It Usually Begins in Greece

It Usually Begins in Greece [¹]

By Chris Weber | 21 October 2007

I've been traveling a great deal and virtually everywhere I go the local stock market is looking very good. The investors in those places, however, are still rather unexcited about the fact that their markets are at or near record highs. They are usually still scared of the huge losses they suffered from 2000 to 2002. So they've been on the sidelines ever since.

The phenomenon (a Greek word) I've seen is perfectly encapsulated in Greece, a country I've been visiting for years. Let me show you what I mean by taking one of the major Greek stock indices, the Athex Bank Index of the Athens Stock Exchange. I like to look at banks because, after all, that's where the money is.

Back in 1996, this index hit a low of 798. But then began the huge run-up in stock prices all over the world. At the peak, on February 11, 2000, this index reached a high of 6,530. From the low of just four years before, the index had soared by 718%: Most of that increase came in the late 1990s.

Well, on a trip there a few months after that high seemingly everyone was in the market. Tour guides would check their stocks several times a day. All wanted to talk about how much they had made, how the market had fallen a bit from the highs, and how this was a good time to buy. In other words, much like other countries.

But the early 2000 highs would deteriorate rapidly over the next couple of years. At the lows of October 10, 2002, the index fell to a low of 1,672. That was a plunge of 74.4%, akin to the Nasdaq.

At the same time, the Dow and all the other major exchanges were putting in their lows. But in Greece during the fall of 2002, people cursed the stock market and swore never again to be in it. Lots of money was lost, as you can well imagine.

But that, of course, would have been the perfect time to buy. Ah, hindsight. From that low of five years ago, the index is now 7,446, and just a bit off of its recent record high of 7,511. So in the past five years, that index rose 349%. It broke out of its 2000 high some time ago, about the time the Dow broke out of its.

Now, 345% rises in the past five years still don't compare to the 700%-plus of the last years of the 1990s, when everyone piled in. Indeed, in percentage terms it is about half as much during these past five years.

But go to Greece today and it is hard to find an "average" person who has much in stocks. It is growing, but there are still many bad memories. Anyway, it is to me a microcosm (more Greek!).

But if that index doubles again, I predict Greeks will be piling in. Just as if the Dow doubles to 28,000, it'll be all any American wants to talk about. And that means the time will be near to sell any stocks we may own.

But if I'm right, all that is still in the future. In the meantime, establish a position that is comfortable for you in any index of your choice. Feel free to choose your own local index, either through an ETF or some other fund that enables you to buy that index. Just remember to have a trailing stop in case.

Which exchange can you buy? Pretty much any of them. Australia is on a tear: It has both the commodity companies as well as the usual companies that are performing very well. An ETF for this country is EWA on the NYSE. I've spoken of the Turkish ETF, the TKF. One month ago, it traded for $19.27. It's now 8% higher.

I've also been to several Eastern European countries recently. Most of them have new and soaring stock exchanges. Slovenia's is up 110% over the last year. Bulgaria's up 90.8%. I'm not rushing to buy these, however. They are too "emerging" for me.

One First World exchange I'm not in a hurry to buy is Ireland. The property boom is in the process of ending, which is putting a damper on the entire exchange. If euro interest rates rise, then Ireland will be hit hard. You could say that Ireland was artificially helped by the low euro a few years ago and would now be hurt by any rise. If Ireland still had its own currency, it would be able to slash interest rates. But being part of the euro, it cannot do this. We may be seeing somewhat of the same thing with Spain.

I myself am happy with my holdings of the five indices I've got ETFs in. We've made very good money in Singapore and India. Our India fund is up over 66% in just over a year, the Singapore up over 62% in that same time.

Also, I'm thankful about the holdings in precious metals and high-yield currency areas. For instance, we've owned the world's largest silver producer since April 2006. It too has soared: up a whopping 67% in just two months and 272% since recommended one and a half years ago. It's still a fine speculation on higher silver prices.

I say all this not to "crow." In fact, quite the opposite: When I see profits like this, my mind turns to trying to find the best way to protect those profits. Even though I am still very bullish on these stock markets, I always want to be able to protect my profits in case I am wrong. This is where trailing stops come handy.

It's all rather heady, considering I think we have much more room to go in both the metals area and the general market indices all over the globe. But I stress with caution... when faced with such excellent news, always keep possible exit strategies in mind.

[ Normxxx Here:  Well, it may be just 1927 after all... And, we all know how well things went in 1928 and early 1929.  ]

Normxxx    
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