As talk of Greeceleaving the euro zone intensifies, two money experts offered competing investment strategies.
“I don't believe the Greeks leave the euro. If they did, it would bring the most severe penalty down upon the people of Greece first and foremost,” Stifel Nicolaus market strategist Kevin Caron said Thursday on CNBC’s “The Kudlow Report.”
Yet while Caron thought Greece’s exit from the euro was unlikely, he also imagined that the process could go one of two ways.
“There’s a disorderly way, which the financial markets don’t want to see and the banks don’t want to see, and then there's a more gradual, orderly way, which will take a longer period of time and really require a lot of negotiation and compromise, not only from Athens but also Frankfurt,” he said. “That’s a longer process, and that is something that I think markets could tolerate much more easily.”
Caron’s comments resembled sentiments expressed by St. Louis Federal Reserve Bank President James Bullard earlier this week.
“I’m one that thinks that Greece could exit, and it could be handled in an appropriate way without causing too much damage, either in Europe or in the U.S.," Bullard told Reuters.
The remarks came as European Union officials worked on contingency plans in the event of a Greek departure.
Michael Pento, president of Pento Portfolio Strategies, dismissed the notion that European banks could survive as national economies founder.
“What do banks hold in their assets? They hold sovereign debt,” he said. “So, the countries are insolvent, and the economies are insolvent. Of course the banks are insolvent. That’s massively deflationary, and yes, Greece must leave the euro zone. Absolutely.”
Another concern was deflation.