Financial Advisor Sees More Trouble in Greece

Grand Rapids, MI -- (SBWire) -- 05/05/2011 -- Dennis Tubbergen is a financial advisor, advisor to financial advisors, author and radio talk show host. Tubbergen updates his clients and readers of current events by posting on his online blog and writing his financial newsletter, Moving Markets™. One of his recent blogs was a commentary on the economic troubles in Greece.

“Almost one year ago, in May of 2010, I gave my opinion that the Greek financial situation could be the next catalyst for a second leg in a worldwide economic downturn,” Tubbergen reminds us. “At the time, I was commenting on an article published in Bloomberg on April 29, 2010 in which economist Noriel Roubini stated that sovereign debts of countries like Greece, the U.S. and Japan could lead to inflation or government defaults.”

Then came the Greek bailout, followed by financial aid to Ireland and most recently Portugal.

“The Greek bailout of one year ago may not have been enough,” reflects Tubbergen. “According to an article published on Bloomberg on April 16, 2011, in spite of the bailout and extreme cost-cutting measures, the yield on Greek bonds is increasing, indicating that investors sense higher risk on Greek debt.”

Tubbergen went on to say the yield on a two-year Greek bond increased to 18.5%, which tells him that some of the wealthier countries are getting fed up with the prospect of another bailout to the Greeks. He refers to the following excerpt from the Bloomberg article.

“Chancellor Angela Merkel’s deputies are raising what has been a taboo issue for European officials – a restructuring by a euro member – to show its unwillingness to contribute to more bailouts. Holger Schmieding, chief economist at Joh. Berenberg Gossler & Co. in London, said in a phone interview. Germany is the largest contributor to European Union rescue funds, which have been tapped by Ireland, Greece and Portugal.”

Schmieding goes on to say in the article, “If Greece doesn’t get access to markets, the funds will probably run out sometime in 2012. That, I think, is the German message: Don’t count on us to add more money.”

“If Greece defaults on its debt, what might that mean for Europe and for you and your money?” asks Tubbergen. “Greece would be the first euro country to default on its debt, but given the financial condition of many of the other euro countries, it would probably not be the last.”

Tubbergen notes that Portugal, Ireland and Spain are also in economic and financial trouble.

“The European central bank is working hard to prevent a default that could not only lead to other defaults by weaker euro countries, but could also wreak havoc with the worldwide banking system,” notes Tubbergen.

Tubbergen quotes The Financial Mirror as saying on April 13, 2011, “Expectations of a Greek default, negotiated or otherwise, are now growing. The EIU’s baseline forecast is a 42% haircut by 2013, Reuter’s last week cited an academic expecting a haircut of 50% and Standard and Poor’s mentioned a haircut of 50%-70%.”

“A ‘haircut’ or restructuring would mean that investors in Greek debt don’t get paid back according to the terms of the note,” explains Tubbergen. “Investors, recognizing that they were not going to get paid back their entire investment when they were promised, agree instead to getting paid back a lower amount or agree to give Greece more time to pay back the money that is owed.”

According to Tubbergen, this type of partial default would likely have a domino effect, harming governments and banks internationally that owned Greek debt and harming banks that had loaned Greece money.

“That domino effect, should it occur, will have global implications,” concludes Tubbergen.

Dennis Tubbergen has been in the financial industry for over 25 years and has his corporate offices in the USA Wealth Management Building in downtown Grand Rapids, Michigan. Tubbergen is CEO of USA Wealth Management, LLC and has an online blog that can be viewed at http://www.dennistubbergen.com. His weekly talk show The Everything Financial Radio Show is simulcast on two Michigan metro stations and also airs to over 600,000 financial advisors, with recent podcasts available at http://www.everythingfinancialradio.com.

The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee. Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.