"You're going where to do what?"
Call me crazy, but I'm in Greece with two fellow Fools for some on-the-ground financial research. We expect to uncover a few solid, actionable investment ideas before we leave. But like our families, you might be wondering why we'd fly all the way to Athens -- a city paralyzed by strikes and violent protests -- to search for investment ideas in an economy on the brink of crisis. There is a method to our madness, though.
The right time to buy?
As the great investor Sir John Templeton said, "The time of maximum pessimism is the best time to buy" -- and we think the unhappy situation here is giving smart investors an opportunity to profit.
Is it really that bad in Greece? We think so. The country is wildly out of compliance with its eurozone financial requirements, and even though the government created an austerity plan to improve its financial footing, the plan faces two huge hurdles: (1) The Greek citizens really dislike it -- to the point of rioting, and (2) it assumes Greece will be able to borrow money at a 4.7% interest rate.
Although clearing the first hurdle would simply take more political backbone, the idea of overcoming the second is laughable. That's because the country's most recent $6.8 billion bond sale offered investors a 6.35% interest rate -- well above the rate Greece is currently budgeting for. Yet the country still needs to raise $30 billion by the end of May to avoid defaulting on its next round of debt. Do you really expect investors to bail out Greece for almost 2 percentage points less of interest? We don't.
All of this is to say that Greece's austerity plan isn't the slam-dunk solution E.U. representatives want us to think it is.
Where the dominoes fall
What happens when the world comes to terms with this is anybody's guess. Someone somewhere will have to buy Greek debt well below market rates, bailing out an original member of the E.U. -- an organization that was supposed to create the largest, most diverse, most stable economy in the world. The logical candidate is Germany, the E.U.'s largest economy and the one that has the most to lose if the eurozone goes haywire.
But Germany's not interested.
Greece's next-best option is the International Monetary Fund, an organization that helped the shattered European economies after World War II and has aided the failing former Soviet states. If the IMF has to step in, we suspect the E.U. will lose credibility around the world -- and the euro could be crushed in the process.
And that's just one scenario. Plenty more could happen as this crisis unfolds.
This is why we're here
Whatever happens in Greece, we think it will influence stock and bond investors, currency markets, and global economic affairs for years to come. That's why we're here, and we look forward to sharing what we learn with you though these email dispatches and a special website created just for this trip. Visit FoolGreece2010.com for all of our commentary, photos, and videos published in real time. Learn what we learn and begin to form your own conclusions about the situation in Greece. As always, we'll create a special report at the end of the trip detailing our top investment ideas based on what we found.
Whether you're a Global Gains member, are just joining us for our trip to Greece, or have traveled with us before to China, India, and Latin America, we hope you will enjoy the trip website. Never before have we reported on a trip with such immediacy, and we hope you find FoolGreece2010.com interesting, illuminating, and helpful.
So head to the site, bookmark it, and keep coming back for fresh commentary, photos, and videos. You'll definitely want to stop by on Thursday, March 25 -- that's Greek Independence Day. We expect thousands of citizens to protest the government's recent actions in Athens, and you can expect lively coverage from us.
Foolish best wishes from Greece,
Tim Hanson is co-advisor of Motley Fool Global Gains and has traveled extensively in Europe, Asia, and Latin America — though never before to Greece. Fortunately, he has experience dodging protests (working and living in Washington, D.C., is good training) and is overjoyed that a weakened euro has strengthened his olive-buying power at the Athens Central Market. The Fool has a disclosure policy.