The diagram above was recently depicted in a letter written by David Einhorn of Greenlight Capital.
On the eve of Greece’s parliamentary vote to approve a new bailout deal, this simplistic and beautiful diagram is extremely relevant. Everyone expects the bailout package will inevitably be approved but no rational minded individual would deem the crisis resolved. These bailout packages are not designed for Greece to fix their fiscal problems, they prolong and aggravate them. To make creditors whole Greece would have to grow their way out of debt, and judging by the health of their private sector, this is a hopeless scenario.
Eventually there will be an orderly default, and a Eurozone minus Greece will be a lot stronger.
I am very paranoid the market will correct itself soon. The cover of Barron’s this weekend, “DOW 15,000” certainly supports that theory. As a general rule of thumb, never trust anything on a Barron’s cover.
Going into this week, my portfolio is ~60% long.
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