Is Greece a good place to invest these days? Is it a "steal" or a "stay away"?
First, the bad news. The World Economic Forum publishes an annual Global Competitiveness Report ranking 137 countries. This year Greece is at the 87th place, behind even Bhutan (82), Iran (69) and Rwanda (59). The biggest bugaboos are high taxes, a notoriously inefficient government bureaucracy, policy and political instability.
These obstacles have been around for decades; limited access to financing is a more recent negative caused by the ongoing crisis, capital flight and weaker banks. You can see the whole list below.
You get the picture.. a backwater of Europe, populated by corrupt lazy people governed by crooked pols who bleed them dry on taxes (IF they pay, of course). Yup, that's the way Bild et. al would have you see things - it sells papers and pixels.
Is it true? (a)Yes. (b)No. (c)Depends. (d)Doesn't matter. Keep this in mind, I will revisit the question at the end.
On to the positives, then. And there are quite a few.
In summary: Greece offers a large educated workforce available at low wages plus cheap real estate, both at a time when confidence is rebounding and businesses plan to raise capital spending significantly. I believe these are very good reasons to think of Greece as an investment opportunity.
Let's now revisit the thorny issues raised by that embarrassing 87th place on the WEF list. The answers to "Is it true?" were: "Yes". "No". "Depends". "Doesn't matter". Which one did you pick?
Well, don't worry because it was a trick question. All four answers apply. Are you confused yet, is it Greek to you?
By way of explanation, a small story: The most accurate description of Greece is one I got 25 years ago from an American expat lady sitting next to me at a wedding reception (not my own, ha ha): "My dear boy (those were the days...), in Greece you may be happy, get angry or become mad.. but the one thing you will NEVER be, is bored!" It still holds true, bless her soul.
What she meant was that even the most prosaic day to day activities can never be taken for granted in Greece. Very little happens as planned (Greek planning is an oxymoron). I like to put it this way: Greeks believe and act as if it is impossible to easily and successfully accomplish the most trivial of activities (case in point: the recent disaster in issuing electronic metro passes).
Therein lies opportunity: Greece's glaring defects can be exploited by smart professionals who will view them as opportunities to profitably apply commonsense solutions. To put it metaphorically, the Greek economic highway is full of potholes just begging to be filled.
It doesn't take a rocket scientist, or much capital, to fill the simple "potholes" of the Greek economy.
I'll give you an example: a friend with zero trading experience within two years became one of the largest exporters/intermediaries between organic Greek farmers and German food wholesalers. When she asked her German clients why they chose her over larger, more established Greek competitors the answer was: "You answered our emails and phone calls". Duh!
Here's another example: Taxi Beat was founded in Greece; it became immediately successful, branched out globally and was eventually sold to a subsidiary of Mercedes Benz for 43 million euro. Why? Because the taxi business was so inefficient and unprofessional that it created a host of problems for Greek taxi users. Ergo, solution begat profits.
Here's another: the pharmaceutical business was notoriously corrupt. Doctors wrote thousands of bogus prescriptions to be filled by private pharmacies at high fixed profit margins, sharing the proceeds with the pharmacists. Ninety percent of all drug spending was covered by the state health system - until it went bust, that is, and had to cut spending sharply. What did it do? Among other things, it mandated that cheaper generic drugs were obligatory, if available. A shrewd Greek drug manufacturer who focused almost entirely on the generic market saw business rise sharply. The company was acquired for $562 million by a major global drug company.
See my point? Greece has LOTS of such problems begging for solutions. Step outside the World Economic Forum box and look for the opportunities inherent in that embarrassing 87th place.
Bottom Line: Greece is cheap and has lots of potholes. Roll up your sleeves, get your spade and bucket and get ready to shovel!
First, the bad news. The World Economic Forum publishes an annual Global Competitiveness Report ranking 137 countries. This year Greece is at the 87th place, behind even Bhutan (82), Iran (69) and Rwanda (59). The biggest bugaboos are high taxes, a notoriously inefficient government bureaucracy, policy and political instability.
These obstacles have been around for decades; limited access to financing is a more recent negative caused by the ongoing crisis, capital flight and weaker banks. You can see the whole list below.
Is it true? (a)Yes. (b)No. (c)Depends. (d)Doesn't matter. Keep this in mind, I will revisit the question at the end.
On to the positives, then. And there are quite a few.
- Workforce. You may be surprised to learn that nearly 100% of young Greeks now enroll in tertiary education - far more than, say, Switzerland or the UK (the EU average is 71%). Note how recent this development is: the enrollment ratio started shooting up in 2000, meaning that Greece has a lot of highly educated young people. With youth unemployment running over 40%, most of them are without a job or severely underemployed.
- Wages. Total labor costs are now at half the eurozone average.
- Real Estate. Prices for homes are down 42%, shops down 38%, office space down 35%. Rents for shops and offices are lower by 50% and 30% respectively.
- Business Confidence. The Economic Sentiment Index is bouncing back after the 2015 snafu and is now above the 10-year average (Greece is in green, its average the dotted line, EU and eurozone in blue and red).
- Capital Investment Plans. Greek businesses intent to increase investment 19% during 2017. If it happens, Greece will swing from #22 on the list in 2016 to #4 in 2017. The EU average is +4%.
- Bond Market. There is a marked improvement in the Greek Government Bond market since the beginning of the year, reflecting increasing confidence by the more sophisticated fixed-income investors.
In summary: Greece offers a large educated workforce available at low wages plus cheap real estate, both at a time when confidence is rebounding and businesses plan to raise capital spending significantly. I believe these are very good reasons to think of Greece as an investment opportunity.
Let's now revisit the thorny issues raised by that embarrassing 87th place on the WEF list. The answers to "Is it true?" were: "Yes". "No". "Depends". "Doesn't matter". Which one did you pick?
Well, don't worry because it was a trick question. All four answers apply. Are you confused yet, is it Greek to you?
By way of explanation, a small story: The most accurate description of Greece is one I got 25 years ago from an American expat lady sitting next to me at a wedding reception (not my own, ha ha): "My dear boy (those were the days...), in Greece you may be happy, get angry or become mad.. but the one thing you will NEVER be, is bored!" It still holds true, bless her soul.
What she meant was that even the most prosaic day to day activities can never be taken for granted in Greece. Very little happens as planned (Greek planning is an oxymoron). I like to put it this way: Greeks believe and act as if it is impossible to easily and successfully accomplish the most trivial of activities (case in point: the recent disaster in issuing electronic metro passes).
Therein lies opportunity: Greece's glaring defects can be exploited by smart professionals who will view them as opportunities to profitably apply commonsense solutions. To put it metaphorically, the Greek economic highway is full of potholes just begging to be filled.
It doesn't take a rocket scientist, or much capital, to fill the simple "potholes" of the Greek economy.
I'll give you an example: a friend with zero trading experience within two years became one of the largest exporters/intermediaries between organic Greek farmers and German food wholesalers. When she asked her German clients why they chose her over larger, more established Greek competitors the answer was: "You answered our emails and phone calls". Duh!
Here's another example: Taxi Beat was founded in Greece; it became immediately successful, branched out globally and was eventually sold to a subsidiary of Mercedes Benz for 43 million euro. Why? Because the taxi business was so inefficient and unprofessional that it created a host of problems for Greek taxi users. Ergo, solution begat profits.
Here's another: the pharmaceutical business was notoriously corrupt. Doctors wrote thousands of bogus prescriptions to be filled by private pharmacies at high fixed profit margins, sharing the proceeds with the pharmacists. Ninety percent of all drug spending was covered by the state health system - until it went bust, that is, and had to cut spending sharply. What did it do? Among other things, it mandated that cheaper generic drugs were obligatory, if available. A shrewd Greek drug manufacturer who focused almost entirely on the generic market saw business rise sharply. The company was acquired for $562 million by a major global drug company.
See my point? Greece has LOTS of such problems begging for solutions. Step outside the World Economic Forum box and look for the opportunities inherent in that embarrassing 87th place.
Bottom Line: Greece is cheap and has lots of potholes. Roll up your sleeves, get your spade and bucket and get ready to shovel!
Observations
ReplyDeleteWages going down is clearly showing massive problems still exist.
Education - more debt to fund it.
The Irish solution. The brightest will emigrate.
Now look at your problem list.
Real estate. Prices down, rents down. Hmmm, that's a massive problem for those with mortgages and their lenders, the banks. It's a doubled edged sword.
Therein lies opportunity: Greece's glaring defects can be exploited by smart professionals
Defects. Exploited. So who losses?
I'll give you an example: a friend with zero trading experience within two years became one of the largest exporters/intermediaries between organic Greek farmers and German food wholesalers. When she asked her German clients why they chose her over larger, more established Greek competitors the answer was: "You answered our emails and phone calls". Duh!
Hmm, doesn't say much about the rest of Greek business. How is your supply chain going to work?
Here's another example: Taxi Beat was founded in Greece; it became immediately successful, branched out globally and was eventually sold to a subsidiary of Mercedes Benz for 43 million euro. Why? Because the taxi business was so inefficient and unprofessional that it created a host of problems for Greek taxi users.
Regulated business of rent seekers. Just like Uber, so you'll find the rent seekers and the state looking to exploit a new source of cash
Drugs. Caused by the state
When pretty much every road leads to Rome, and its shit, Rome is the problem.
In the case of Greece its the Greek state and the Greek state's debts.
But no doubt, Greece will carry on funding the military.
Unquestionably the Greek State created a bunch of problems and it compounded them by going on a debt binge. All that is past history, however, as Greece is now going in the other direction with massive primary surpluses.
ReplyDeleteAnd yes, the State needs massive restructuring to become smaller and more efficient. It's going there, kicking and screaming all the way, but it is going.. want it or not - the EU/Troika are forcing it in that direction.
As for the rest... education, wages, real estate, etc. ... it's all about timing. Prices are down massively, so are wages and the young workforce is well-educated. That's opportunity, the flip side of crisis, of course :)