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Greek Drama and The Average Texan

It has been a popular watercooler topic in the financial industry; what do you think will happen to Greece? What will that mean for us?

Although they are interesting and intellectually challenging questions, my answer is I simply don’t know.

As the ink dries on this article the Greek banks are shutting down, their ATM’s are out of cash and the Greek stock market is closed for at least a week. This is eerily reminiscent of the Great Depression.

At a minimum, this is disconcerting and unfortunate for the Greek people. In addition to a collapse of their financial structure, 25% of their people are unemployed. Once you remove the Greek citizens under age 15 and over age 65 from the equation, you only have 49% of the population working.

Furthermore, their indebtedness-to-GDP is more than 166%. About 75% of their debt is held by big banks around the world. It will be very difficult for Greece to earn or grow their way out of the abyss.

Given that backdrop, I have little clue as to how the Greek drama will play out. Even Zeus would have a hard time saving the nation.

Fortunately, as investors outside of Greece, we don’t have to know what will happen. Throw it in the investment pile of “Too Hard to Figure Out.” The older I get the bigger my pile of “Too Hard to Figure Out” becomes.

Regardless of what the hyperactive traders may insinuate, true investing (as opposed to trading) is a discipline best applied with tremendous patience and diligence.

Warren Buffett has often stated that investing is like a baseball game in which there is no called third strike. As such, you can stand at home plate and watch pitch after pitch—until you get the one you really are comfortable swinging at.

Understanding this, we always attempt to focus on what is important and knowable. I am pretty sure the sun will come up tomorrow, but that is not very important when assessing investments. A major catastrophe could be very important to an investment portfolio, however, the timing of such events is not knowable.

As such, the disciplined investor must analyze investment opportunities with an eye for things that are both knowable and important. 

For instance, if I owned shares in HEB (or the whole company) I’d have a high degree of comfort knowing that people throughout Texas need to buy groceries and supplies for daily living. It would also be important to know that HEB has carved out a competitive niche in the difficult grocery industry. Although this may be a simple analogy, no one said investing had to be difficult. Often, the best decisions are the easiest ones.

Additionally, it is important to have context when assessing your investments. Greece may get a lot of headlines, however, it is a country of only 11 million people. Texas, alone, has just shy of 27 million people and the U.S. has more than 318 million citizens.  Greece’s GDP is about $242 billion whereas the Lone Star state’s GDP is $1.648 trillion. If Texas were an independent nation it would be the 12th largest economy in the world. Greece doesn’t even crack the top 20. The U.S. posted $17.4 trillion in GDP in 2014—70% more than China in the number two slot and 72 times larger than Greece!

If Greece defaults there will certainly be repercussions—especially to the banks that lent them money. There may be repercussions to other economically weak countries in the European Union. There will probably be a ripple effect in the broader financial markets. However, I highly doubt it will change our shopping habits at HEB. 

However, the large levels of Greek debt should remind us that borrowing money does not make you right or wrong—but it significantly magnifies the impact of your decisions. A small downturn can become a big issue if you have borrowed money.

True investing should focus on the important and knowable, while tuning out distractions—no matter how much news coverage they receive.

Finally, buying good quality businesses, at fair prices over a long-term time frame allows the wise investor to weather

short-term storms and turmoil. 

Dave Sather is a Victoria certified financial planner and owner of Sather Financial Group. His column, Money Matters, publishes every other week.

Originally published July 1 2015, Victoria Advocate