ABH

SunEdison (SUNE) is getting slaughtered today and if you only look at it superficially that might make sense. Digging a little deeper reveals a lot of value here though so I've been buying it today all the way down.

At this point it is all but certain that the Greek people will vote to reject a bailout offer that no longer exist. For the Greek people this is almost certainly bad news. Although it is entirely their own fault, you cannot help but to feel for those who - naively maybe - trust the government and are given to accept nationalistic rhetoric over what they view as foreigner imposed austerity. One might think this is all bad for the Greek banking system, although that is actually a non-sequitur. Indeed, given a "No" vote there are a couple of ways things can turn out: in one scenarios bank investors will be in a world of hurt; in the other, those holding a diversified portfolio of banking institutions will likely fare well. I will assume that in either scenario Greece will try to renegotiate a bailout in one form or another, although it's not key to my argument. Scenario 1: Greece tries to stay in the Euro despite rejecting the deal that is no longer on the table. This is actually the worst scenario for bank investors. Not because this will prove to be disastrous in the long-run for Greece, or even the banks but because it will continue, or even accelerate deposit withdrawals because people loathe uncertainty and do not trust anyone when it comes to their own money. With the ECB and probably the rest of the Troika unwilling to extend further lines of credit to the greek banking system, this would likely mean a collapse of multiple banks, wiping out equity holders entirely and leading to a government takeover of several failed banks and difficult times for the next 5 years. Scenario 2: Greece reintroduces the Drachma (or some other equivalent) Given a "No" vote this is actually a great outcome for bank investors - provided you hold a diversified portfolio of banks as there might very well be some bank failures and a bumpy ride. All balances are converted from Euro to Drachmas, and with that the value of deposits in Euro (or some other currency) is significantly reduced. At this point Greek depositors have much less of an incentive to withdraw as their money has already been devalued. True, Greece has a spotty history of maintaining monetary stability and inflation will likely be a problem in the future as, in the past, they have been prone to leave the printing press working overtime. However, even fairly hefty expected future inflation would not lead to a mass exodus of withdrawals as no sane person in the FX market on the other side of that trade is going to ignore the future inflation and accept Drachmas for Euros without a serious haircut. Given this, there simply will not be as strong an incentive to withdraw money, and even if bank runs occur, the Greek central bank would now be in a position to act as a lender of last resort to avoid a collapse of the banking system.