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business newsNational Bank of Greece: "It's All Good"
If Greece were falling apart and a deal were not to happen, someone needs to tell investors in the National Bank of Greece to stop buying.
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-- George Soros
Will Greece default or not? Will the euro remain, or disintegrate? Will Zeus strike down upon the land with his mighty lightening bolt or leave Prime Minister Lucas Papademos alone? Apparently, the National Bank of Greece (NBG) says the answer to all of this is no. Take a look below at the price ratio of the NBG relative to the S&P 500 (IVV). As a reminder, a rising price ratio means the numerator/NBG is outperforming (up more/down less) the denominator/IVV.
I've been tracking the relative performance of the National Bank of Greece as a proxy for risk-taking sentiment in Greek stocks (particularly since its in the financial sector). The stock relative to the S&P 500 peaked out around early November 2009, and has substantially underperformed in a consistent and powerful way since then. This should make sense given the depression-like conditions and financial stress in Greece due to low growth and a high debt load relative to Gross Domestic Product (or GDP).
But, since around January 10, the stock has substantially outperformed even within the broad “risk-on” rally of the Winter Resolution I've been writing about. As a matter of fact, since the low a few weeks ago, the stock is up over 100%. I don't quite understand why investors would push the stock up unless there was anticipation that things would not collapse. If anything, the move seems to suggest there was a significant amount of overreaction on the downside to Greece. Of course those traders/investors in the stock could be wrong, but keep in mind that money is betting based on probabilities and not certainties. The move higher seems to suggest that the probability for something positive to occur is higher than the media makes it out to be. We'll see if the relative performance of the National Bank of Greece was justified very shortly.
This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.
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This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.
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