Bloomberg Hedge Fund Summit 2012 now turns to the European panel, speakers include, Clint D. Carlson, Founder and CIO, Carlson Capital, L.P. Stuart Fiertz, Co-Founder, President and Director of Research, Cheyne Capital Management (UK) LLP, and Hans Humes, Chairman and CEO, Greylock Capital Management, LLC.
9:56AM: In 2010, European leaders were in complete denial, such as statements like Greece will not default. However, now politicians are catching up with reality. Despite the rhetoric from Merkel, Schubale and others, there is much going on behind the scenes.
9:57: Most macro hedge funds missed the Euro trade, most people in the financial world try to sound smart by putting out negative points.
9:59: The best companies took look at, is strong franchises with exposure outside of Europe. Those companies could be in Europe or other parts of the world. Just because Europe is cheap, one should not buy blindly.
10:01: However, there are some tremendous opportunities as real estate unwinds over the next couple of years.
10:02: Are hedge funds underestimating the risk of a Greek default and Grexit?
10:03: It would be pretty irrational for Greece to leave the Euro. It does provide a good opportunity to the market, there is a 15% yield on Greek debt as opposed to Portugal at 6%, although it is risky. However, it makes no sense to take Greece out of the Euro. There will be right down, bot a default.
10:07: The deal put together was done by bureaucrats, who do not really understand the market. Reducing Greece’s debt by a tiny percentage by 2020 makes no difference. The big risk is unemployment, people go to the street and the Government falls.
10:09: Chris says the distressed opportunities could take a while to play out, since the banks have more liquidity now. He thinks that there will be opportunities, but it is unclear when it will come.
10:11: Hans sat on the committee, and agrees with Draghi that there will not be haircuts. Greece recently was like Russia in 1998, about 96% of banks divested from the country. He thinks that this creats many value opportunities.
10:14: Chris thinks that the pressure down the road for peripheral countries could cause countries like Spain to leave the Euro. Chris spoke to many policy makers in Europe, and he believes that there is almost no chance Germany will leave the euro, due to their export driven economy.
10:16: The speakers think that the easy money is done, and it is all about individual names currently.