This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

U.S. Investors Brace for a Third Bailout in Greece

Stocks in this article: ^GSPC ^DJI SAP SI

"This is a George Lucas production," quips Paul Nolte, managing director with Chicago-based Dearborn Partners, referencing the filmmaker who brought six Star Wars and four Indiana Jones epics to the silver screen. "The debt hasn't gone away. It's still there. So perhaps a better analogy is that it's like shuffling cards and the joker keeps showing up."

These jokes may not be far off the mark. Both Reuters and The Financial Times separately reported Tuesday on a confidential analysis conducted by the International Monetary Fund, the European Central Bank and the European Commission that shows Greece will probably need additional relief in order to reach that debt-to-GDP ratio of 120% by 2020. Without structural reforms and any meaningful changes, that number could jump to 160% by 2020.

Put another way, this debt crisis for Greece -- the one that investors have grown tired of after more than two years -- could last at least another eight years. Suddenly, the so-called "lost decade" for U.S. stocks over the past 10 years doesn't seem like that big of a problem when investors are staring at the potential for another decade or more of wild, head-spinning volatility.

"It's a never-ending story. That's what investors are dealing with," says Nolte. "There will be another meeting or something will be coming up. There will be another bailout package. There will be another vote. There's always something to be hanging your hat on when it comes to Greek and European issues."

That reality struck investors on Tuesday. The Dow Jones Industrial Average briefly regained the 13,000 level Tuesday for the first time since May 2008, months before the collapse of Lehman Brothers. The follow-through was lacking, however. "You're not getting that violent reaction we usually see," Nolte says. "This deal would be worth 300 points to the upside. We were lucky if we got 20 points."

So how should investors prepare their portfolios against the threat of yet another drawn-out drama that results in another last-minute Greek bailout? For now, both Stone and Nolte note that it's tough to bet against any scenario where central banks are working in coordination with each other.

2 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,652.56 -20.04 -0.11%
S&P 500 2,054.08 +2.26 0.11%
NASDAQ 4,763.6890 +5.81 0.12%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs