Dear Fools,

Maybe we had it wrong. We came to Athens in search of shorting ideas -- based on what we'd read in the U.S. media and the numbers we'd seen, it didn't look as if Greece had many outs to its economic and financial problems. Germany wanted no part of a solution, and the E.U. wouldn't let the IMF step in. Even if Greece sold any additional debt, the interest rate it would get on it wouldn't be enough to placate the other countries using the euro.

The doomsday scenario was that Greece would be forced out of the euro zone, the country's cost of borrowing would skyrocket, and investors in Greek stocks would be wiped out.

This might not be doomsday
But the story has more layers than the U.S. media have been reporting. And in this level of detail, we're beginning to find investment opportunities, thanks to some keen insights from our new friends at Proton Bank and the Investment Bank of Greece.

Of course, if you've been following along at FoolGreece2010.com, you already know about our change of tune. Within a mere 24 hours, we went from Nate "the Snake" Weisshaar predicting a major currency devaluation (and all it entails) to Joe Magyer saying he thinks Greece's debt-reduction efforts are more likely to succeed than fail. Our analysis is evolving as we're getting information that we just couldn't get sitting at our desks at Fool HQ.

Take this observation from a broker at Proton Bank: The company's customer mix is changing. Large mutual funds with investment committees aren't taking his calls anymore -- but he's suddenly become very popular with the hedge fund and private-equity crowd. Let's consider why.

They'd better look good
There's a well-known phenomenon in the mutual fund industry called "window dressing." This occurs when fund managers sell the stocks they don't think investors want to see them holding and buy the stocks they do. So Greece, a country whose financial crisis has been in the news almost every day for two months, has become unpopular with mutual fund managers.

But for better or worse, hedge funds and private equity don't have to disclose their holdings -- so those managers don't have to care what their investors think about their holdings. And what we're hearing, though we have to verify it, is that Greece has become very popular among this savvy group of investors.

For more on why a Greek recovery could be in the cards, check out Nate "the Snake" Weisshaar's column from yesterday, "Greece and the Euro: Down but Not Out."

Our next steps
I emphasize could because there are still so many moving parts. No matter what happens, the Greek economy will probably contract or show no growth over the next one to two years as the government's austerity measures -- tax increases and public sector pay cuts -- reduce consumer spending. We also don't know what kind of debt relief Greece might receive, though recent rumblings have it coming from a European-led consortium, with the IMF playing a small role to provide political cover for German Chancellor Angela Merkel.

Finally and most importantly, we need to determine the size of the problem here. We've heard from multiple sources that Greece's black market, or shadow economy, accounts for 25% to 50% of all economic activity here. That's huge! We've met taxi drivers, olive merchants, and even restaurant workers who haven't given us receipts for our purchases -- a problem that reportedly extends to white-class professionals such as doctors and lawyers. Incredibly, according to the Investment Bank of Greece, 95% of Greek taxpayers declare less than $40,000 in income.

One line of thinking here is that if the government can figure out how to tax the tax evaders (and it's trying to implement an incentive system for receipts), Greece's tax revenue would jump significantly, easing its budget woes. If it works, this would be a relatively painless improvement for the country -- and one that could cause the world to reassess its opinion of Greece.

That's what we're already doing, so stay tuned to FoolGreece2010.com to learn more as we do.

Tim Hanson

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.