be even more impressive – but the faltering of our economic order may make it impossible to actually liquidate gains – but perhaps this in itself may also present opportunities – is it possible to map out all the permutations for profit or loss deep into ‘TIME WITH CONSEQUENCES’ in this three dimensional chess?

  9. Harold says:

    Trump doesn’t have any business on a presidential campaign microphone. At best in the White House, a janitor, and that wouldn’t work ’cause he’s got a big mouth! He knows nothing, he’s just got money! I know a lot of people that have got money and no brains.
    He’s one of them!
    Watch his show, bunch of dummies playing kids games.

  10. Ronald E. Baker says:

    The Euro has been around for 15 years now and has gyrated from about $0.85 up to $1.40+. The problem is forecasting its moves when buying stocks with large Euro exposure. At this time, I’d have doubts about even some of the strongest, like Nestle, Novartus, Unilever, Royal Dutch and StatOil, It looks like the Euro is due for a decline vs. the US$ to below par, as cash flows to safety in the USA. That is a big disincentive to invest in these blue chips for the next year. Even Apple has its Euro exposure, tending to hold it back at the moment. Add to this the huge pile of derivatives, credit default swaps held by European Banks and the situation gets too complicated for me to follow. A sudden series of bank insolvencies that no government can fix lies ahead, in my opinion. We are facing a Europe wide Argentine scenario if these huge liabilities blow up, as well they might. So, for now, the US$ is still the best horse in the glue factory; …… for awhile!

  11. Marianne Parlee says:

    Is it possible to get a ten year yearly track record of Money Map, or going back as far as you can go?

  12. Ella Charles says:

    Thank you to crossing my pathway, on my way to growing my currency investment to pay for my 12 grandchildren’s college education, as I retain my health to see each of them walk across the stage.
    You crossed my pathway in 2012 and caused me to believe you could teach me to reach this dream.
    I have made some money in the past, but this is the grand-daddy venture of my life. You have won my confidence the way you are so clear in your instructions. Even at age 72 I believe I can make my dream come true….

    THANK-YOU FOR THE HOPE I GAINED FROM FOLLOWING YOUR PUBLICATIONS. God bless us all…

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