After Greece entered the European Union under likely false pretenses about their financial condition, and after the European Union has obsessed for months trying to find an orderly solution to the massive debt issues of Greece, Greek leadership now decides to suddenly be uber-democratic and ask for a referendum.
It goes to show that politics is a never ending game focused on popularity. It's discouraging and ridiculous.
The financial markets are watchingthis play out with many banks (including Morgan Stanley ) eagerly awaiting an orderly resolution to this drama. We operate in a global environment and the sins of one country now spill around the world; contagion risk lives.
After the collapse of MF Globaland the exposure of financial institutions around world to their toxic assets, one would think that Greece leadership would recognize that they are the problem child of the day and should take their medicine. Yes, a democracy does require inclusion in decision-making, but that's what legislators are for. And it's a little late in the game, after all the efforts made, to suddenly have a burst of populist thinking.
This latest news confirms for us that Europe is as dysfunctional as one might imagine, even more dysfunctional than the United States with its political gridlock and rising deficits. It would seem that there is no unity in Europe that can overcome Greece and its problems. I actually feel for Germany and France; they must be feeling like the parent bailing out their problem child, only to be disappointed yet again.
As an institutional manager, we are negative on Europe and have been for 2 years. Of course, stay away from European financials, names like Societe Generale. Avoid European discretionary names that are sold to Europeans. Do not buy the euro; it's a currency that the world will continue to doubt, especially Asian central banks. Don't be misled by strength against the dollar; it's a doubted currency as well.
Buy gold as a hedge against headline drama. And recognize that this crisis has an impact on Asia as well. Problems in Europe impact Asia to be sure; that’s why the Chinese have been attempting to help this distressed customer to avoid fiscal calamity. Their motives are not altruistic but instead pragmatic.
Ratchet down your growth expectations for Asia. We expect China to grow at 7 to 8% not it's historic 12%+ rate. Asian is strong but has it's limitations. And consumption, especially in China, can't make up all of the export shortfall. (See my views on China here)
The best case scenario is that Greece will be one of the countries that will cause Europe to be mired in low growth for years to come. It's no wonder companies like Apple talk about expanding into countries like China and the surrounding region. You don't hear the same passion about Europe; it's obvious to everyone that Europe is broken.
So the next time you start thinking about the United States as a disaster country because of the obvious challenges facing America, do a relative comparison with Europe. You'll likely conclude that while the United States has challenges to tackle, it's no Europe. And thank goodness for that.
Editor's Note: An earlier version of this story misidentified MF Global.
Michael Yoshikami, Ph.D., CFP®, is CEO, Founder and Chairman of YCMNET's Investment Committee at YCMNET Advisors. Michael is a CNBC Contributor and appears regularly on the network. YCMNET is a San Francisco Bay Area-based independent money management firm that provides fee-based wealth management services to institutional investors and individual investors. The firm works with clients around the world. Michael was named by Barron's as one of the Top 100 Independent Financial Advisors for 2009, 2010 and 2011. He oversees all investment and research activities of the firm and is actively engaged on a daily basis in the firm's securities analysis activities and determines the macro tactical asset allocation weightings for client portfolios. He works with YCMNET's investment team in integrating behavioral investing strategies with the firm's core fundamental perspective. Michael holds a Ph.D. in education, other advanced degrees, and holds the Certified Financial Planner® (CFP) designation.