Heyer Capital, LLC

investment management and timely advice from a local CPA (Fox Valley, Wisc.)

Archive for April 2010

Greece is the word

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I remember last Thanksgiving talking with the family back in Iowa about the Greece debt situation. It had just started to bubble to people’s attention, but at that point it wasn’t a “problem.”  It was just a reminder that we weren’t out of the woods yet in terms of unwinding the credit excesses around the world.

Today, finally, the equity markets are acting as if they are tangentially aware of Greece. (In the world of investing, equity takes a hit before creditors.  Therefore if the creditors are nervous, shouldn’t the shareholders be too?)  The rating agencies cut Greece’s sovereign debt to ‘junk’ (below investment grade) and downgraded Portugal. Who’s next?  Spain? Ireland? Italy?  The list goes on…  California? Municipalities?  Pension funds?  Is there a reason Germans are starting to check the serial number prefix on their Euro currency bills before accepting them as a tender?

Action plan:

1) Always invest knowing where the exits are.

2) Understand the Austrian Business Cycle Theory. (Start with Mises.org.)

3) Accept the fact that we’ve been through credit deflations before. They are not cured by new legislation. In fact, meddling always makes them worse and extends and exacerbates the pain.

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Written by heyercapital

April 27, 2010 at 11:04 am