Is It Time To Worry About Greece?

How I wish we could say that what happens in Greece doesn’t really matter. But we can’t.

It is not because of the dizzying billions that Greece owes to its creditors. Whilst the amount of Greek debt is not exactly peanuts, it is small in comparison to the countless trillions that have been magicked by central banks around the world, thanks to Quantitative Easing.

So if central banks ever want to replace the lost billions from a Greek debt default, they could do so if they wanted.

However the ramifications of a Greek default and a possible exclusion of Greece from the Eurozone could open up endless problems for the world’s second-largest economic zone.

Specifically, it could reveal unwelcome fault-lines for the common currency, namely, the euro, which no one really wants to talk about, yet. We sometimes forget that the euro is only 15 years old. But even though it is relatively new as a currency, it is still the second most widely held reserve currency.

The euro is perceived to be safe because the Eurozone was always viewed as the Hotel California of the financial world – you can check in but you can’t check out.

So until something is resolved about Greece’s debt, markets are likely to be troubled. Germany as one of Greece’s largest creditors could be troubled. The International Monetary Fund could be troubled. The European Central Bank could be troubled.

In fact, anyone holding euros could also be troubled, as a consequence of the uncertainty surrounding the currency. But eventually the mess will get cleared up. It always does. It might take a while, but sooner or later it will get cleared up.

As investors, rather than worrying about things that we can’t control, we should instead focus on the things that we can, which means looking for good companies to invest in.

Some people might call these good companies defensive stocks. But they are more than that – they can be stable income generators for any portfolio.

Ascott Residence Trust (SGX: A68U), for example, has a decent track record of delivering a return on shareholder funds. As a REIT, it also distributes a significant portion of its income in the form of dividends to shareholders. Admittedly, it is exposed to Europe through its properties in France, Germany, Belgium and Spain. But it is also has exposure to Australia and Asia.

International hotelier, Mandarin Oriental (SGX: M04), generates nearly half its revenues from Europe. It has hotels in Madrid, Milan and Munich. But half its revenues come from outside of Europe, too. Over the years, Mandarin Oriental has delivered a high Return on Equity, thanks to above-average Net Income Margins and Asset Turnovers.

Greece and what happens to its debt is evidently worrying markets. But the market always likes to worry about something. If it isn’t about Greece then it could be something else. Right now Greece takes centre stage. Next week it could be the timing of an interest rate rise in the US, the slowdown in China’s economy or problems in the South China Sea.

The market loves to worry. But the time to really worry is when there is nothing to worry about because it means that stock valuations are too high.

A version of this article first appeared in The Independent on Sunday.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.