Analysts Evaluate Grexit Scenarios
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The latest headlines out of Europe warn that the Greeks could drop the Euro, and the odds are it would be a very disruptive event. On the other hand, the Greeks might decide to keep the Euro. If they do stay, there could be plenty of opportunity risk and lost profits for investor who aren't positioned. The following list highlights various analysts' comments on Greece.
What if Greeks Stay
There is a real possibility that the recent stresses in Europe might actually lead to results and firm decisions out of policy makers. If so, RBS analysts think this would translates into buying bonds at distressed levels. Noting the high yields on Spanish and Italian bonds, this would be a good place to bargain hunt.
How Does Greek Exit Affect Oil
Bank of America analyst think that if Greece leaves the Euro, demand for oil will drop by one third, and under a disorderly breakup they expect a huge contraction and prices as low as $60 per barrel.
Greeks Leave in an Orderly Way
If this happens, BofA expects a short, sharp shock to the euro exchange rate. In the short run if the ECB responds decisively they believe risky assets, especially bank stocks and periphery bonds, may be prone to a short squeeze.
What if German and France Break Away?
If Germany and France and other "strong" countries in the EU break away leaving the Greeks and others to fend for themselves, many might assume that there will be an automatic pop in the Euro. Analysts at Citi don't think this will happen, at least not in the short term. Their advice is to stay way from the currency until more clarity is seen.
Disorderly Greek Exit
Given the length of time Greece has been in the headlines, RBS analysts think it is likely Europeans have a plan B in case of a Greek exit. "And if contagion really kicks off then a thinly veiled form of monetary financing of debts may be on the table." The Greek euro exit risks a total of €400 billion from bailouts, but the major risk is if there is capital flight in the periphery. If this happens, no one knows for sure where the dust will settle and it might be a good time to stay on the sidelines.
What if Greeks Stay
There is a real possibility that the recent stresses in Europe might actually lead to results and firm decisions out of policy makers. If so, RBS analysts think this would translates into buying bonds at distressed levels. Noting the high yields on Spanish and Italian bonds, this would be a good place to bargain hunt.
How Does Greek Exit Affect Oil
Bank of America analyst think that if Greece leaves the Euro, demand for oil will drop by one third, and under a disorderly breakup they expect a huge contraction and prices as low as $60 per barrel.
Greeks Leave in an Orderly Way
If this happens, BofA expects a short, sharp shock to the euro exchange rate. In the short run if the ECB responds decisively they believe risky assets, especially bank stocks and periphery bonds, may be prone to a short squeeze.
What if German and France Break Away?
If Germany and France and other "strong" countries in the EU break away leaving the Greeks and others to fend for themselves, many might assume that there will be an automatic pop in the Euro. Analysts at Citi don't think this will happen, at least not in the short term. Their advice is to stay way from the currency until more clarity is seen.
Disorderly Greek Exit
Given the length of time Greece has been in the headlines, RBS analysts think it is likely Europeans have a plan B in case of a Greek exit. "And if contagion really kicks off then a thinly veiled form of monetary financing of debts may be on the table." The Greek euro exit risks a total of €400 billion from bailouts, but the major risk is if there is capital flight in the periphery. If this happens, no one knows for sure where the dust will settle and it might be a good time to stay on the sidelines.
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