Penn Wealth Publishing

2019.09.15 Penn Wealth Report Vol 7 Issue 04

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15 Sep 2019 penn wealth Report volume 7 iSSue 04 7 Penn Wealth Report Copyright 2019. All Rights Reserved. tactical Awareness W hen Alexis Tsipras was swept into power on a wave of Greek nationalism back in 2015, the sky seemed the limit for the ener- getic, 41-year-old socialist. Greeks, tired of being dictated to by the Northern European countries which led the EU, gave France and Germany the ultimate poke-in-the-eye: they put the left wing Syriza party in charge; a party that prom- ised to wrest back control from Brussels, or jettison the Union altogether via a "Grexit" referendum. e insurmountable challenge to this plan, of course, was the nearly €300 bil- lion of bailout money sent to Greece courtesy of its European neighbors. at kind of money doesn't come without a lot of strings attached. e great irony of this episode lies in the fact that a party built upon a platform of handing out goodies to the citizenry suddenly had to rein in fiscal spending. Tsipras ran on grand promises of wrest- ing back control of the country, but ultimately realized that certain austerity measures forced by the creditor nations simply had to be followed. Considering those diametrically opposed forces, it is amazing he was able to hang onto power as long as he did. Despite doling out a flurry of monetary goodies in his waning months as prime minister, the die had been cast. Return of a Greek dynasty. In a snap election held this summer, Greece's opposition New Democracy party regained power, and by all accounts it was a landslide. e new prime minister, Kyriakos Mitsotakis, is no polit- ical newcomer. His father, Konstantinos Mitsotakis, was prime minister of Greece in the early '90s, while his sister has been both the mayor of Athens and the coun- try's foreign minister. His nephew was elected mayor of Athens this year. Most importantly for the prime minister, his New Democracy party now controls 158 of the 300 seats in the Hellenic Parliament, giving the movement an enor- mous advantage in shaping the political and economic landscape of the country for years to come. So where will the party take the coun- try? e tremendously good news is that, unlike under Tsipras's government, Greece is now out from under the heavy hand of Brussels and the austerity hammer the EU wielded. After running budget deficits as far back as the eye could see, the govern- ment now has a budget surplus. In a televised address to the nation, Mitsotakis told his citizens that he is committed to fewer taxes (he wants the corporate tax rate cut from 29% to 20%), more investments, faster job growth, and higher wages. He also appears poised to jump start a number of infrastructure plans which had been put on hold or abandoned under Syriza rule, such as port and airport renovations. Greek investment opportunities. e best way to bet on the resurgence of the Greek economy is through the Global X MSCI Greece ETF, symbol GREK. Over a five-year timeframe, GREK is down 56.25%, but it has been surging so far this year. With a current price of $9.34, the fund holds 32 companies with an average market cap of just $1.7 billion and a P/E ratio of 18. While Greek gov- ernment bonds are up about 20% this year, there is currently no Greek bond ETF or mutual fund. While we urge cau- tion (the beta on GREK is 1.5), Greece appears to be on the road to recovery. Greek unemployment is down, the GDP is expanding, and consumer confidence is up. Will the Greek Election Results Change Anything? Global Strategy: Europe It is sad to say, but the leader who must undertake belt-tightening—especially in leftist countries—has little chance of leading for long. Such was the case for Alexis Tsipras.

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