Are there any good buys emerging in Greece?

It may be interesting to look at some of the public companies in the hardest-hit European countries, since the stock indices here are lower than anytime in at least a decade. Here are the results of a search for Greek shares, with an eye towards companies in defensive industries that will not be hurt, or could even benefit from a weaker currency.

All of these businesses are likely to survive a very bad economy, even if they go bankrupt – the question is how the equity holders will fare.

Athex index chart (Athex is now 60% lower than at the 2009 bottom): http://www.bloomberg.com/quote/FTASE:IND/chart

List of top 20 Greek companies by market cap as of May 2010: http://topforeignstocks.com/2010/05/09/the-top-20-greek-companies-by-market-capitalization/

Here are a few names – these first 2 look strongest to me (bottler and utility):

Coca Cola Hellenic Bottling Co:

Biggest foriegn Coke bottler

http://www.bloomberg.com/quote/EEEK:GA/chart

http://en.wikipedia.org/wiki/Coca-Cola_Hellenic

EUR 13.00, EPS 0.93 – not really cheap yet by earnings, 1.62x book. Keep an eye on this one.

Public Power Corp SA , ticker PPC

Biggest utility in Greece. To raise cash, the gov sold 17% of its until then 51% stake.

Plants are mostly coal-fired.

http://www.bloomberg.com/quote/PPC:GA

http://en.wikipedia.org/wiki/Public_Power_Corporation_of_Greece

EUR 5.30, EPS 1.10 – very cheap by earnings, 15% dividend yield.

Hellenic Telecommunications Organization S.A., ticker HTO

http://www.bloomberg.com/quote/HTO:GA

http://en.wikipedia.org/wiki/OTE

3.6% div yield, 15 PE. 1.14x book – not cheap at all, though stock is way down

Boutaris J & Sons Holdings SA , ticker MPK (preferred shares also traded)

6 Greek wineries, one in France, most recognised Greek wine brand

Company website: http://www.boutari.gr/?TEFORz1FTg==

http://www.bloomberg.com/quote/MPK:GA

No earnings data available, but trading at 0.3x book and 0.27x sales.

Attica Group

Largest ferry operator

http://www.bloomberg.com/apps/quote?ticker=ATTICA:GA

http://en.wikipedia.org/wiki/Attica_Group

No earnings data, but 0.12x book

ANEK Lines SA

Ferries

http://www.bloomberg.com/quote/ANEK:GA

http://en.wikipedia.org/wiki/ANEK_Lines

Great little speech at EU: fire the bureaucrats & restore national sovereignty

This is Nigel Farage, a UK delegate to the European Parlaiment, saying that all Europe really needs is free trade and some basic standards for regulation, not the whole mess of regulation and loss of sovereignty offered by Brussels today.  (I totally agree about free trade, but where do you draw the line with labor and environmental regulation – so many of the EU’s silly laws today are in those spheres – better to just say, “Tarriffs, quotas and bans are hereby abolished within the EU. Fin.”).

It seems as though opinion within every EU nation is turning against the institution. This is good, but also dangerous, as it would be a shame to see Europe return to the mess of trade and travel restrictions that existed a few decades ago. The lack of such restrictions was a great contributor to the flourishing of civilization on that continent in the 19th century, and their reinstitution in the early 20th brought war. “When goods don’t gross borders, armies will.” –Frederic Bastiat

Taleb video: credit crunch not black swan, moral hazard now worse

From Bloomberg:

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Some great comments on the OMB (“lying on their forecasts”), Geithner (“who has a mortage on a house not far from mine… who didn’t understand risk and real estate prices”), Summers (“uses wrong mathematics in his papers” and has “systemic arrogance”), and Bernanke (“the one who crashed the plane”).

He has praise for David Cameron, whom he thinks understands how to solve the crisis.

Plenty of fodder for inflationists and bond bears here: Hard assets like metals and agricultural land would be a good way to protect value. Forget the stock market and most real estate.

Does anybody, such as professors, now understand the issues he raises? No. Don’t go to business school, but if you go, don’t take any business class that has equations in it: “it’s all bogus.”

I thought the bailout was supposed to save the Euro.

In government and mainstream media logic, the bailouts are supposed to be good for the euro. With EUR/USD pushing 1.27, it appears that somebody forgot to tell the market that implied guarantees for GIPSI nations to the tune of 100s of billions of new euros should strengthen the value of those in circulation.

Here’s a 10-year view of the spot market, revealing just how much downside there is in this cross. On the other hand, the euro is getting oversold on a short-term basis, with RSI approaching the conditions preceding the short but violent rally in late ’08. It could trend a little while longer, but don’t get caught short without your stops.

TD Ameritrade

Video on Greece w/ Hugh Hendry: Never compromise when it comes to moral hazard.

On Russia Today via Zerohedge:

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Hendry:

–  “This is a bailout of the banking community… especially in France but of course also in Germany.”

–  Questionable whether the French banking system could take the hit, estimated at 35 billion euros.  This would raise questions about their Spanish, Portuguese and Italian bonds. This is not the end, but the “end of the beginning.”

RT:

–  How does this help the Greek people? They will be “paupers in Europe.”

Hendry:

–  There is a remedy. The remedy is that Greece could leave the Euro. If it were to bring back the drachma, the currency would be very, very cheap. This would bolster tourism and exports. London is full of foreign shoppers now that the pound is down 25%.

–  Soveriegn bankruptcy is the normal and healthy procedure. Bankers take the hit they deserve.

–  Great political flaw in the euro, trying to join cultures that don’t want to join. Angela Merkel is not being generous. Spending taxpayers’ money is not generousity. She’s trying to salvage a bankrupt philosophy.

RT:

– Moral hazard issue is not being talked about. This gives a green light to Spain, Portugal, etc to spend away.

Hendry:

– The truth is unpalatable. Giving an over-indebted country more debt is not the solution. We need to restructure the debt and punish the irresponsible banks and investors.

– We should never compromise with bailouts, and certainly not on Greece, which is just 2% of the European economy.

Silly Greeks

Those government workers don’t seem to get it: they’re on the same side as their politicians and the foreign bankers. They should all support the bailout and austerity measures, since this is the only way to keep the racket going a little longer. It’s the taxpayers who should be storming parliament and demanding default (just like in the US, UK, Japan, etc)!

Also, it makes perfect sense for the euro to tank on this news — Europe just tipped its hand that it’s likely to print 100s of billions of euros to bail out all these GIPSI nations.

Greece defaulting would be good for the euro, deflationary — 200B in euro balances would go POOF! Even if all the GIPSIs dropped out of the euro, which they would NOT have to do even if they defaulted, the euro could strengthen. In the end, if everyone but Germany defaulted and dropped out of the eurozone, it would be a hard currency and they could just call it the Deutsche Mark again.

Bill Laggner interview: Greece, GS, derivatives, etc.

Eric King always does a good interview, and Bill Laggner is a hedge fund manager (Bearing Fund, LP) who has been on top of the credit bubble and bust. He comes at things from an Austrian perspective.

Listen here.

Some take-aways:

– People of wealth around the world have lost faith in their respective governments.

– There is a limit to government borrowing, but establishment economists and politicians are very complacent right up to the end.

– Goldman’s swap transactions on Greek debt.

– Good luck getting Greece to go from 14% deficit to 3%.  Mathematically impossible — Greece must default like Argentina did in 2001. They’ll probably leave Eurozone, and this may be best for each of them.

– Portugal, Ireland and Spain face the same issue. Spreads blowing out. Puts heavy pressure on European banks.

– Politicians and talking heads are saying sovereign debt issue is contained, just like they said sub-prime was contained.

– European banks are at least as levered as US banks were two years ago.

– We’re at a juncture where we can print and delay or default and get it over with.

– Some countries may realize they are better off defaulting than taking IMF money and being slaves.

– GS people have been hired by Greek government to advise on bailout.

– Monetary elites like GS face a risk of the structured finance business, their bread and butter, disappearing.

– GS and others don’t produce capital. They speculate and then siphon money from taxpayers when they lose.

– Goldman’s proprietary trading book is highly lucrative, much more so than most other investment banks’. They make money over 90% of the time – how is that possible if it’s all honest?

– Goldman was a credit facility for New Century, one of the worst loan originators in sub-prime. We’ll find out more about their roll in helping build a market for junk mortgages. Possible exposure of fraudulent practices.

– Goldman sold a lot of this mortgage paper on leverage — they provided loans to funds to let them go levered long CDOs.

– Civil litigation will open up Pandora’s Box. Where there illegal activities within Goldman? Possible reputational risk. If they survive, they’ll be a shell of their former self.

– US has the same problems as Europe. US cities and states are just as bankrupt as Greece.

– Local politicians are corrupt and clueless and bankers took advantage of them, as in Jefferson County Alabama.

– Criminal proceedings in Italy against Deutsche Bank should provide insight into possible bribery and fraud related to derivative transactions.

– Expect litigation related to US city and state derivative transactions, as in Jefferson County Alabama.

– Expect increased outrage towards bankers.

– No transparency in US financial system.

– As states and cities go bankrupt, expect them to default on derivative transactions and enter litigation.

– (My own note: what about government employee unions? If you’re looking for an explanation for municipal and state bankruptcies, look there first.)

– US financial reform bill doesn’t solve anything. Still have the moral hazard of too-big-to-fail.

– Geithner is walking moral hazard.

– Amazing rally in risk assets over the last 14 months. Complete about-face in sentiment. New low in bearishness.

– Bill and partner Kevin Duffy are two of the few remaining bears left on the planet.

– VIX is ticking back up, Fed has ended a key lending program, sentiment is too extreme, leading economic indicators are rolling over. Stimulus will wear off like any drug, and there has been nothing done to sustain economy.

– If central banks hit the accelerators on their printing presses to bail out bankrupt governments we could enter a hyperinflationary mode. If we go the route of default, that could be avoided (deflation).

How long until Greece’s Athex index makes new lows?

wsj.com

Video: Public employee of the year awards (SNL)

Mish put this up a few days ago. If you haven’t seen it, it’s a must-watch.
http://www.popmodal.com/nvp/player/nvplayer.swf?config=http://www.popmodal.com/nvp/econfig.php?key=eb054f3ea718f61adfa1

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This version may play better in the US:

http://www.hulu.com/embed/AmuCTb1tvO-5YOc5N-97Mg

This is why your state and local governments are bankrupt, as well as the national governments of Greece, Portugal, Spain, Italy and probably soon France.

Selling munis today is like selling Greek bonds six months ago — the numbers guarantee default. The only question is whether or not there are bailouts, but like with the GIPSI states, there will be a lot of uncertainty leading to higher rates in the interim, and in the end they can’t all be bailed out.

Look at these rates. Considering the risks, that’s a pretty skimpy premium over Treasuries, even considering the tax advantage.

Source: Bloomberg.com

The myth of the evil short-seller lives on

Bloomberg’s Jonathan Weil writes a good column. Here he digs into the falacy often cited by executives of failing companies and politicians that short-sellers are responsible for drops in price:

Still Believing

So I asked a Morgan Stanley spokesman, Mark Lake, this week if the company’s executives still believed what Mack said in September 2008 about short sellers to be true. And if so, based on what evidence? No comment, he said. Mack wouldn’t talk either.

I got the same response at a conference in Phoenix last weekend when I posed similar questions to the SEC’s enforcement- division director, Robert Khuzami, who joined the agency about a year ago from Deutsche Bank AG. How are his staff’s short-seller investigations going? Found anything significant yet? No comment, he said. Cuomo’s office didn’t comment either.

My guess for why they have nothing to say is that the whole thing was a farce to begin with. Yet this same urban legend — that mysterious, unnamed short sellers and speculators somehow are to blame whenever markets plunge — still lives on.

In Greece, Prime Minister George Papandreou has tried to blame his country’s budget crisis on speculators who profited by buying credit-default swaps on Greece’s sovereign debt. Actually, it turns out Greece was shorting itself.

Paulson’s Evidence

One of the largest buyers of such swaps was the state- controlled Hellenic Postbank SA, which made a $47 million profit last year after it sold its $1.2 billion position, the Athens newspaper Kathimerini reported a few days ago. The bank’s former chairman later said Hellenic was just protecting Greek bonds it owns against a possible default, not speculating, though that doesn’t change the economics of the trade.

In his memoir, “On the Brink,” Paulson writes like a true believer. “Short sellers were laying the bank low,” he said, describing Mack’s plight a year and a half ago. “But John and his team weren’t about to go down without a fight.” What facts did Paulson cite in support of the notion that short sellers were harming Morgan Stanley, or that they had the capability to do so? None, of course.

Paulson mentioned only one short seller by name in his book, David Einhorn of Greenlight Capital, who shorted Lehman’s stock and warned other investors that the bank’s books were probably cooked. In that instance, however, Paulson said Einhorn was proven right, a point echoed in the findings of this month’s report by Lehman bankruptcy examiner Anton Valukas. (Paulson’s book didn’t name anyone who had shorted Morgan Stanley.)

Wrong Target

Einhorn also was right when he tried to warn the SEC in 2002 about the accounting practices of a business-development company called Allied Capital Corp. The SEC responded by turning around and investigating him, at Allied’s urging, without any basis for believing he’d done anything improper, as SEC Inspector General David Kotz’s office chronicled in a report released this week. Eventually, the SEC let the company off without any penalty, in spite of what the report called “specific, detailed allegations and evidence of wrongdoing by Allied.”

Here’s another idea for Kotz. How about investigating whether the SEC had any reasonable basis for believing Mack’s short-seller story in September 2008 when it acted on his pleas, and whether Mack had any plausible grounds to believe the story himself? Now there’s a probe that might turn up something.

Read the whole article here.

More here on how CDS traders are being used as a scapegoat for a well-deserved decline in Greek debt.

Manuel Asensio’s Sold Short tells the story of a small hedge fund that sought out frauds to short and was eventually pushed out of the business by high-priced lawyers paid for with cash from pump-and-dumps.