Quick Take: Greece Is Better Off Than Detroit
NEW YORK (TheStreet) -- Is Greece actually better off than Detroit? Many may think it's not possible but Axel Merk, CIO of Merk Investments, told TheStreet's Joe Deaux that is the case.
Detroit's Chapter 9 bankruptcy filing is the largest municipal default in United States history. Like Greece, Detroit's pension liabilities were one of the many factors that caused the city to slip into economic distress.
However, Merk said that the situation is different in Detroit because once the slate is wiped clean, the city still doesn't have a "path forward" -- meaning the underlying problems are still not fixed.
The one advantage Detroit does have over Greece, he said, is the Chapter 9 process is much smoother than typically seen within the eurozone, which can be much more chaotic and painful.In a situation like this, how much help could be the federal government be? According to Merk, not much. Considering that Detroit can't print its own money and the U.S. government is in its own state of financial stress, there's really no easy way out of it. Plus, as Merk stressed, the underlying problems in the once-booming economy of Detroit haven't changed yet. Until they do, losses are going to continue to mount. He also said he expects similar issues to arise in the future with more municipalities and even some states. He concluded that investors don't want to put their money in places like Detroit and Greece, where paying off the principal balance is hard enough, let alone the interest owed on the notes. His suggestion is to go long the euro, since central banks will ease when they have to but are much more reluctant to do so than the Federal Reserve. -- Written by Bret Kenwell in Petoskey, Mich. . Follow @BretKenwell
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV