Greek Rumors of Eurozone Exit, Wrong But Massive Impact (NBG, UUP, USO, SLV, GLD)

The big Greek rumors are already being refuted today, but it doesn’t matter.  Friday’s big rumor is that Greece will leave the Eurozone.  Our prediction: this rumor is not true now, but on a future basis we don’t see how the Euro can really keep a nation like Greece inside the Eurozone over the long-term.  How that all comes about is for an E.U Constitutional Law attorney.  This is killing commodities due to the currency implications.

This rumor comes on the one-year anniversary of the Flash Crash and it was on the day of the Flash Crash that U.S. investors were seeing the Greek citizens rioting in the streets. The rumor, despite the refuting of the rumor, has taken a bite out of the Euro and boosted the dollar.  That in turn has hurt commodity prices. Here is the raw currency impact, with the big change being the Euro:

• EUR/USD 1.4334 (-0.0208)
• USD/JPY 80.4950 (+0.1700)
• GBP/USD 1.6362 (-0.0032)

The biggest move of all has been in the ADRs of National Bank of Greece SA (NYSE: NBG), where shares are now down 5.4% at $1.40 on the day and volume is almost 200% higher than normal with nearly 13 million shares traded.

PowerShares DB US Dollar Index Bullish (NYSE: UUP) has risen now as the dollar strengthened against the Euro. This ETF is now up 0.95% at $21.47 and trading volume is above average at nearly 9 million shares.

Oil fell after having been trying to bounce all day.  The awful oil-tracking ETF of United States Oil (NYSE: USO) is now down 1.5% at $38.71 and shares had been up at $40.65 earlier today.

iShares Silver Trust (NYSE: SLV) is still up 1% at $34.05 today, so maybe it is not all a waste of a dollar day.  Still, shares hit $35.50 earlier today, and that is down from $48+ just last week.  SPDR Gold Shares (NYSE: GLD) is still up 1.2% at $145.14 on the day and that had been almost $1.00 higher earlier in the day.

Here is some parting food for thought.  Think of the Eurozone without a nation like Greece.  It might actually be good, assuming it doesn’t set the stage for nations like Spain, Portugal, and Ireland to all jettison the currency experiment as well.

Since joining the Eurozone, Greek no longer has the option of devaluing its currency by printing new Drachmas to repay debt.  Its printing presses were taken away.

The Drachma is not back.  Not yet.

By the way, it is time to revisit some nice Friday humor… The New Greek Financial Terms

JON C. OGG