US Companies Prepare for Greece Exit

More evidence of the financial market-real world detachment.

Seen from the financial markets, Euro’s problems seem headed for a silver lining. But from the ground, events seems turning for the worst.

US companies are reportedly preparing for a “Greece exit”

From the New York Times,

Even as Greece desperately tries to avoid defaulting on its debt, American companies are preparing for what was once unthinkable: that Greece could soon be forced to leave the euro zone.

Bank of America Merrill Lynch has looked into filling trucks with cash and sending them over the Greek border so clients can continue to pay local employees and suppliers in the event money is unavailable. Ford has configured its computer systems so they will be able to immediately handle a new Greek currency.

No one knows just how broad the shock waves from a Greek exit would be, but big American banks and consulting firms have also been doing a brisk business advising their corporate clients on how to prepare for a splintering of the euro zone.

That is a striking contrast to the assurances from European politicians that the crisis is manageable and that the currency union can be held together. On Thursday, the European Central Bank will consider measures that would ease pressure on Europe’s cash-starved countries.

Public’s opinion has been shifting rapidly. Again from the same article… (bold emphasis mine)

In a survey this summer, the firm found that 80 percent of clients polled expected Greece to leave the euro zone, and a fifth of those expected more countries to follow.

“Fifteen months ago when we started looking at this, we said it was unthinkable,” said Heiner Leisten, a partner with the Boston Consulting Group in Cologne, Germany, who heads up its global insurance practice. “It’s not impossible or unthinkable now.”

Mr. Leisten’s firm, as well as PricewaterhouseCoopers, has already considered the timing of a Greek withdrawal — for example, the news might hit on a Friday night, when global markets are closed.

A bank holiday could quickly follow, with the stock market and most local financial institutions shutting down, while new capital controls make it hard to move money in and out of the country.

“We’ve had conversations with several dozen companies and we’re doing work for a number of these,” said Peter Frank, who advises corporate treasurers as a principal at Pricewaterhouse. “Almost all of that has come in over the transom in the last 90 days.”

From the hindsight everything looks easy to explain, but as I have been saying events can be so fluid, where moves can be swift and dramatic.

I’d say that an exit will mark the climax of the bear market of Greece equity markets.

The Athens General Exchange index has fallen by nearly 90% since 2007. (chart from Bloomberg)

Greece will likely devalue (inflate) intensively. These should put a floor and perhaps reverse the bear market trend. But rising stocks doesn’t necessarily translate to an economic recovery, instead they can be symptoms of severe inflation or even hyperinflation.