Forget NBG

Forget NBG. The spread of the downturn has created bargains elsewhere, such as Google. NBG's a good bank, but at the end of 2009, it had about 20% of assets exposed to greek gvt debt. That's over 20B euros, about 20x 2009 earnings before taxes. That's a looooong time for write downs.

National Bank of Greece

I took a look at NBG's Dec 2009 annual report to try to determine its exposure to Greek gvt. debt. Including loans to government and agencies, it appears to have 18% of assets in the Greek government. It is also apparently hedging its exposure to Greek government fixed rate bonds by buying German bond futures. Couldn't find any specifics. I hope it was hedging for rising interest rates!

If Greece defaults, then a fair-ish book value for NBG would be 2.89 USD/ADS share (based on a little algebra from the data at reuters.com). According to Reuters, NBG is trading at 2.71, for a P/B of 0.75. I would buy at 2.50, or a P/B of 0.7, and sell at a P/B of 0.8 (2.89 USD). Keep in mind that as the Euro falls, so does the book value. A P/B of 0.7 at today's exchange rate is not necessarily the same share price as a 0.7 P/B at next week's exchange rates.

US Bond Outlook - Update: Stay Away from Junk

In a recent post, I recommended investing in high-yield bonds since they still seemed to have some capital appreciation left. The performance of high-yield bonds is similar to the performance of the stock market as a whole. You can see below that in the last few days, the S&P500 is tanking, and along with it, a high-yield ETF.

So, I changed my mind. Stay out of the high-yield stuff until Mr. Market has calmed down. You might miss a bit of the run-up, but you'll still get a nice yield.