NEW YORK (Real Money) -- Doug Kass of Seabreeze Partners is known for his accurate stock market calls and keen insights into the economy, which he shares with RealMoney Pro readers in his daily trading diary.
This past week, Kass had a lot to say about the ongoing Greek debt debacle, why Airbnb's valuation is full of hot air, and what the Federal Open Market Committee's inaction really meant.
Originally published June 16 at 9:12 a.m. EDT
"Manic moves and drowsy dreams
Or living in the middle
between the two extremes."
-- Hall and Oates, Out of Touch
According to my research, the first Greek default occurred in fourth-century B.C. when the 13 city states of the Delian League borrowed money from the Temple of Delos and defaulted on most of their loan. (There were only 14 inhabitants remaining on the island of Delos as of a 2001 census. Sic transit gloria!)
Greece's financial history is one of repeated defaults on sovereign-debt obligations. Most led to market dislocations, but limited or no long term systemic damage.
In modern times, the country has been in default for nearly 90 years -- or about half of its history as an independent nation.
There have been at least five separate defaults in the modern era. The first occurred in 1826 during the early days of Greece's fight for independence. Defaults then recurred in 1843, 1860, 1894 and 1932 during the Great Depression.
That said, Greece isn't the worst country in terms of repaying its bills. For example, Venezuela and Ecuador have each defaulted on their debts on 10 different occasions.
Still, I hear many in the media incorrectly suggest that Greece is a "one-off," and that a default would have a limited impact on markets.
Perhaps that was true in 400 B.C. -- or even in the 19th or 20th centuries -- but in today's flat, networked and interconnected world, no country is an island of Delos any more. History over the last four decades has demonstrated that increasingly, "contagion" is the natural consequence of country defaults.
As Greece begins to slip into the abyss of capital controls and default, we've already seen signposts of contagion as the bond-yield spread between Germany and other Eurozone states is widening.
The France/Germany 10-year spread has almost doubled in the last three trading days. European and U.S. equities have also begun to roll over, and Chinese stocks are also taking a spill.