What a great year of sports. The FIFA World Cup is now only a few years and the Vancouver Winter Olympics are now into their 2nd full week with a very big hockey match tonight (Canada vs USA). So yes, I have been doing a lot of tv watching in the past few days and I expect more of the same in the coming days.  But yes, I did still find some good readings and here they are:

-Greece has about 30 days to fund its next debt roll, will it make it? ZeroHedge posts about the European crisis
-Very well written post about using 60 minute charts and why it is irrelevant at AlphaTrends
-9 ways to multiply your your sources of income and pay off your debts at GatherLittlebyLittle
-A very interesting Morningstar studyon investor returns described and commented on at CanadianCapitalist
-Good ETF newsletter, I just signed up, you might want to check it out
-Think you can make money trading on news? EvilSpeculator thinks otherwise!
-Doctor Stock might have found trading success, you might want to go see how he is doing it!
-Good theme – Becoming a ninja of happiness at TheFinancialBlogger
-Solid results from the latest stock picks by Blain at StockTradingtoGo
-What my first job thought me at MillionDollarJourney

I’m not quite certain how Google executives and public relations are able to get some sleep as it seems like every day they are moving 100 miles/hour in an attempt to compete with all of its enemies. First up:

Google Buzz!

Launched as yet another attempt to better compete with Facebook & Twitter, Google Buzz launched amid a lot of turmoil and criticism because of many flaws. Most criticism around Google Buzz is geared towards its potential to help Google better compete in social media but also its flaws in regards to privacy protection. Stunningly, Google had made the default options very flawed. Google did not lose much time to answer back but damage had been done. Two things can be concluded in my opinion:

-Google did not do much testing on Google Buzz – Google has generally been a strong defender of privacy and I would assume that the mistakes made here were made not by choice but simply because Buzz was not tested enough to notice such flaws. Google does seem in a hurry to generate something to compete with Facebook/Twitter.
-Google Buzz is being talked about – To everyone that said Google Buzz had not shot, I would suggest looking at every technology media in the past few days. Turns out that Google Buzz is being talked about quite a bit and it is certainly good news for a company that to this day has been unable to generate anywhere near that word of mouth for its previous social attempt, Google Wave.

Google Docs

Interesting release from Google as they launched a series of template documents aimed to help brides and grooms to-be. You can take a look at their blog post explaining everything here. You can easily see how such tool kits can help Google Docs be more useful. Anyone who has planned a wedding knows how much planning is involved and having template for budgets, invitations, tables planning, timetables, and more can provide a huge help. With many people involved, having documents online for family members to view, modify and update saves many emails. Can you imagine sending an email to everyone involved each time someone new confirms their presence to the wedding?

Is it a major launch? No, of course not. But I expect that such launches provide the opportunity to showcase why users would gain by using cloud computing and more specifically, Google Docs. Long term, this is very positive.

Google Youtube

Did you hear about the tragic luge accident on the opening day of the Vancouver Winter Olympics? It is tragic, sad and spread all over the world in a matter of minutes thanks to social media. And where did everyone tune in to get the news & images? Youtube of course. It is gaining more and more power as the first source of news and for that reason, Youtube looks like an increasingly valuable property.

Google Aardvark

As Google continues its desperate search to become a major player in the social web, it just bought another small part of the puzzle, buying social search company Aardvark for $50 million. It is a cheap price of course but I continue to feel like Google is not taking the time to get this right and has instead been spending left and right trying to find an easy way into the market. Still too early to say if this will be a winner, but having Google Wave, Google Buzz, Google Aardvark as well as many other local and international initiatives certainly raises questions about Google’s strategy regarding social.

Overall conclusion

Overall a decent week for Google and generally positive because of all the attention that Google Buzz received but I will be anxious to see if Google can keep its momentum in the coming weeks… as for impacts on its stock, not much to report from the past few days, I remain comfortable being long the stock.

I wrote about it briefly in my financial ramblings on Friday, but it does look like there is a lot of risk of seeing a sovereign nation going down the road of a debt default in the next few months as quite a few countries (including the US) are seeing deficits spiraling out of control. The problem of course is that even one  such case, especially if it happened in a high profile country such as Greece could have effects throughout the world. Read any book that describes the recent financial crisis and you will usually hear that everything started getting out of control when Lehman Brothers went bankrupt. Is Greece going to be the start of a devastating domino effect??

Lehman and Greece both hid the truth for some time

Lehman Brothers said almost until the end that it was fine and there was no real issue or liquidity problem. Of course, Greece has been saying the same all along. For years, it used clever tricks from Investment Banks such as Goldman Sachs to “hide” how bad its financial situation truly was.  As the New York Times puts it:

“In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means.”

Greece has a major ally

Of course, Greek is fortunate to have a major friend as the European Union has a lot riding on its member and that means having nations as powerful as Germany and France have an important stake in Greece. It is far from a given though that European countries will bail out Greece but you could easily make the case that without the EU, sovreign debt default risk (as measured by CDS spreads), Greece would be #1, and it is only at #10:

#10-Greece
#9-Lebanon
#8-Romania
#7-Lithuania
#6-Dubai/United Arab Emirates
#5-Iceland
#4-Latvia
#3-Argentina
#2-Venezuela
#1-Ukraine

Major impacts already

Remember how Lehman Brothers started hearing about market rumors of liquidity issues? This caused most counterparts to start lending to Lehman which in turn created more liquidity issues, and so on. Of course, even with Greece months away from these possible problems, things are already getting much tougher. Foreign institutions and banks have started charging higher rates to Greek banks and cutting off funds. This will of course not help the financial situation of the country. Could all of these talks of a possible default become self-fulfilling?

The Greek government might soon be helpless but for now it is doing its best to get an intervention from the EU: Greek Prime Minister George Papandreou – “There was lack of coordination among the various bodies of the EU — the Commission, the member states, the ECB — and even differences of opinion within these bodies,” he said. “All this has undermined our credibility even within the European Union … all this has not helped our position in the markets.”

Major Impacts in Europe and abroad

And these changes are already making things difficult for Europeans banks. The magazine The Economist puts it best:

“Steep downgrades of the sovereign-debt ratings of countries such as Portugal, Greece and Ireland would probably translate into immediate rating cuts for their banks, as well as higher capital charges on banks’ debt holdings and bigger haircuts when using this debt as collateral.

The consequences of even small changes in a bank’s borrowing costs can be extreme. JPMorgan, an investment bank, reckons that an increase of just 0.2 percentage points in the borrowing costs of British banks such as Lloyds Banking Group and Royal Bank of Scotland would trim their earnings by 8-11% next year”

So imagine if things got much worse and these banks saw capital costs rise by a few percentage points?

How to trade a possible Greek collapse?

Of course, the logical question now would be: “How do I profit from this situation”?

There are many different ways, although it is not as easy for individual investors:

#1-Trade sovereign debt of Greece, Italy, etc (this is much more difficult for individuals)
#2-Short the Euro through an FX trade
#3-ETF plays

As I wrote last week, it is not entirely clear if trading an FX or equity ETF is the best way to do this but here are a few ideas:

Vanguard European ETF (VGK)
CurrencyShares Euro Trust (FXE)

#4-Individual names

The best way to do this would be playing the scenario described by the economist, and trading individual European banks. Some of them such as Royal Bank of Scotland (RBS) are also traded on US markets which makes it an easier trade.