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What would we do without the financial experts?

Tired of reading about Greece, Italy, and the problems in Europe? Sorry, that story isn't going away any time soon. But here's a word of encouragement from one Zachary Karabell. His bio says he's president of River Twice Capital, a regular commentator on CNBC, and the coauthor of Superfusion: How China and America Became One Economy and Why the World's Prosperity Depends on It. Sounds like an informed guy. In a recent article, he explains Why Europe Won't Implode:

The assumption in finance land is that Greece will default on its debts, and that will then trigger a financial crisis to rival, if not surpass, what happened three years ago. Mavens such as George Soros have predicted as much. But while the risk is undeniable, it is just that—a risk. It would be foolish to ignore, but as the panic spreads, it is increasingly clear that it is just as foolish to assume that all this is a done deal and that incalculable pain lies ahead. Contrary to what many are now predicting, Europe—reeling though it is—will not implode....

The risk remains that globally, because of Europe, we are on a precipice and will fall. That needs to be factored into any near-term decision about money, business, and economic outlook. But the costs of dissolution are prohibitive, for Europe and for the world. China, Brazil, India, the new creditor nations of the world, have begun the unthinkable conversation about bailing out Europe if Europe will not bail out itself: an unlikely event but indicative of how serious this is. In the end, it is those costs for Germany, for France, and for the entire euro zone that should act as a bulwark against the worst-case scenario.

Naturally, there are those who differ. Here's a contrary opinion offered by Matthew Lynn, chief executive of Strategy Economics, a London-based consultancy and author of Bust: Greece, The Euro and The Sovereign Debt Crisis. Another expert we can call on to settle the matter. Unfortunately, his view (and, it seems, the majority view) is not as sunny as that of Mr. Karabell:

The imminent Greek default is now the only issue that matters to the financial markets. The country is running out of money to pay its bills. It can no longer borrow on the markets. It has missed the deficit-reduction targets in the bailout package, and unless the euro area’s political leaders can come up with a fresh rescue package it will soon have no choice but to renege on it debts.

The only force that can avert catastrophe is that strange double-headed beast known to bond traders as Markozy — the French President Nicolas Sarkozy and the German Chancellor Angela Merkel. Neither shows any signs of getting to grips with the scale of the challenge they face, nor have they done so at any point since this drama started 18 months ago.... Europe is stuck with two incompetent leaders [who] have neither the authority nor the imagination to cope with the scale of the challenge they face.... In reality, the Greek default is going to be ugly.

So, as always, the experts are of little help when it comes to predicting future outcomes. You can't go "all in" or "all out" based on their conflicting opinions (which, in any event, may well change tomorrow). That's why we continually counsel maintaining a steady course and following inside-out thinking when it comes to your investments. As we consistently remind our readers, you want to be a proactive, not a reactive, investor.

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Posted by Austin at 1:31 PM | Comments (0) | TrackBack
Category(s): Current Market Events
Tag(s): current market events, debt crisis, financial experts

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