Greece Walks, Money Talks, and Gold Falls?
Kyle is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
“I may be crazy but it keeps me from going insane.” – Waylon Jennings
Leftist candidate for the Greece Prime Minister spot, Alexis Tsipras (see-praas), has been reported to be willing to drive the country out of the Euro with a proposal to reject an international bailout. New Democracy leader Antonis Samaras, was seen on Greek TV (some austerity, huh), claiming Tsipras was looking for friends in low places to align with him in the “…destruction of Greece”, demanding an EU/IMF bailout be rejected in order to achieve a coalition government for the inventors of Democracy. Don’t you love politics?
I know several of you are asking yourselves, “Why am I reading this?” or, “What does this have to do with Apple?” or, “Where can I get good hummus?”
First off, hummus is native to Egypt, just so we can avoid further confusion. Greece apparently pertains to everyone with moody market sentiment, so if it’s a stock, odds are, someone out there is reacting to any Greek tragedies.
Now there are people who act crazy, people who are crazy, and then there are those special folks who happen to be insane. If you invest in a 401K, you are likely to not fall under any of those ranks, simply tucking that portion of your pay into your company’s investment account that is managed with care. Now as a sort of gauge, for those of you scoring at home, I will offer some reference points for acting crazy, being crazy or outright insane, so we might all be on the same page, or chapter, anyway.
In terms of leadership, I would characterize Khrushchev as someone that acted crazy, while Stalin was flat-out insane. Lenin was fairly moderate, Brezhnev was pretty crazy. For you World War II buffs, Mussolini acted crazy, Hirohito was crazy, Hitler and Franco were about as insane as it gets. Sports fans, Dennis Rodman acts crazy, Mike Tyson was crazy, Bill Romanowski, insane. Are we good?
Our friends in Greece aren’t really worthy of a place in the crazy leadership Hall of Fame, but they are definitely taking different paths to the asylum. The thing to remember is that without an administration being formed, elections will likely be held again in a few weeks, and we can repeat this nonsense all for a country that has a debt-to-GDP ratio at 125%. These stories keep getting reincarnated with every pebble thrown in the EU pond and the ripples make it all the way here as if this is “news”.
So if you are uncertain investing in this type of environment, I understand. If you put your hard-earned dollars with a company that has European exposure and executive management hasn’t glanced at a headline in over three years, I would be a tad concerned, as well. It would probably be wise to steer clear of Greek banks, probably Portugal, as well. George Soros wants them out of the EU, maybe he should run for Prime Minister on that platform.
As you are performing your portfolio’s physical exam, if you are uncomfortable with any of your holdings’ exposure to Europe, get out, nobody will fault you for doing so. This isn’t a “Tough Man” contest. If you are at all sensitive to the bloody headlines and screaming heads on the TV, by all means, there is no reason to own a stock you don’t want to own.
Which obviously brings me to shiny metals. Call me crazy, but SPDR Gold Shares (NYSEMKT: GLD), have fallen recently, and anyone interested in playing a “Buffett fade trade” should be careful. The volume spiked to almost 18M the other day, when we enjoyed that uncomfortable early-morning opening and it’s down again recently (as low as $153.60, 5/9/12). Typically trading in line (check your one-year chart comparison), is Barrick Gold Corporation (NYSE: ABX), which I own, and it happens to be up recently (3%). I’m not a financial veterinarian, but I am certain Barrick has worms, because it has been dragging its butt all over my portfolio. After replacing my portfolio’s carpet, once my stock gets upward momentum, lo and behold, the much safer Gold Shares move nicely in tow. Now before everyone starts yelling at me, “DUH, Barrick is a gold miner!” well, they also mine copper, as well as having oil and natural gas interests, listing 26 mines in their portfolio. But the key is momentum, which a one-day uptick is not.
Along those same lines, the iShares Gold Trust (NYSEMKT: IAU), plays the same mirror game with Barrick. This ETF is coming close to its 52-week low of $14.37, and if the miners get off the mat, the metals tend to move accordingly. But my miner could rise sharper while the bullion stays flat, provided everyone runs to our dollar for shelter from the European storm. Wouldn’t that be crazy?
So we do need to portion some of our fiscal peripheral vision across the pond when it pertains to our holdings. If it gets crazy, maybe even a little insane in Europe, keep a close watch on the metals, specifically gold, they may give us some potential buying opportunities if people continue playing paper, which covers rock.
kmet312 owns shares of Barrick Gold (USA). The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.