Portfolio manager Cale Smith on investing, Spoke Funds®, and Islamorada in the Florida Keys.

My latest column from the weekend.

Q. What exactly is going on in Greece?

A. This week a leading ratings agency lowered the credit rating of Greece to junk status. Combined with a bigger than expected budget deficit and a widespread worker strike, that has created considerable uncertainty in the financial markets.

Investors should pay attention to Greece. A massive joint bailout of Greece by the Eurozone countries and IMF has already been announced, but it is unclear when that money will actually show up. In the meantime, investors fear a bad precedent should Greece ultimately default on its debt since Portugal, Spain and Ireland are also in poor fiscal shape.

Greece simply spent too much the last few years, financing that spending by issuing debt to foreigners. Rather than paying interest on that debt outright, however, Greece basically refinanced its interest payments each year by issuing new debt. In a sense, the country has been constantly taking out home equity loans to make its monthly mortgage payments. If you’re saying that sounds short-sighted, you’re right. If you’re thinking there may be a lesson to be learned here at home, you’re also correct.

Despite the stock market’s reaction to Greece’s woes, most of the possible outcomes from this situation will likely have only a minor direct impact on U.S. stock market investors. To be clear, there is a potential very bad scenario if multiple European countries default on their debt. As I write, however, the odds of that occurring appear remote.

There are plenty of other reasons to keep an eye on the indirect effects of Greece’s woes, however. The debt crisis in Greece is an indicator of the state of the European economy, which is recovering much slower than the U.S. Europe is obviously an important market for many U.S. companies, too, and those companies could see difficulties in the months ahead, potentially delaying their recovery.

For now, there are two takeaways for individual investors. First – think “debt is bad, thrift is good.” The second is that international investing, even in Europe, may not be all that it’s hyped up to be.

Cale Smith is the portfolio manager of the Tarpon Folio. More info can be found at www.islainvest.com and www.caleinthekeys.com.