Let’s get PrOGRessive SPIRIT! (Finally a positive acronym.) We are either destined for destruction preferring to wallow in negativity or instead can soar with optimism. The only difference between the two is perspective. Time to focus on the positives in the world. I choose optimism.
Portugal, Greece, Spain, Ireland and Italy had financial difficulties spending more than could be supported by tax revenues. This was blatantly obvious during the global recession of 2008 and the painful but necessary fiscal adjustment that followed.
Nine Years later, this period of adjustment that left confidence and economic growth levels low concluded last Friday. Greece agreed to a political solution to conclude their third memorandum or bailout. All that is left is for the technical issues to be concluded. This is a historic moment that closes a dark chapter and ushers in a new age of disciplined prosperity.
Today, German Finance Minister Wolfgang Schaeuble said there will be no fourth memorandum and the aim of the current program is to allow Greece to once again tap the markets for financing needs. Now work begins to foster even stronger growth levels than expected by reducing the government’s debt burden in the medium term.
The consequences of pessimism and negative news headlines over almost a decade has left the PrOGRessive SPIRIT countries’ equity markets at deep discounts and presents some seldom seen opportunities. Companies are trading at fractions of book value as if a massive currency devaluation or a new great recession is imminent. Neither are on the horizon. And now that Greece’s heavy government debt load is being addressed, capital controls soon lifted and Greek bonds inclusion into the ECB’s QE program soon to be concluded, the upswing should be long lasting.
European markets should be flying and celebrating but victory horns haven’t been heard. Unemployment is trending down as GDP is going up. Bank balance sheets are being restored and confidence is returning to both public and private sectors. Interest rates have never been lower fanning the flames of a strong recovery. There is so much positive news and reasons for optimism. But the public, which has been so conditioned to tune out the good and focus on the bad, appears to be tone deaf.
Greece’s current government is partly culpable for conditioning the public to focus on the negatives. Greece’s Prime Minister Alex Tsipras has pursued policies of a hopeless romantic over the last 2 years. His heart appears to be in the right place trying to help those less fortunate and most in need. However, by pursuing policies that had no chances of being accepted, he delayed the much needed economic rebound. Instead, Greece was left with additional billions lost in financial markets and much lower GDP growth. Finally accepting the bitter pill that needs to be swallowed, he has turned the corner and agreed to policies that will foster solid economic growth far into the future.
Yes, with Tspiras agreeing to bailout conditions last Friday, he set the stage for a dramatic shift in sentiment and growth trajectory for Greece and the rest of the EU. The long protracted sovereign crisis is over. These European markets have been overlooked and avoided for such a long time, they now represent some of the most compelling stories. Let’s roll up our sleeves, accept the progress and do the homework necessary to capitalize on these recent events. It’s time to shed the cloak of pessimism we’ve been programmed to wear and put on our capes of optimism.
by Michael Carino, 4/12/17
Michael Carino is the CEO of Greenwich Endeavors, a financial service firm, and has been a fund manager and owner for more than 20 years. He is optimistically invested in Greek equities.