Business

Kyle Bass On Opportunities In Greece

Kyle Bass on a Capital Link panel discussing investing in Greece the conference took place on December 11th 2017 and the speech was uploaded on December 15th 2017 – below is an informal transcript which is for information purposes only – first from the same conference a short interview

H/T @DennyCrane550

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[00:00:00] I think Greece has gone through eight years of a great depression with GDP decline of roughly 30 percent. That's some of the some of the worst economic performance of any country in the world. And we think that given the secular turn in southern Europe and that Greece has had to bank restructurings and has had a write off of their private sector debt we think there's going to be a public sector debt solution that will allow Greece to again rise and we think that the financial sector and the real estate and various sectors of Greece are are the place to be investing for the next call it three to five years.

[00:00:35] I have two my two recommendations are stop tax evasion and stop selective defaults on loans. I think that the wealthy people in Greece need to pay their taxes and I think that the people that are selectively not paying their mortgages should pay their mortgages. Those two things would go a long long long way to helping Greece really accelerate economically.

the full panel

Moderator: Mr. Constantine Karides, Partner, Reed Smith Panelists: Mr. Stephen Johnson, , Managing Director, WL Ross & Co. LLC Mr. John Koudounis, CEO, Calamos Investments Mr. John Wollen, Founder, Portfolio Manager, Waterwheel Capital Management Mr. Antonios Achilleoudis, Group Managing Director, AXIA Ventures Group Ltd. Mr. J. Kyle Bass, Chief Investment Officer, Hayman Capital Management Mr. Anthony Diamandakis, Global Co-Head of Global Asset Managers, Citi

Video and transcript below

 

So we're starting with a dynamite panel. We talk about investing in Greece. And here are the gentlemen who are investing in Greece. So they are going to share with us their experience their story in Greece how they look at things and also tell us what needs to be done to make things better. And we have with us Antonio the managing director of a who's going to moderate the panel. Unfortunately from rates may have got the flow. So he had to stay home but Antonis panelist will moderate when he knows that topic InsideOut actually he is the person who brought the number of investors to Greece so go ahead.

[00:00:54] You have to bear.

[00:00:58] Thank you. Actually thank you for such an amazing organization again you guys pulled it off. So Nikolas and his East Timor capital link deserve a very warm congratulation.

[00:01:12] I want to thank the panelists the esteemed panelists were with us. All of these are investors who basically participated in one way or another in Greece and are most invested there as well just to make a quick intro and then I'll give everybody a couple of minutes.

[00:01:34] Stephen Johnson with Wilbur Ross. John could do and is who is the CEO of Calamos investment. John Wallon who is a portfolio manager and founder of water will Kyle Bass was the chief investment officer of Haymon capital and Celia Tragos who's the managing director and head of Iby central and southeastern Europe.

[00:02:00] Stephen let's go down the line and make a small intro into your experience in Greece and Wilbur Ross and what do you guys have done in the country.

[00:02:11] Sure this is good. Hi Steve Johnson really I guess didn't with my group now for 10 plus years started doing a lot of NPL framework renegotiating some deals that we had owned both from a private equity standpoint as well as some other assets we purchase over the way currently reinvests investor in Eurobank I sit on the board of the bank now actually joined the bank the day of the referendum being announced. So I've been on a capital controlled bank board for the entire time in Greece. Other than that we have about a billion in shipping assets to cross the world of carry on.

[00:02:53] Yes. John could do some CEO Calamos investments and I've been going to Greece for a while all my life but the last several years the last six seven years I've been doing. With some of my other investor friends. Before I worked with John Kellerman's I would go with him and go with metropolis and we would look at different investments during that course of time. Bought a year and a half ago I don't count investments. And since then we invested we start investing in Greece. Last December was our first acquisition of smaller insurance company. And then we tendered and won the tender for and keeps fairly sticky which is a larger insurance company so we thought the timing was right. And I think that's what this panel is about when we talk about why we think that is John.

[00:03:52] Hi my name is John wul from waterwheel Capital Management. I have spent the last five or six years pretty deeply involved in Greece but formerly at my former firm called old Alden Global Capital. I recently spun spun this firm out into it into a new registered investment advisor waterwheel which we started up on November 1st. We are focused in the public markets so the Gigi's bank equities and other equities were long shorts so at different times over the last five years we've been both long and short. Various different securities but focused on the public markets.

[00:04:35] Hi I'm Kyle Bass. My first trip to Greece was 2009 where I met the finance minister at the at that point in time where he handed me an investing Greece FAAB.

[00:04:47] And it was the number of properties that they were going to auction off in the next 12 to 18 months to repay all of their outstanding sovereign obligations and everything was going to be fine. Back in 2009 I saved that far too to have as a matter of record going forward. But Greece has come a long way. We invest globally and I think Greece is the single most interesting place in the world to be allocating capital to today given the fact that it's gone through such a difficult economic period.

[00:05:16] I see all of the signs in the macro economy of Greece are turning up and it looks like this government is starting to embrace all the things that need to be done to turn Greece around. So with that we invest in both the public and the private markets and have had relationships with Axia and some friends George in Greece for a long time and were excited about the opportunity.

[00:05:42] Good afternoon. I'm Fuga Draco's I'm a managing director at Citi and the only member on this panel who is not an investor but rather facilitating and helping our clients whether it's governments corporates financiers and ultimately institutional investors to have to conduct their business. And clearly it's been an interesting ride the last five or six years. I do remember that you know back in 2011 or 2012 some of our clients predominantly the Greek government and Trosch of that with the privilege of soliciting investors interested in raising awareness for a number of important projects beat Hellenic on regional airports austere and so on and so forth. Clearly there was a common denominator and probably we're going to talk about it which is that things take time. Some of those projects which were started working going in 2011 were actually still working going or were recently completed. But I think you know the other thing that you know probably we should be touching on these we're talking about a very different sort of conversations that we're having with prospective investors versus five years ago and these are different conversations both of these the macro backdrop but also the way that investors look at the risk profile of success from Greek businesses and looking for for the champions and we want to invest their hard earned capital Kyle you mentioned a couple of things that were pretty interesting.

[00:07:13] First of all you and the other investors are global investors. Also your thought process of how to invest in Greece evolved over the years. Can you give us a little bit of Buchanan perspective like what in essence is the driver behind your current theses about Greece as it relates to government as it relates to the opportunity set and get into a little bit more detail. And actually I'd love to hear the views because what I mentioned about you stands from the other three investors as well.

[00:07:51] OK. One other thing that I was telling Theo that my wife and I just named our puppy after him and we named Pepe Theo. Never never look as far as the macro economy is concerned in Greece you know. No matter how you look at the indicators I know for those of you that live in Athens and live it live across Greece it doesn't really feel like things are turning out. But from the macro economic perspective whether you are looking at cement production new vehicle registrations where I guess announced last night up 16 and a half percent year over year two new tourist arrivals had hit an all time high. And when I was in Greece I guess early October the first direct flight from Beijing landed. And you know to see the Chinese takeover Syntagma Square was was was an event to be seen and that was just the beginning. And so I think when you look at the basic economic activity as any macroeconomist looks at it is starting to turn it's starting to turn for the first time in eight years. You know we've had a 30 percent real GDP decline which is a full Great Depression in any economy. When you have a 30 percent real GDP decline. So from our perspective it's starting to turn. Clearly there's a lot of work to do. Clearly we're not out of the woods yet but it is the most exciting time to be considering investing in Greece. So from our perspective that's why we're there.

[00:09:18] And when we look at the Greek banks you know pre precrisis state about 60 billion of equity you know today I think the collective cap of the banks the big four is like you know seven billion dollars on a on a on an economy. So when you look at a Greek bank market cap to GDP it's the cheapest bank market capita GDP in the world. So I think it's I think it's just a fascinating opportunity. I'm going to I'm going to hand it off to John.

[00:09:47] Well I would a few other things I think you know the way we think about it is is relatively simplistically I think which is that if you look at through the first half of 2017 and really for the two and a half years up until the first half of 2017 you had read Grex it on the front page of The he in the Wall Street Journal you know five times a week at different times was five times a week sometimes only five times a month. But Grex kept popping up in June of 2017 with the agreement on the second second review of the third memorandum.

[00:10:24] After that the idea of Grex it has sort of been taken off the table so markets don't react immediately and especially scarred markets like Greece is deeply deeply scarred it hasn't reacted very very quickly to the idea that the political risk is very largely off the table. But we think that obviously there are signs that that is coming true. Like for example you know there's this bond exchange everyone talks about the bond exchange. It's a great thing we agree with that but Greek government bonds a 10 year is currently trading for 50 and was trading at 7 percent. Coming into this year and is trading at 6 percent coming into the fourth quarter it's tightened by 150 basis points in two months. You'll find that in any economy anywhere in the world almost any time in what you certainly won't find is an equity market that has not reacted to that really materially in any way whatsoever. So the Greek equity market has not followed. Bond yields up know yields down and the equity market up. So we would expect that over time that will happen as people start coming out using lower discount rates and models and showing that the future value of the present value future cash flows is much much higher. The other thing is yōkai refers to a 60 billion dollar market cap of the Greek banks before the crisis. Greek banks had a 36 billion euro market cap in 2014. So in the first recovery of the crisis in 2014 they were trading at six times where they're trading right now.

[00:11:45] Now I'm not making a call that they're going back to where they were in 2014. That gives you a sense of the possibility of investing in those those bank equities.

[00:11:55] Don't you want to give us your perspective or you're new in the market as well.

[00:11:59] I agree wholeheartedly with Carl and John Karl you talk about GDP we got 3 in a row with positive GDP. Are you talking about bonds. Definitely when we do the bond you need to get more liquidity and that's why they did that. It was very successful and if you look at the returns just this year like you said we're talking about. Over 19 percent of increase in the total return is over 23 percent. So number one performing bond in Europe. So people need to realize that it's real it's not over. It's not perfect but there are definitely definitely things that are happening and a lot of that let's look at credit reading to upgrades as well. So there are things that are happening are all positive. That's one of the reasons we took a dip into the market and look at it because we do feel this is the time and there's a lot of good things that are happening.

[00:13:01] Even you want to.

[00:13:02] Yeah I mean there's no reason to belabor the point. If it does move up six times I'm going to name my puppy that I don't own yet.

[00:13:08] After you to early to get it.

[00:13:14] No I think the rating agency moves. I think that the change in foreclosure law a lot of things that have helped the banks to really provide a pathway to dealing with the two things that we're not talking about one being the impales which I know we'll get into at some point but with an NPR framework as large as it is a lot of people want to see that it's a show me state show me what you're going to do with that before they start to give credit for the equity story and that will come to roost over the course of the next two to three years in a positive way for the banks I believe. But the other piece of it too that we need to be cognizant of is all of those positives are great the foreign direct investment component the Zionist piece that really need to continue to push through.

[00:13:57] So that with some of that off the plate with that addressed with the third and fourth reviews I think that they're going to be in a tremendous place come it year hopefully 2018 right field you in Syria and anoxia and we share a lot as far as visibility on who and what they do in Greece. But I'd love to get your perspective and Syria's perspective on the table investments and investors that you see right now showing the most interest and I think you know if you can touch a little bit on what John Wallon said a little bit earlier about the equities lagging is there interest for Greek equities and if not is there a reason why bubble investors are not as bullish on equities as they are on duty let's say.

[00:14:50] Sure sure. So that's a fascinating point. How how the equity market has not jumped back to reflect what we've seen in the credit markets. There are some parallels to be drawn with 2014 realities that a lot of the market cap of 2014 was effectively state money. It was effectively a much larger Changle face FSF money. And I think you know that you know the question is you know how fast can the private sector catch up with that.

[00:15:18] Greece has consistently underperformed through the crisis in the very crude metric of total market cap to do the show. Whatever the Buffett index or whatever you want to call it it's it's it's performed below its own cycle cycle through levels as well as below where you see other European markets trading through on a cycle through basis. Now having said that you know in terms of in terms of public market opportunities Greece has always been dominated by the banking sector. This is you know the predominant component of of of its market capitalization. And I think you know it's going to be it's going to be very much a question of dry banks driving you know any potential surge. And it goes back to the very topical point made earlier today on the ability to to go about the quality of the balance sheet and the ability to go back to sustainable profitability in the banking sector. Of course we always have ordinator sort of you know being nimble about opportunities and firing. Finding you know micro businesses where one wants to invest. But if you want to see a systematic rise in that in the stock market it's going to be it will need to be driven by the biotech sector in terms of and this. And I think this kind of you know highlights one of the demand that we see from a public market perspective of people looking whether on equity or credit there are people who are going to follow the market and there are people who are just going to be opportunistic about a more opportunities.

[00:16:47] I believe the more interesting question is what kind of investors do you see on the private side of the equation. What kind of you know private equity approach to life. Do people take around Greece. And again probably you know you can actually Closter they mean you know three or four different categories you had some of them you know more brave or Locher whatever you want to label them pockets that looked at Greece and actively invested in Greece on the private equity side back in 2012 or 2013. Probably a common denominator between those investors would be that you know they had a more flexible mandate. They had the ability to react to investment decisions. I always make case in point v the constellation of investors who have bought the 33 percent and OPAP which was a very brave decision was a difficult investment decision at the time both in terms of the macro backdrop but also in terms of getting a conviction.

[00:17:40] Can I control a listed company with a minority stake and this is where investors will took this conviction and certainly realise the extraordinary value and then obviously as we move as we move across the spectrum of risk and types of investors you know you come to a day where you have bulge bracket private equity firms if you want to call them that whether it's CVC or VC partners and they're the angle always needs to be business specific and you need to find a Greek denominated business where value can be can be it can be explored because their revenues are very extroverted they come from outside Greece or because there is some other you know Alpha generator whether it's you know they're all of a sector like what for example CVC is trying to do at this stage with in terms of the healthcare space I think are to try to wrap up this kind of long winded response. It's fair to say that right now there are very few investors who have not spent time trying to understand Greece. One of the colleagues mentioned it. It has an extraordinary value opportunity. You will not find people who didn't spend the time to do their homework but not a lot of them have invested yet and a lot of a lot of the value to be unlocked will come from those people actually getting conviction I don't value and again boring and a little bit on what Steve said but a no comment.

[00:19:02] We've seen the risking of the sovereign being the major driver behind the economy the confidence in the market the banks have committed to 40 per cent reduction by 2019 and we're beginning to see certain actions how instrumental do you think is the unlocking of the NPL market and how would you like to participate in a start. Steve and then we'll go down the road.

[00:19:37] I won't directly or indirectly are invested in the banks.

[00:19:42] I think that no one can give credit to the book value if they don't believe the book value Israel or burned down book value. It's a simple way to think about a bank if you're gonna have a 25 percent discount from where it is on that basis then it should be trading at a discount to that to get you some return. What the banks have been so good about doing over the last several years and driven really by that stress test a couple of years ago is funneling so much into reserves right out of the gates. So from an actual provisioning level you're at 50 plus percent when you look at it relative to the security that's on the package if you believe the actual security and stabilization in the markets then you're at 100 per cent plus. So there's a real clearing point and then the question is Who are the who are the people that are most interested. I think the NPL trade over the course of the next probably two to three four quarters is going to start with some of the lower hanging fruit unsecured loans charged off are really a pretty interesting quick opportunity to keep ahead of the troika guidelines. What that is is providing people like interim Justicia and some of the other players have been so strong voiced in the market to be participants then it's going to trail into some of the other corporate and enemies.

[00:20:57] But you have to kind of think about it on an individual component basis but I do think that as a stay ahead of the game on these as they look at securitization or other ways to manage different parts of the book you're going to see that there's more credence given to those that debt servicing capability on the board as well as the actual clearing price of these such that you can really start to give value for the book value itself and then you'll see a rerating the stocks.

[00:21:24] So the key is of appeals to sales and sell whatever market you have to give.

[00:21:31] You have to give some people a little chance to make money along the way too.

[00:21:34] So having third parties to participate and John wollen you're an investor in banks as well. Can you give us a little bit of your feedback on the same question and what would you want to see the banks do that maybe they're not doing as aggressively right now.

[00:21:53] Sure. Well so if you look at the Greek banks the Greek banks are very much. It's a large large empty player NPL play and whether they're worth where they're trading now whether they're worth a lot more or less depends upon almost entirely what comes out of the NPL portfolio if it goes poorly things will be bad if it goes well things will go very very very well and tied up and that is of course the elephant in the room which is the stress test coming in the first half of this year or so first half of next year I should say and you know someone told me a couple of weeks ago they said well no one's ever made money investing in Greek banks in front of a stress test. If you look back at 2015 clearly that was true. I would argue 2015 was different from many many many different perspectives from political to economic to the actual fundamentals of the banks. But in 2014 it's also true you didn't make money if you invested in the Greek banks and from the stress tests and today in late 2014 that's because of the sort of political cataclysms that occurred through 2015 as opposed to anything that happened within the stress test itself and so from our perspective we look at these very large NPL and MP portfolios and it's very difficult for me outside to say OK well I know I can stick a pin in it and I can say I know exactly what these things are worth.

[00:23:14] What you can do is you can say I can probability wait this I can think a little bit about what happens if if we end up that these are either appropriately marked or under marked in which case you make a ton of money and you can see what happens in the alternative scenario and with banks trading at point one five times book you know how much you can lose you lose that much money. And with banks with a provision profitability that these banks have a hand with the potential on the upside obviously from point one five times book we think it's a multiple many many many times of that. Also as I suggested earlier and so you know I think a lot of this is going to come out related to the stress test over the next six months. And if there is a relatively benign or completely benign response to stress test then within the next six months these things are going to be trading a lot higher. And so in that instance you just have to think right now you know you have to be involved now or you are not. If you're going to take advantage of that over the next six months so that's why I would think of that it's not being able to stick a pin in OK they're perfectly properly marked. I know that I think any bank in the world if you took you know JP Morgan and you forced them to liquidate their whole portfolio tomorrow they would run through all their book value. So if you do that the Greek banks are going to run through all their book value. But if a slower more measured and intelligent approach is used by the regulators then then you won't.

[00:24:40] And so that's the way I would think about I think twice on appeals and on your view.

[00:24:48] I mean I agree with a lot of what John just said. I think that you know one of the other things that we talked about was confidence you know that couple of elephants in the room with Greece are you know we just went through a couple of exercises. One was with the IMF rattling the cages saying we need another bank recap. I thought that was unfounded and we can kind of get into our views on that if you want to I don't know so large panel here.

[00:25:11] But I think the other elephant in the room is you know we really just went through a scenario where the notary's didn't feel like they were protected enough to actually go through with the electronic auctions which you know I'm wondering you know are we in a third world country or are we in a member of the EMU you know in the U.S. If you jump on an administrative law judge as a desk or a judge's desk the bailiff will shoot you. And in Greece these gangs were coming in and canceling these procedures. So there are kind of a few Keystone Cop things going on in Greece that we still need to get our arms around. And I know Minister Sachal Odesa has addressed a lot of those issues. But you know if they need the help we can send some teams in to make sure that the notary's are going to be OK to get these things done. And we laugh at. This thing. These things are actually going on today in 2017 which is kind of hard to believe. So I think for us to for us the global investment community to really get confidence and get confidence moving forward we need some of these kind of basic things to get taken care of. And I know these it's not as easy as as we say it is and there's a lot of let's say let's say some of the customs that are kind of deeply embedded in the Greek culture have to change. And the good news is is meeting with the various bank CEOs CFOs and the government.

[00:26:30] It seems to me like people are willing to put the effort in to change those things. And so that's I think there are obviously reasons why things are priced where they are. As John was just saying and I think that all of these confluence factors get us to where we are today. But I think that I think there's enough effort being put into some of these projects to move these thing forward.

[00:26:56] So you stuck to the beautiful micro and it was very powerful but you do see a little needy greedy details and you're still there which is very inspiring. John you were involved in quite a significant transaction with me. Yes. We wanted to understand a little bit the logic behind that transaction. What motivates you and are there in Unison's nuances there that you're dealing with or things that you didn't expect when it comes down to reality. Look.

[00:27:31] Every large transaction you know is largely complex so there are complexities. It is Greece as well. But for the most part. Why did we invest in this transaction when we were global investors and when we look at things we looked at the asset and the asset was actually very very good performing. We thought there was some low hanging fruit that we could actually change and make it even a better performing and it was during a time where the environment the underlying Southbourne. Was in a crisis isn't a crisis. Even though we feel strongly that we're starting to come out. So when you look at an asset that's performing well and that you feel. That you can improve it immensely in a really difficult environment. Well the upside we felt and we still feel is extremely high and the delta is really really strong there so. We feel when the economy turns around the asset will you know two extremely large doing well now. So that's what we looked at we looked at the actual asset first. Then we looked at the country and the upside and both were tremendous. That's why we went to great.

[00:28:53] And as a closing and then we'll open it up from some questions.

[00:28:59] How do you see adapting your reality. What's your vision of the country that started with 2018 and let's say you're five years out. What do you see especially with some investors that are basically in larger and more inequal type investments and we know we're going to see them around a few years from now unless there's a quick exit. So maybe we start with Steve when we go down the line as far as 2018 what is the.

[00:29:31] Yeah I mean our view is we feel very good about what the next year or two look like. I mean you've got the global upheaval around tourism things are happening in Egypt Europe and even in Turkey which really provide an opportunity and which is why you've seen 9 to 10 percent year over year growth in tourism which adds tourist assets have been a real attractive area for growth. You've been able to see more trades in that space and even NPL front. I do think that they're going to have a tremendous opportunity to grow. When you think about what GDP can be for next year I think one important thing to think about. You know you have 34 months of consumer confidence increases that such a good rate now but imports were up 9 percent last year. And that is going to hurt GDP. So getting back into some component of an export driven economy is going to be a key fundamental for those three to five year run and actually doing a lot on the FDI side I think is going to be important. So you have a good two year trajectory I think you have an even shorter term Whipp from an improved and a beneficial view of the stress test that comes out John. But after that it's going to be the real blocking and tackling to say what are we now doing from an investment side. How are we doing what we need to do from a tax and tax side so that there is more interest in people coming in and really driving foreign investment.

[00:30:54] I'm sanguine I'm very optimistic especially on the near term but when some of those real opportunities around tourism start to wane because hopefully the global economy or the global tourism market finds a way to stabilize. I want to see that Greece is still in that great position and as an investor in one of the systemic banks we always say banking is a warrant on the economy.

[00:31:15] So really are very optimistic about where our position in our investment stands relative to that macro overlay one of the biggest things that Greece has for its going for it is tourism and like you said the sure we have 30 million people visit Greece. That's a record. Expect more next year especially with what's going on geopolitically with our neighbors. So that's a fantastic thing. And it's only going to get better and so the country can continue to build on that. We still need more photos they still need the infrastructure to accommodate all these tourists. And like you said called you know now the Chinese are making it more of a tourist attraction as well. So that's going to bring in a lot more people so that's a great thing for the country. Also despite who you know the political party in office they've been in office for what's been a longer period of time than other parties in the last few years. So that brings a certain source of stability to the country as well. So that combination I think is also positive going forward.

[00:32:26] You on your outlook for Feenan.

[00:32:29] Well you know I think I think this is one of the reasons why this conference and other conferences like this are so important for Greece because you know I think someone mentioned earlier today that the draw drag the draw down in the Greek economy from precrisis to now is largely a starvation of of investment or other consumption is much lower obviously. But look the difference between 240 or whatever billion euros GDP and 175. More than half of that is reduced investment. And I'm not arguing that there is a chance that Greece goes back to 2007 levels of investment. I don't think really anywhere in the world is going to do that and it's a good it's a good thing that we don't. Given what happened immediately thereafter. But but Greece is under invested and is starved for investment. And so I think the thing that the one key missing piece to the puzzle right now for Greece to recover is substantially increased investment and it's across the board in everything it's obviously in sectors like tourism and energy. But it's really a manufacturing but it but it's really straight across the board.

[00:33:38] And so what I would argue is that if Greece is able to prove the stability you know from whichever political perspective it comes from if it's able to prove the stability and the attractiveness of the of the investment opportunity and the idea that things aren't going to change every one year two years three years the rules aren't going to change U.S. substantially dramatic investment in Greece and that will allow the Greek government which is running you know sort of unprecedented primary surpluses which will then be higher to reduce taxes which will in fact increase investment and and growth opportunities again. So I'm very very optimistic. If the positive scenario turns out I'm optimistic then it will turn out. But so sticking a pin in a number one point three one point seventy two point one I think all those things are sort of like who cares. The answer is is that if Greece is able to do this going forward in 2019 and beyond the numbers will be much much higher for a short period of time than people in this room can imagine or fathom. That's

[00:34:42] our view.

[00:34:45] That's a tough act to follow. John what happens if it doesn't.

[00:34:50] Well I will take a little bit the other side to let's just say what we worry about I agree with you agree with everything John just said. I think that we think that the Greek economy is on the proper trajectory we think that once we get through IFRS IFRS 9 and we get through the stress test we get through the banks moving NPL and ps off the balance sheets that the economy is going to be unlocked and move higher. What we focus on a geopolitical risk here is the real risk you know we have we have another Catalonians kind of referendum December 21st. And and our view is that Hoy's can actually lose this one. Does that mean that there's going to be a recession. We don't think so we think they'll come up with some sort of bargain but that will provide some problems for global investment for a few weeks. You have the Italian elections next year. You have the large guy in North Korea that likes to shoot missiles and you have the U.S. you know building up arsenals in Guam you have all these things going on that maybe need to be thinking about or temper our enthusiasm for Greece with all of these crazy things going on. So as far as what could go wrong in Greece. I think Greece is on the right trajectory I think is what could go wrong with all of its neighbors is another story. If you need to pay a lot of attention there.

[00:36:08] So I'll leave it there.

[00:36:12] So it might mean a lot of very intelligent things spoken so maybe maybe I take I take the question how does it look like five years down the line or beyond and I'm pretty confident that you know in the medium run Greece will still be what it was 10 20 30 years ago which was fundamentally a country of 11 million of people or very vibrant very outgoing very extrovert of people who like to spend. And you know with certain you know very very specific cultural features like you know you want to be a homeowner but not people are levered. These are these are the fundamentals of the Greek economy. And it's a place that people want to visit and want to spend their money and actually want to live in Greece rather than migrate out of Greece. So that's that's my conviction for the future. And and synonomous too to a very prosperous economic activity I would argue just two more things quanties couldn't agree more with Kyle. There is you know there is a risk around geo politics. There is a risk in the sense that you know we've seen everything that we're experiencing. This is probably the longest period of geopolitical tranquillity around Greece. We've never had an uninterrupted 30 35 40 years of geopolitical tranquility. So you know this commands us to be even more vigilant and to actually read through. You know what are the the underlying dynamics. And the second point is again picking up something Kyle said but taking the current view. Hopefully I don't get upset to rename your puppy or anything.

[00:37:48] But but I think that there is Greece hasn't done a great job in terms of marketing. How receptive the people of Greece have been to change. There is a continuing perception that that system you know systemically Greece does not accept change. You've got broken institutions broken structures yeah you're starting off of a very very low base you know which is that you know you had a you know a bankrupt infrastructure as a society. But the reality is that the depth of the reforms that we've seen in Greece where they have happened in any other place in Western Europe the reaction will have been radically different. I cannot imagine whether its capital controls or the super deep cuts that we saw in the public sector taking place in places like France or even the U.K. and the general public actually being so receptive and acceptable to them.

[00:38:43] Thank you. And just to kind of bite a little bit on what you said because it's very crucial I mean you know we have these investors in front of us who are five or seven years ago I couldn't even imagine Greece getting such attention whereas who's driving this change in the adaptation of the Greek business people to you know capital such as Is it means that they accept corporate governance they accept dilution and they take in capital demands and requires a business plan rigidity and again a long term vision that the Greeks liked in the past.

[00:39:27] So these competitive capital instead of going anywhere else in the world it's diverted to a grievance because it diverted places and investments that are willing to accept all of what I just said. So I think it's fantastic to hear the where we today where you know every single year that we come to Capitol link there's positives and negatives this year there's definitely a lot more constructive sense with all investors and I'm very happy to hear that.

[00:39:57] But I think 10 years out and we see a the changing landscape where Greek corporates will be funded by institutional capital that require a lot of things that were not required in the past from Greek businesses. And we see money being diverted in projects that are instrumental for a very fundamental change and shift in the Greek economy such and the Negro in a lot of other projects that are not only in tourism and so high profile but in every other aspect of the Greek economy.

[00:40:32] So with that I'm going to open it up for questions in the back as hello panelists.

[00:40:46] The question goes for all the panelists Nicole Scott from Marriott International. I have a question that has two parts. Mr. kidney's rightfully so said that Greece is lacking investments in hotels and tourism. So the first part of my question to all the panelists is would your company be interested in actually investing in hotel investments in Greece. And the second would be what kind of deals would that be appealing for your companies.

[00:41:12] Thank you.

[00:41:15] Get on the second part of that question maybe one of the other panels heard what was the tourism Well I'll say from our standpoint we don't do much in the hotel and tourism space that are us. We have been very much focused on identifying interesting corporate opportunities that have an export ban as well. So we've looked at a few assets that have been unfortunately taken over by the banks independent of what's going on with your bank but also really a place where there's that dynamic shift and kind of an opportunity away from the tourism sector. So I probably wouldn't be as helpful to you from that standpoint.

[00:42:04] I think there is a lot of movement. I think there is a lot of interest in hotels. I think there has been a couple of iconic hotels that have been sold in Greece just recently that of a stir that of the Hilton. And I think that there are investors I know that I've spoken with the CEO of Hire very recently and they are looking to increase as well because they do not have I think they have one up in Thessaloniki. So. I know that there is interest and I think that there's going to be continued interest and I think it grows on each other. The more people see investment and foreign investment more people are going to continue to invest.

[00:42:43] And I think it will we'll continue to see that I view tourism in Greece from a tourist perspective actually we evolved in as far as Jonah is concerned invest in public markets and unfortunately there's not a single investable company that represents hotels that he can actually put a few million but hopefully that will change.

[00:43:09] We know one thing greased as best as tourism and I think that if the if the current government would engage in changing the land use permits around the Athenian coast you know I don't think it should look like the Spanish coast but it could easily look like southern Italy or even Croatia. For those of you who have been there I know the four seasons is building there but they should be calling the Amman and St. Regis and all these places and be thoughtfully building the Greek coastline I think would be a fantastic thing with various concentric circles of GDP growth around them kind of leveraging what Greece does best so I got my own two cents and I'm not any of those hotels but that's what I'd be doing.

[00:43:51] Yeah I would just add to that that you know one thing that the Greece hospitality sector is probably missing is capacity and scale. So we have a lot of fantastic assets but they're very fragmented and probably what you need is a few more platforms which actually deliver scale to the feeders of traffic. Because right now it is a market that has a very much a price taking price.

[00:44:17] They can do secrecy one more question here.

[00:44:31] So thank you for your analysis. As a Greek is you know I'm delighted to hear something positive in a quite a while. So my question is more about neo substantiate your confidence about where your analysis. So what has happened if you can give us specific examples of what has happened the past few years. A couple of years that make this upward trend sustainable rather than individual optics in a system that's fluctuating in crisis and due to extraneous factors.

[00:45:10] I think those draw to you.

[00:45:12] I'll I'll take it. Look you know when you look at when you again back to this issue of peak GDP declined you had a real GDP decline of 30 percent when you study history of the world. You don't see developed economies that have 30 percent real GDP declines over a decade. And so you know we have a we have this term in our office you can't break your arm jumping out of a basement window you know at some point in time there's a margin of safety that's there that's enough for you to start looking and when the Globe's growing at call at 2 or 3 percent real and Greece is actually in my opinion the head of the snake or the one belt one road project for China. It's the largest deepwater port between Asia and Europe. Strategically tactically it's one of the most interesting places in the world that's just really found a way to screw everything up and now I think there's been a lot of intellect kind of poured into Greece that have turned it around and again you look at these macro indicators and every single macro indicator we can find it's starting to tick higher. So if you ask whether it's sustainable. What I what I'll tell you is unsustainable is 30 percent decline. It's not going to decline another 10 10 percent of GDP. I'm fairly certain of that absent kind of a catastrophic geopolitical event on its own.

[00:46:33] So I just I think it's I think it's the nature and the severity of the decline coupled with the duration of the decline that lead us to believe it's the right time if I may add just one quick one thing very quickly and I agree with everything that Kyle said.

[00:46:49] But the other thing is that Greece engaged in a seven or eight year recession and depression obviously but also a seven or eight year debate in terms of what it wanted to be and even like I said into the earlier part of this year so much of the focus was on the political and so much of the focus over the last three years clearly has been on the political but for the four or five years before that as well.

[00:47:10] And I think so much more focus now in the markets will be on the fundamental but that's also it feeds through into economies as well when people were always looking at you know is there going to be a Brexit or not. That's a really really negative basis upon which to have a growing economy. People don't invest people don't engage in economic activity. And when you take that sort of political risk off the table and then you're just debating how we're going to stay in the eurozone how we're going to you know sort of construct our geopolitical economy. It's a very very very different ball of wax. And so I'd argue that off this baseline there will be more investment. The only question is how much more.