Greece has got bills, they're multiplying, and the market's losing control.
There are times in a crisis when you just want to know the worst. Even bad news is better than the agony of not knowing. If you are suffering from a mystery illness, an accurate diagnosis can be a relief… even if the prognosis isn't good. You know where you stand and can then start dealing with it.
Don't you get that feeling about Greece?
The EU has squandered billions on quack bailouts and snake-oil aid packages, but all it has done is delay the inevitable. Greece is never going to clear its debts, which total 160% of GDP, while the country remains locked into the eurozone. What Greece needs is a spiky dose of that favourite double action cure-all: default and devaluation.
EU bosses won't allow that, at least, not until they have bought enough time for French and German banks to untangle themselves from this Greek tragedy. Which is bad news for EU taxpayers and investors everywhere.
The drugs don't work
The European sovereign debt crisis has cast a shadow over global stock markets for the past 18 months. Markets have soared on the back of each new bailout package, then crashed back to earth when reality set in. The bailout drugs don't work, yet we still go on pretending.
The soar-slump cycle is getting tighter. On Thursday, we had the panic. On Friday morning, the rebound. Expect more volatility when the Greek parliament votes on the latest austerity plan. If the proposal is rejected, the Greeks don't get the latest slug of the €110b aid package… and run out of money. In mid-July.
So what does this mean for British investors?
The C-word -- contagion
Given the disproportionate size of the UK's financial services industry, we are highly vulnerable to another banking crisis.
True, British banks appear to be in less danger than German and French banks and their subsidiaries, because they have much less exposure to Greek government bonds and business debt.
But markets aren't taking any chances. I thought I was clever buying Barclays (LSE: BARC) when its shares dipped to 290p in January, especially when they quickly zipped up to around 330p. They now stand at 246p.
I nearly broke even on Lloyds Banking (LSE: LLOY) when its shares hit 70p during February… now I'm deeply in the red at 46p.
Last year, Aviva (LSE: AV.) admitted it had £900m exposure to government bonds in the eurozone, of which £150m was Greek debt. Its share price gets bruised every time a Greek rioter throws another stone.
So does my portfolio.
The worm turns
David Cameron may have commendably wriggled out of the Greek bailout package. But any eurozone meltdown would still be disastrous for the UK, because half of our exports go to Europe. Things could turn really nasty if contagion spreads to Portugal, Spain, Italy and Ireland. UK banks have plenty of exposure to Ireland.
This isn't just a European problem. Nobody knows how much exposure American banks and insurers have to Greece, but some have put it at above $100b. No wonder people are talking about Lehman II.
Cash or trash?
The FTSE 100 is a global index, stretching far beyond the eurozone, and its growing exposure to emerging markets may give investors some much-needed protection.
Some sectors will also perform better than others. Neil Woodford at Invesco-Perpetual has been ahead of the game by piling into defensives, notably pharmaceuticals AstraZeneca (LSE: AZN) and GlaxoSmithKline (LSE: GSK), and cigarette giants British American Tobacco (LSE: BATS) and Imperial Tobacco (LSE: IMT).
You may look at other defensive sectors, such as food or drink. Or high yielding, cash-generative stocks such as Vodafone (LSE: VOD), retail powerhouses such as Tesco (LSE: TSCO), bankable Swiss healthcare giants such as Novartis and Roche, utility stocks (anyone for the hugely unloved Drax (LSE: DRX)?), and even luxury brands, much sought after in the wealthy East.
There may also be buying opportunities for the brave, in another dash for trashy banks. Perhaps Prabhat Sakya will finally get his Lloyd's buying opportunity.
Will the pound finally rebound?
If you were hoping the eurozone crisis would bolster sterling, you will have been disappointed so far. The pound has repeatedly failed to rebound against the euro, even though the bond markets appear impressed by George Osborne's attempts to grapple with the deficit. I guess we can blame German manufacturing strength for that.
I've spent too long waiting for the pound to recover to expect anything to happen now. Especially with the Bank of England talking up another bout of quantitative easing. If you disagree, you might want to think about reducing your exposure to the euro.
Beware Greeks demanding gifts
If Greek MPs do agree to another €28bn of spending cuts and further privatisations, we can probably expect another stock market rebound. Another dip will no doubt follow, and in short order, because the Greek prime minister, George Papandreou, has to start his draconian programme on 3 July -- in the teeth of a dreadful recession, mutinous trade unions and furious rioters.
I don't fancy his job.
If MPs don't pass the package, we will just get the dip.
Greece will default -- it is only a matter of time. You know it. Germany knows it. The Greeks know it. Pimco knows it. Stock markets are likely to remain troubled until it happens and the mess is finally cleared up. That could take a while.
Never mind. If we weren't worrying about Greece, we would be paying more attention to the US deficit. Then we might be really panicking.
Disclosure: Harvey owns shares in Aviva, Barclays, GlaxoSmithKline, Lloyds Banking, Tesco and Vodafone. The Motley Fool owns shares in AstraZeneca, GlaxoSmithKline and Tesco.
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