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Greece Problem is really NOT a Big Problem from a Big Picture Perspective

Written by Dennis Ng on .

The financial markets seem to typically "sell first", ask questions later. Yes, Greece is in trouble, (nothing new, we knew this since a few months ago). And yes, maybe even Spain and Portugal might be in trouble.

How would this derail U.S. economic recovery? Below article mentioned that U.S. exports to the WHOLE of Europe only constitutes 2% of U.S. GDP. Thus, from this Big Picture analysis, whatever happens to Greece, Spain and/or Portugal is NOT likely to have a big impact on U.S. economy, and thus unlikely to affect the World significantly.

Since U.S. economy constitutes 24% of the Global Economy, if U.S. is OK, the world will be ok. Despite so much talk about China and India, they currently only contributes to 7% and 2% of the Global economy respectively.


Thinking is really the hardest thing to do, as it appears to me that so few Investors do their own thinking in making investment decisions, but rather let their decisions by affected by sensationalism in News reporting.....reporters like to exaggerate things to make "Interesting and Impactful Newspapers Headlines".

I took the last 2 days' Fear to buy some more CITIGROUP shares instead. Be Greedy when Others are Fearful is easy to say but how many people are able to do it.

Of course, I might be wrong, even if I'm wrong, I'll be financially ok. Since my investment into CITIGROUP only represents 2% of my total investible assets.

Why do I buy more of CITIGROUP shares? Becos the shares are now trading at a discount to Net Asset Value (NAV). While local banks, such as DBS, at S$15 is trading at 136% of Net Asset Value, or premium of 36%. OCBC is trading at 147% of NAV and UOB at 156% of NAV. So which stock is Better Value for Money? Things suddenly become Clearer when one knows What to Look at.

The Good News is we don't have to be Right 100 % of the time to make money in Investing, we only need to be Right 51% of the Time, which is why it is Very Difficult to lose money in Investing and Very Easy to Make Money in Investing, provided you Learn HOW to Invest. If you invest without learning how, you are actually gambling, not investing.

Whatever I teach at my 2-day Secrets to Making Money in Stocks Seminar, is what enabled me to make my first million dollars through investing...and everything I shared are Real and Works, not some theory only.

There are many trainers out there who are FAKE. ie. they did NOT become Rich from the things they are teaching you at the Seminars. I cannot stand such seminars anymore, which is why since last May 2009, I started conducting my own Series of Seminars, to teach what Really Help Make Millions of Dollars for my sifus and for myself, from the strategies I learned from my sifu and I learned and applied in the markets to make Real Money.


Dennis Ng, - When You Master Your Finances, You Master Your Destiny

By Ron Scherer, Staff writer / April 28, 2010
New York
On Tuesday as the news spread that Standard & Poor’s had downgraded the government of Greece’s debt to “junk” status, the US stock market stumbled.

Again, on Wednesday, the market’s gulped as Spain’s debt was downgraded. But by the end of the day, the Dow Jones Industrial Average had shrugged off the news, closed up 53.28 points at 11,045.27.
Other than the stock market, what other affect could Europe’s debt crisis have on the US economy?

At the moment, economists believe the fallout from Athens's or even Madrid’s financial problems may have only a modest impact on Main Street.

• Some US companies that export to Europe may have a harder time competing if the Euro continues to weaken.
• A stronger US currency might cause some German or French tourists to reconsider a trip to New York or Miami.
• US banking regulators will be questioning the largest banks to determine how much they could potentially lose if a European nation somehow defaulted on its debt.

IN PICTURES: The top 10 things Greece can sell to pay off its debt
“At the moment it’s something we need to watch but not fear,” says Nariman Behravesh, chief economist at IHS, Inc., an economic research company in Lexington, Mass. “The US is growing almost three times as fast as Europe and the biggest impact is likely to be as Europe grows slowly, our exports to them grow slowly.”

How big a trading partner is Europe?
The slow growth may come about since economists expect European nations, such as Greece, Portugal, Spain, and Ireland to cut spending and perhaps raise taxes.

“Raising taxes and cutting government spending means relatively weak economic growth,” says Jay Bryson, international economist at Wells Fargo Economics in Charlotte, N.C.

The actual impact of this slower growth and fewer tourists walking around the US will be relatively small but measurable, says Mr. Behravesh. “If we’re growing at 3 percent, it could take a couple of tenths off our growth,” he says.

All US exports represent about 11 percent of US gross domestic product (GDP). Of those, 20 percent go to Europe. So, about 2 percent of the nation’s GDP is involved in exports to Europe.

“Any reduction in exports is not a good thing, but it probably won’t drive the US back into a recession,” says Mr. Bryson.

But, at the same time as some European nations have to tighten their belts, the European Union may have to mount a massive bailout of European banks that own much of the downgraded sovereign debt. Behravesh estimates it could cost as much as €600 billion ($800 billion) to rescue the banks.

The US Troubled Asset Relief Program (TARP), which funneled money into the US banks, cost about $700 billion.

Greek bailout not a sure thing
If the Europeans are going to bailout Greece, a lot of the money will have to come from Germany, where public polls indicate opposition to the rescue. “It’s not a sure thing,” says Bryson. “It may not get done.”
And, as other economists point out, throwing money at Greece might be just the first step.

“The problem, of course, is that if Greece is bailed out, then surely Portugal, Ireland, Spain, and perhaps even Italy may not be too far behind,” writes David Rosenberg, chief economist at Gluskin Sheff, a Canadian wealth management company, in a report.

In the case of Spain, he writes, the amount of debt it has to refinance in the coming year is as large as the Greek economy. “So this is not even a case of being too big to fail as much as being too interconnected globally to default,” he concludes.

Exactly how much Spanish debt is on the books of the US banks is not clear. But Behravesh does not think it presents a major risk to the US banking system.

“There is always the risk to individual banks,” he says. “But it does not present a systemic risk to the US.”