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Who Wins if Greece Exits?

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If you've been brave enough to peruse any newspaper over the last month, you've seen headlines stressing the likely enormous consequences if voters in the country give the euro an effective vote of no confidence. In the short run, capital would be yanked from Greece, contagion would cause already historically high bond yields in Italy and Spain to spike, and lending on the continent could freeze up sparking chaos and bank failures throughout Europe. The Eurozone itself could eventually break apart.

A doomsday "Eurogeddon" would be bad (actually really, really bad). But there is an eclectic assortment of industries and players that could do well. Here's a crib sheet for what we can consider the "Silver Lining Club":

Euro short sellers. Sure hedge funds betting on higher commodity prices right now are getting hammered, but not all put all their eggs in the oil and copper basket. Many have ramped up their bets against the euro to a record high. An anti-austerity vote would likely push Greece out of the euro, and reward these pessimists as the economic and political outlook for the Eurozone worsened.

The U.S. Treasury (and qualified borrowers). Our stock market might collapse along with Europe's, but a Greek exit would increase appetite for US Treasuries, as investors seek a safe haven to park their capital. The benefits would flow not only to the government, but also to other issuers and qualified borrowers of dollar denominated debt influenced by government rates. So if you want to refinance anything from home mortgages or, as Larry Summers suggests, the entire US federal government's debt, June 18th will be a good day to do so if Greeks bail on the bail-out.

Emerging Market Value Shoppers. Because a Greek exit would place enormous downward pressure on the euro, a no vote would provide a golden opportunity for firms looking to pick up cheap European assets. At least, this will be the case if you have the cash--and emerging markets and commodity rich countries have plenty of it after years of trade and current account surpluses. So not surprisingly, companies in Canada, Hong Kong, and Brazil are among the biggest investors in Europe, behind the US and Switzerland. Meanwhile, Europe has become the number one destination for Chinese bargain hunters as the crisis has punished not only the euro, but also the continent's stock markets, making acquisitions much more attractive.

Greek exporters (well, at least some). In the longer run, if Greece eventually pulls out of the euro, and presumably reinstates the Drachma, Greek exporters will be well positioned to begin to compete more effectively in key industries like manufacturing (and tourism). But only the daring will be inclined to lend and finance Greek companies, so those that are already well capitalized will be the ones best able to take full advantage of more favorable trade conditions.

Asian regional banks. A financial crisis would put a severe strain on the European banking system. Along with Basel III, the new international capital requirements for banks, heightened financial stress would inevitably cause EU banks to retreat from some overseas activities. My colleague at the Milken Institute, Cindy Li, has noted that their departure will create an especially good opportunity for regional well-capitalized Asian regional banks looking to grow their market share in the region. Indeed, banks in Australia and Singapore banks are already reportedly expanding into India and China.

Sub-Saharan Africa. For firms looking for yield, Africa will probably keep looking better and better. Although the commodities downturn could ramp up if the global economy slows, investing in the continent may become even more attractive as QE 3 (4 and 5?) programs roll out of American and European central banks, depressing interest rates. Studies have for several years shown Africa to be generating the highest rate of return of any region in the world, and GDP growth continues grow steadily, with estimates next year exceeding 5%. Plus the rule of law is arguably expanding just as quickly, with fewer serious conflicts now than in decade past, making the continent safer for foreign investment.

The lesson? Politicians and investors should recognize that in the face of a Greek exit, cash and safety will be king. Those who can offer one or the other (or both) will be able to at least partially shield themselves from the storm. The rest will be left out in the cold.