TAKING STOCK: Greek bonds: Only for investors with a death wish

Dear Mr. Berko: I've been asked to join a partnership of like-minded people, many of whom live in Central Florida and believe that Greek bonds have significant profit potential because their low market prices are unduly influenced by scare tactics and panic-selling caused by greedy traders and Wall Street banks. I'm also told that legendary international trader George Soros is quietly buying Greek bonds as they continue to fall in price. Two of my friends are very enthusiastic about this opportunity, to the extent that I am considering a large investment. I would like to know what you have to say about the viability of Greek bonds and the Greek economy in the coming three to five years. Your advice would help me make a decision. GD, Cleveland, Ohio Dear GD: I'm not a George Soros fan, but I'm as certain as the divinations of the Oracle at Delphi that George ain't dumb enough to be buying Greek bonds. Frankly, I think your partnership smells like the beginning of a Greek tragedy. In the opinion of folks a lot more knowledgeable than I, there's no hope for Greece - unless it defaults and reissues the drachma. With the exception of food and clothing (Greece's two largest exports), there's little world demand for most Greek products. The Greek auto industry doesn't make a decent car; its computer industry doesn't make a good laptop or server; its electronics industry doesn't make a worthwhile TV set or cell phone. The Greek software industry doesn't produce any programs that are in demand by IBM, Apple, Intel or large U.S. manufacturers; its entertainment business doesn't produce exportable music, movies or games; its universities don't export brilliance or innovative ideas. The Greek fashion industry doesn't export designer apparel; its health care system doesn't export new prescriptives or design medical devices. Greece doesn't export fertilizers, machinery, precision-made products, tractors or combines, and the Greek scientific community hasn't produced any remarkable discoveries. Greece doesn't have the ability to become an industrialized nation because it lacks the political, economic, and banking infrastructures. Political corruption is rampant; government corruption is indigenous; corporate corruption is ubiquitous; civil servants are not civil and certainly not servants; the courts and the legal system reflect the wishes of the highest bidder; and the public education system doesn't produce notable engineers, scientists or business leaders. And Prime Minister George Papandreou, Minnesota-born and Minnesota-bred, hasn't a clue what to do. Meanwhile, back in June, Standard & Poor's lowered its rating on Greek debt to CCC - the lowest in the world among developed nations. So AFLAC, the International Monetary Fund, the ALCU, the European Common Union, the World Bank and even Diogenes pleaded with the Greek government to implement austerity measures. The Greek response? Unions encouraged riots, and the crisis rippled around the world. Greece cannot recover because its political, financial, social, and economic infrastructure has reached critical mass, so there's no return. The Greek five-year bonds are now trading between 34 and 36 cents on the Euro, while Ireland and Portugal's bonds are trading between 54 and 56 cents on the Euro. The consensus is that while Greece is currently paying the interest on that debt, those bonds will be worthless in less than a year, and your partnership of likeminded friends will be a lot poorer. This collaboration has an unusual odor, and I wonder why you don't smell it. ---------- Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com. © 2011 Creators Syndicate Inc. Published: Mon, Sep 19, 2011