Are You Invested in a $13 Trillion House of Cards?

If you own any European stocks, you may be justifiably concerned about the fallout of the Greek debt crisis within the eurozone -- the group of 16 European nations that have adopted the euro as their official currency. Even though the crisis has been brewing openly for several months, there is still no consensus from the European Union on a solution. (There is much hand-wringing over whether or not the International Monetary Fund should lend a hand, for example.) Because governments are dragging their feet, it's all the more imperative that investors get a grip on the situation.

No trifling matter
Investors shouldn't underestimate the significance or the potential consequences of the current European crisis. The International Monetary Fund estimates eurozone GDP will reach $12.7 trillion in 2010, or nearly 15% of global GDP on the basis of purchasing-power parity (not far behind the U.S., at nearly 20%).

U.S. companies are exposed, too
Neither should those who don't own European shares think they are immune to any of the potential consequences of this crisis. The U.S. companies contained in the following table generate more than a quarter of their revenues in Europe; in the case of Newmont Mining (NYSE: NEM), the figure is a whopping 72%! It goes without saying that a wider crisis in which Greece's ailment spreads beyond the Hellenic peninsula (to Spain or Italy, say) could hurt the performance of companies with any significant exposure to Europe.

Source: Capital IQ, a division of Standard & Poor's.

Institutional investors scale back
As national governments and European authorities plod along to find a solution, the lack of visibility is clearly taking its toll on investors' appetite for European shares. In January, when Bank of America Merrill Lynch (a unit of Bank of America (NYSE: BAC)) surveyed institutional investors globally, net 2% were overweight European equities. Fast-forward to this month, and results of the same survey, carried out between March 5-11, show that more than a fifth of asset allocators are now underweight European equities.

More tellingly, 40% of global investors said the outlook for the eurozone was worse than for any other region. The 207 asset managers who participated in the survey represent more than half a trillion dollars of assets under management.

Global investing: risks and opportunity
I firmly believe that individual investors should adopt a global outlook toward asset allocation. At a time when the facilities to invest globally are more than adequate (international mutual funds, direct trading on foreign exchanges, etc.), it doesn't make sense to restrict yourself to your home country -- even if, as is the case of the U.S., that country happens to sport the deepest capital markets in the world.

However, the increased opportunity set that comes with venturing beyond U.S. borders also comes with new risks -- risks that must be monitored and managed. For investors who have made that step (or those who are now considering it), the current European crisis is an event that demands their attention.

If you want to understand this crisis
Motley Fool Global Gains co-advisor Tim Hanson predicted a year ago that the euro would vanish by 2014, and he is standing by that prediction. I'm not that bearish, but while I still think the odds of that outcome are small, it's clear that they have increased dramatically since Tim first made his prediction. In order to dig deeper, Tim and two other Motley Fool analysts, Nate Weisshaar and Joe Magyer, landed in Greece today and are set to speak to business and financial leaders in order to understand the repercussions of the present crisis -- and to develop an appropriate investment strategy.

If you'd like to receive their timely insights concerning what this Greek tragedy means for investors, drop your email into the box below. The first dispatch goes out this afternoon. You'll get all the benefit of their legwork -- without having to argue with Greek taxi drivers to get the job done.