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Is the "Greece Problem" Really an "American Problem?"

Those who think the deficit problems are limited to Greece should listen to managed futures CTA George Tzanetatos, who is said to have predicted the Greek debt crisis in a speech in 2009 to a banking convention in Athens, Greece.

Monday, July 02, 2012

The "Greece" Issue is Really an "American" Issue
By Mark Melin

After several conversations with Chicago-based managed futures CTA George Tzanetatos of Tzanetatos Capital, one is afforded insight into the difficult debt crisis problem.  Mr. Tzanetatos notes he predicted the collapse of the Greek economy and identified worldwide depression risks before it became apparent, announcing his forecast and findings in a presentation in the annual Greek Banking Asset Forum in Athens in May of 2009.  Mr. Tzanetatos has been previously profiled in the Opalesque Futures Intelligence on February 24, 2011 regarding his macro outlook. [http://www.opalesque.com/OFI1214/Manager_Tzanetatos_a_CTA_from_Greece_talks214.html]

"The problems in Greece are not specific to Greece," said the Greek born and now Chicago-based fund manager trading the Global Titan CTA Program, a discretionary global macro diversified managed futures program.  Mr. Tzanetatos is credited with coining the term "volatility clustering" and has delivered conference speeches on the topic as it pertains to long run Kondratieff wave cycle macro economic analysis.

Kondratieff's wave cycle, attributed to the Russian born economist of the same name, theorized  in his book The Major Economic Cycles (1925) that capitalist economies are prone to high performance volatility and long cycles averaging 40 - 50 years.  According to Tzanetatos, the world is in a state of flux and Greece is only part of that flux.  The economic system needs to cleanse itself, it needs a fresh start." 

When Mr. Tzanetatos says "cleanse" it's time to get to the thorny point of the problem.  Does he mean forgive a debt that hangs over the society as interest rates run literally near loan shark levels?

"The Western world has lived the high life, we have become accustomed to entitlement," the founder of CTA Global Titan observed.  "In Greece labor laws make firing someone from a job almost impossible.  Entitlements and bureaucracy dominate the landscape. The laws of nature, the system, are telling us it needs to change.  We have engrained in our heads a social safety net.  We are like an aristocrat who goes poor and is shunned by his 'friends.'  However, 'kicking the can' might need to come to an end." 

While Greece has unique peculiarities, at the core the problem isn't that much different from that of the United States.  "Greece learned about leverage and monetization from the United States," Mr. Tzanetatos noted.  

At this point we might note the US currently running deficit spending to the tune of over $1.5 trillion each year.  [http://www.bloomberg.com/news/2011-03-10/u-s-had-record-222-5-billion-monthly-budget-gap-in-february.html ]  In three to five years seniors will retire in significant numbers, drawing on Social Security benefits that have been spent. [http://www.businessweek.com/magazine/why-the-debt-crisis-is-even-worse-than-you-think-07272011.html] These events could collide with a rise in interest rates.  In other words, on a mathematical basis, the future the US faces is just as precarious as that of Greece.  Dealing with this problem could bring about extended market volatility, potentially triggering significant market price trends at some point.  Solving the problem requires creativity and looking at both investing and financial solutions from a different perspective.

One significant difference between Greece and the US, Mr. Tzanetatos noted, was US entrepreneurship.  "In 10 years I wouldn't be surprised to see the US independent of Middle Eastern oil.  This country has a DNA based on developing new solutions and paradigm shifts.  There is not much of a dependence on a safety net."

In the short term Mr. Tzanetatos noted the need for European banks to bring all their toxic loans on the balance sheet and deal with them.  "The banks are not well capitalized.  This is a systematic issue." 

The longer term is a different story that only those with a desire to understand the reality of the situation might care to address.

While Mr. Tzanetatos work may sound difficult for an investment manager to handle, one might remember that market environments that feature price persistence, price dislocation and price volatility offer opportunities for investments un-hinged to economic strength.



 
This article was published in Opalesque Futures Intelligence.
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