Greek 10Y yields are breaking back above 13%, bonds ar trading at 50 cents on the dollar, Greek stocks are near multi-decade lows, and Greek bank bonds have collapsed amid the ever-more-likely Grexit (or at least redenomination amid capital controls). But, there are some very smart chaps who must know something Tsipras, Merkel, and the rest of the world does not... because they are spending "Other People's Money" to buy the dip in Greek stocks and bonds. From Allianz and PIMCO (the world's lagest Greek bondholder ex-ECB) to Putnam and Wilbur Ross, it seems more than a few American investors will be impacted should Greece really implode.
The contrarian American billionaire Wilbur L. Ross Jr. made a bundle betting on the Irish banking system when it was down and out, and a similar wager on Cyprus now looks promising. But Greece may prove to be the toughest test yet of his knack for cashing in on eurozone crisis spots.Mr. Ross, who built his career investing in distressed assets, is the ringleader of a group of investors who last year pumped 1.3 billion euros, or about $1.47 billion, into Eurobank Ergasias, the third-largest bank in Greece.“A default and a removal from the euro would provoke even worse austerity than anything being proposed by the institutions,” Mr. Ross said in an interview.On paper, Mr. Ross and the other investors have already lost hundreds of millions of euros. Eurobank shares have fallen by more than half since April 2014, when Mr. Ross and a group he leads bought a stake of a little more than 20 percent. The shares recently traded around 13 euro cents. Before the crisis began in 2010, Eurobank shares traded as high as €60.The other investors allied with Mr. Ross include Fairfax Financial Holdings in Toronto, whose founder and chief executive, Prem Watsa, is known as the Warren E. Buffett of Canada. The private equity firm Mr. Ross oversees, WL Ross & Company, invested €37.5 million of its own money.He and the other investors poured their money into Greece at a time when the country was beginning to show signs of finally returning to growth after a long, deep slump and two international bailouts. But since January, when Mr. Tsipras’s government came to power, promising to relieve Greece of the austerity engendered by those bailout programs, the economy has lapsed back into recession and depositors have been pulling money from the banks.
Allianz SE, Europe’s biggest insurer and asset manager, increased its holdings of Greek sovereign debt to more than 1.2 billion euros ($1.4 billion) from about 1 billion euros reported in May.Allianz, through its asset manager Pimco Investment Management Co., had the largest holdings of Greek bonds of any investor after the European Central Bank,according to data compiled by Bloomberg. Pimco invests capital on behalf of clients. Allianz’s direct exposure to Greece is 2 million euros, according to its first-quarter earnings.A deadlock in talks between Greece and its creditors prompted Finnish Prime Minister Juha Sipila to say on Tuesday that “we need a miracle” to seal an accord or get an extension before the euro area’s bailout expires on June 30.U.S.-based Pimco held 888.4 million euros of the debt and Pimco Funds Global Investors, based in Ireland, held 326.7 million euros, the filings showed.Other top investors in Greek debt are Boston-based Putnam Investments with 469.9 million euros and Carmignac Gestion SA, a French asset manager, with 424.1 million euros, the data showed.
Keep buying the dips... it has to work in the end right?
in Government bonds...
in Bank bonds...
or in stocks?
As a reminder, "Disorderly Default" is now the most likely outcome for Greece...
Of the five scenarios that could play out for Greece, a happy ending is the least likely, Karsten Junius, chief economist at Bank J Safra Sarasin, writes in client note.
1) Disorderly default: 35% likelihood
Greece defaults, but pays maturing bonds and loans solely on basis of cash position; creditors would have incentive to continue talks to prevent a total loss
Capital controls would be necessary to keep Greece in euro
2) Orderly default, within euro: 25%
Greece defaults, with prospect of new talks with creditors, who want part of the debt serviced in return for aid that would allow Hellenic Republic to keep euro
Capital controls would be likely; Greece might have to issue IOUs for some domestic payments
3) Interim solution: 20%
Eurogroup offers a bridging loan, which prevents Greece defaulting on its debts this summer
4) “Sticky-end” or orderly default, with euro-exit: 15%
Greece makes a clear break with creditors, embarks on its own monetary-policy course
5) Happy ending: 5%
Greece agrees on M-T adjustment program, which enables it to return to stronger growth path
Charts: Bloomberg
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