Are Greek Stocks A Contrarian Buy Right Now?

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Greece: Will The Real Contrarian Please Stand Up?
It might sound CRAZY when I say that Greek stocks could become a good LONG TERM investment soon. However, from a real contrarian point of view, it might not be that crazy.
Here's why — The Greek stock market has lost 93.3% from its top in late 2007 to its recent low. Yes that's correct: 93.3%!

[BigTrends Editor's Note - the author of this article shows some compelling charts, but be sure to read through to the bottom of the piece. If Greece does depart from the Euro currency, defaults on its debts, and/or devalues its currency, the effect on Bonds & Stocks priced in Greek currency could be very dramatic. Currently, there aren't a lot of direct ways in the US to play the Greek market -- the main ETF would be Global X Greece 20 ETF (GREK). Individual stocks are another way, and sectors such as Global Shipping may have a 10% or more Greece component, such as Claymore/Delta Global Shipping ETF (SEA).]
Greek Index Long Term

When we look at the Dow Jones Industrial Average (INDU) (DIA) in 1929, we can see a similar move: From the top in 1929 to the bottom in 1932, the Dow Jones lost 89.48%… So Greece has declined even more than the Dow Jones in the GREAT DEPRESSION!
DJIA Long Term

When we overlay both charts, we see striking similarities between the two indices:
Greek Index vs DJIA 1929 Overlay

So if this pattern holds, we could expect the Greek market to drop another 30% before a MAJOR turn takes place (perhaps a "GREXIT" (referring to a Greek Exit of the Eurozone) combined with a huge devaluation of the new "Drachma"? This would boost Greek exports and could be the beginning of the end of the Greek mess…
Greece's unemployment shot up to 21.9 per cent in March, rising sharply from the 15.7 per cent rate in March 2011 and up from 21.4 per cent in February. So yes, it looks like "Hellas" is going to "Hell"
However, when we have a look at the Unemployment in the US during the Great Depression, we can – again – see striking similarities:
US Great Depression Unemployment

Let's think positive: How much worse can it get than during the Great Depression?!?
Greece is missing $80 Billion in taxes. Is that good news, no. But maybe not the fact that it is MISSING it, but imagine if Greece could suddenly collect all (or part of) these taxes and invest it in the Economy!
Now how "badly" did Greek stocks perform actually? Let's have a look at some ratios:
"Greece" measured in Gold (GLD) shows us that in 1999, people were willing to give 25 ounces of Gold for 1 "Greece" stock. Now they are only willing to give 0.31 ounces for that same stock. Clearly times have changed…
Greek Index vs Gold Ratio

Greece vs the S&P 500 (SPX) (SPY): only 0.37 shares of the SPX needed to buy 1 "Greece" stock, versus an historical average of around 1.5-2 stocks…
Greek Index vs SPX Ratio

Greece vs the MSCI World index (excl. USA): showing a dramatic underperformance:
Greek Index vs World Index (ex-US) Ratio

Now let's have a look at Greece vs the other "PIIGS" (Portugal, Ireland, Italy, Greece, Spain):
Greece vs Spain (EWP): 0.075 "Spain" shares needed to buy 1 "Greece" stock vs an historical average of 0.3 shares…
Greek Index vs Spain Index Ratio

Greece vs Italy (EWI): 50% below the historical average:
Greek Index vs Italy Index Ratio

Now let's have a look at Greece's neighboring country Turkey (TUR) – This looks like a "Penny stock" doesn't it?
Greek Index vs Turkey Index Ratio

Speaking about neighboring countries, please have a look at this stunning chart of Spain vs Portugal – Looks like a lot of money has been made going Long Spain, Short Portugal:
Spain Index vs Portugal Index

One thing is sure, Greece won't "disappear". There will always be people living in Greece. This means that there will always be a Greek Economy. Sure it can change dramatically, and will unlikely be the same as it was 10 years ago, but one day or another Greece will start to grow again.
When that day comes, the Greek market will have rallied by several %. It's always hard to catch a falling knife as you never know where the bottom will be, but one thing is sure: compared to the rest of the world, Greece looks like a nice opportunity to me for contrarians.
There's only one catch here: If you buy stocks now and Greece devaluates its currency (after exiting the Eurozone), you could lose loads of money due to the currency devaluation.
Therefore, I will wait until the moment that that happens. That day, I will buy the HELL out of HELLAS stocks…
I wonder if there will be other "contrarians" (the John Templeton-likes) who will follow me…
Courtesy of Willem Weytjens, www.profitimes.com