Submitted by Tyler Durden on 05/07/2012 11:02 -0400
About two years ago the Norwegian sovereign wealth fund did something truly remarkable: it invested for infinity: "Norway, which has amassed the world’s second-biggest sovereign wealth fund, says Greece won’t default on its debts. The Nordic nation’s $450 billion Government Pension Fund Global has stocked up on Greek debt, as well as bonds of Spain, Italy and Portugal. Finance Minister Sigbjoern Johnsen says he backs the strategy, which contributed to a 3.4 percent loss on European fixed income in the second quarter, compared with gains on bonds in Asia and the Americas. Norway says its long-term perspective will protect it from losses. “One could say we are investing for infinity,” Johnsen said." Well, we all know how the experiment ended: "Norway Sovereign Wealth Fund Purges All Insolvent Eurozone Debt Holdings." So much for infinity. But that has not stopped others to boldly catch falling knives where so many other have tried to catch falling knives before, and failed. Enter Greylock Capital and various other hedge funds who are positive they have rediscovered the wheel.
From the NYT:
As Greece girds for an election on Sunday that top politicians warn could ultimately force the countryto leave the euro zone, some risk-happy investors have adopted an improbable rallying cry: buy Greek bonds now. Among counterintuitive bets, few in Europe match this one.
The common wisdom holds that the new Greek government, whatever its composition, will be unable to force another round of public spending cuts on its people. That could prompt Greece to leave the euro currency union and default on its debt. But the contrarians, who are mainly distressed-debt experts, see a buying opportunity. They favorably compare the junklike 21 percent yields on Greek bonds to the much lower returns, but comparable risks, on bonds of international renegades like Venezuela and Argentina, which now trade in the 11 to 13 percent range.
"This is the trade of the year," said Hans Humes, president of Greylock Capital, a New York-based hedge fund. Greylock is actively buying the debt at prices that have ranged from 19 to 25 cents on the dollar. "It's a no-brainer, LOL got that right" Mr. Humes said.
Investors like Mr. Humes are betting that a new Greek government -- even if it is a coalition that includes unruly splinter parties -- will have to accept demands from Europe and the International Monetary Fund that the country adopt yet another round of to-the-bone spending cuts, to secure the money it needs to survive and make good on its debts.
Bond traders say that others now doubling down on Greece include Banco BTG Pactuel, the Brazilian investment bank; Finisterre Capital, a London-based fund company that specializes in emerging markets and, in particular, Brevan Howard, one of Europe's largest hedge funds.
Mr. Humes was a member of the steering committee that negotiated the deal in March that erased 100 billion euros from Greece's still-staggering debt load, but left investors like himself with eye-watering losses.
http://www.zerohedge.com/news/greek-bonds-monkeyhammered-hedge-funds-slash-hands-catching-falling-knives?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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