In Greek mythology, Plutus is the god of wealth. He was blinded by Zeus so he could dispense his gifts without prejudice. He is also lame, so he is slow in coming, and winged, so he is quick to leave.
Plutus came to Greece in the early 2000s and left abruptly a few years later.
In fact, Greece was the poster child for the 2008 recession. It was crushed by a debt crisis and a series of poor governments. In its worst year, the economy fell by 6.9%. Industrial output fell 28%, and 110,000 companies went bankrupt. Unemployment hit 23%, 20,000 people were homeless, and depression, suicide, and prostitution surged.
The stock market fell 85%.
Times were bad, but as Heraclitus points out, change is the only constant. Times are getting better.
In fact, Greece’s gross domestic product grew by 1.9% in 2018, the fastest pace since before the economic crisis. This is on top of the 1.5% growth seen in 2017. The outlook for 2020 is 2.0% growth.
Greece Is Now a Buy
The catalyst is the center-right New Democracy Party, which won a landslide victory on Sunday, putting Kyriakos Mitsotakis in charge. Greece has rejected both the leftist Alexis Tsipras, who almost ruined the country in 2015, and the neo-Nazi Golden Dawn Party.
Mitsotakis has promised to cut corporate taxes, unblock privatization, deliver a digital transformation of the economy, attract investment, and bring efficiency to the public sector.
Now, don’t get me wrong; Greece has been an economic mess for a long time. It took a lot of austerity, reform, and suffering to get to this point, but it is now heading in the right direction.
Recently, Greece has repaid its crisis-era funding. Private sector deposits grew 8% over the past four years. Cost of capital is going down. Lending capacity is going up. Bad debts, while still at a high of 45%, have dropped 21% since the peak.
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What makes Greece a good contrarian buy is not only the reforms but also that it is cheap. The Greek stock market is bouncing off historical lows. Greek stocks haven’t been this cheap since the 1980s.
The downtrend is broken, and three bottoms have been put in, setting a support line. If you want to buy, the MSCI Greece ETF (NYSE: GREK) fits the bill.
I Own It
In my newsletter, Christian DeHaemer’s Bull and Bust Report, I recommended GREK. It has been the best-performing ETF in 2019 and is up 43% year to date. It also pays a nice 2.16% dividend.
All the best,
Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
