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Moore Capital, Which Is Long Greek Duration, Warns Of "Potential Breakdown" Of EMU
Moore Capital, which was recently blamed for being a CDS "speculator" by Greece and the EU, discloses that it is in fact net long Greek duration (and its P&L is suffering as a result), according to a fund letter obtained by MarketWatch. It is thus not surprising that the fund is lamenting the botched Greek rescue, and the end of the EMU and hopes an effective bail out will soon be instituted. After all most leading hedge funds have been buying up Greek cash debt on the way down (and this certainly includes Paulson) without CDS hedging; they need it to avoid having the embarrassment of explaining to their LP how the only bet on global moral hazard so far this year has not panned out.
Letter excerpts from MarketWatch:
"Perhaps the most interesting area for the foreseeable future is in the potential breakdown of the European Monetary Union,"
"Instead of punishing the Greeks for their free-rider and fraudulent gaming of the Maastricht rules -- either by ejecting Greece from the Union to propel them to reform and come back at a competitive exchange rate or by forcing them to restructure their debt within the confines of monetary union, either of which would have eventually strengthened and solidified the euro -- the European leaders have decided to reward the prodigal Greeks with a bailout, socializing their ills and taxing once again the prodigious Northern European workers."
"The bailout could have "disastrous consequences" for the European Union and Europe."
"Sovereign-wealth funds have bought trillions of euros to diversify away from U.S. dollars. That's supported the euro and allowed European investors to flee their debauched currency."
"When sovereign-wealth funds finally realize what they own, they may stand aside... The euro will find a new level while these large funds instead seek currencies in the emerging markets where solvency is not such an issue."
"There were many recent newspaper reports citing that Moore Capital and others were shorting the Greek bond market. We are positioned with a net long duration exposure to Greek bonds, which explains a drag on performance month to date. We are expecting the European authorities to move beyond uninformed blame-casting and begin bailing out Greece."
"European financial authorities see hedge funds particularly as a threat to their ability to contain prices, information and confidence in their increasingly risky sovereign-debt markets. Witness their demonization of hedge funds in the market revolt after the Greeks were found to be lying about their deficit data."
"Instead of listening to the market's warnings (and if anything, the market players had been much too relaxed about sovereign-funding risks), the European authorities would prefer to adopt a stance of 'First Kill All the Canaries in the Mineshafts'."
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Spain has just raised EUR 2.1 Bln instead of EUR 3 Bln in 15 Yrs Bonds....
Why on earth would anyone be long EURO against any currency? Good lord, you would have to be insane.
What bailout? There won´t be any bailout. Greeks want free-money, not some conditional loans. Expect default within few months.
Leo: I thought going long Greece was a no-brainer?
Hedgies go long on debt from people who keep lying about how large it is?
Jeez, I thought retail investors were supposed to be Dumb Money.