October 7, 2011
Dear Symmetry Investor,
In addition to a sluggish economy here in the States, European economies have come to dominate the
business headlines as of late, notably Greece. There’s no shortage of talking heads ready to opine on what
the U.S. or the Eurozone should do in answer to this particular crisis. This column is intended to provide
the investor with some facts. Broadly speaking, there are two possible outcomes to the Greek debt crisis:
1. Allow Greece to default on its sovereign debt and the bondholders will take the hit. Many holders
of this debt are Eurozone banks and indeed, some U.S. banks. There is debate over how much net
exposure the U.S. banks actually have to Greece.
2. The Eurozone puts together some type of bailout package to keep Greece afloat, effectively
kicking the can down the road. In effect, taxpayers of many European countries pay this bill.
The fear is that a Greek default leads to an Italian default and so on across the PIIGS nations (Portugal,
Italy, Ireland, Greece, Spain). One country defaulting on its debt is quite different from three doing so. So
a Greek default in and of itself, is certainly survivable for Euro banks. A domino effect is the real fear.
The European Central Bank, the European Union (Germany and France being the largest members), and
the International Monetary Fund have taken steps to provide capital, along with the Bank of England. The
Federal Reserve is also cooperating with foreign central banks to ensure dollar liquidity around the world.
So there is an effort to contain this situation that is coordinated and global in scope.
In examining how we as investors should think about this crisis, it is important to consider how we are
exposed to it. Our equity exposure to Greece itself is very minimal, about 1/10 th of 1% in both our
Structured 100% Equity1 and GlobalCore® ETF Portfolios.2 We have no direct exposure to Greece in our
fixed income portfolios. Our exposure to the PIIGS in general is about 1.3% in the Structured 100/0 1 and
3.7% in the GlobalCore ETF 100/0.2 We have less than one percent of PIIGS exposure in our bond
portfolios. Let’s consider for a moment that outcome number one comes to fruition. Would we be best
served to divest of any nations on the brink? We have seen sovereign nations default before, and in many
cases, divestiture would not have worked out well for the client. There are two examples that might be
helpful, the implosion of the Russian markets in 1998 and Argentina in 2002.

The MSCI Russia Index dropped nearly 83% in 1998 and has returned over 23% annualized from
1999 through September 2011. It was up over 247% in 1999 alone.3

MSCI Argentina dropped more than 50% in 2002. The following year it was up 101% and its
annualized return from January 2003 through September 2011 is 22%.3
Must this also happen with Greece or other PIIGS nations in the event of a default? Of course not. But
remember, these are countries, not companies. Countries don’t just go away. They can’t hang a going out
of business sign on their door. They restructure and press on.
Assets in balance.
Given the extended exposures of the PIIGS nations, perhaps we should consider eliminating our exposure
to the whole of Europe? The return for MSCI Europe from June 2003 through September 2011 is 6.55%
annualized versus 4.01% for the S&P 500.3 The return for the equity index blend that matches our
portfolios (66% US, 24% Euro/Asia, 10% Emerging Markets) has returned 6.51% annualized over this
same time period.3 Clearly exposure to Europe has added to returns and this geographic diversification
has improved portfolio returns over this timeframe.
Of course the wider exposure that we always face is that of our overall equity market exposure. To
actually escape the contagion associated with defaults, we would need to consider a move out of equities
in general. If we entertain this notion, when do we get back in? The unfortunate reality is that time and
again investors’ attempts to get out of the market before the disaster and back in before the upturn are
ineffectual. Because timing is notoriously difficult, investors may end up inadvertently doing the opposite
– they sell low and buy high, when the recovery is already in full swing.
This brings us to the fundamental problem with reactionary selling associated with market turmoil. We
are too late. Simply put, if we were going to pull out of Greece or the PIIGS or equities in general, we
probably should have made that move a long time ago. By that, we mean before news of potential defaults
ever became apparent. Unfortunately, once the news is actually out, the market is pricing it in. We have
already seen equity losses resulting from the market’s anticipation of a default or multiple defaults.
Granted, losses could continue, but stocks may also rise. Based on decades and decades of academic
research, we believe that the very crux of successful equity investing entails accepting the market ups and
downs in order to achieve the long-term potential return that the market has to offer. If we could
effectually time moves in and out of the market, naturally we would do so. But the weight of evidence
indicates that manager after manager is not always effective at knowing when to get in and when to get
out in a manner that leads to outperformance relative to simply staying put the entire time.
So in either scenario outlined above, the message is still for investors to stay in their seats. Patient
investors have been rewarded over time and we see no reason for us to change our discipline at this
juncture.
Sincerely,
David E. Connelly, Jr., and Patrick A. Sweeny
Principals, Symmetry Partners
1
Source: Dimensional Fund Advisors
Source: Morningstar Office
3
Source: Zephyr StyleADVISOR
2
Symmetry Partners, LLC is an investment adviser registered with the Securities and Exchange Commission. With the investment strategy
mentioned here, as with any investment strategy, there is a possibility of profit as well as loss. All data is from sources believed to be reliable but
cannot be guaranteed or warranted. For the indexes mentioned herein, past performance is no guarantee of future results. Investors cannot invest
directly in an index. Indexes have no fees. Historical performance results for investment indexes do not reflect the deduction of transaction
and/or custodial charges or the deduction of an investment management fee, the occurrence of which would have the effect of decreasing
historical performance results. Actual performance for client accounts will differ from index performance.
Assets in balance.