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As Greek Bonds & Stocks Crash, Here's Who Keeps Catching The Falling Knife

Tyler Durden's picture




 

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.

Wilbur Ross (and his friends) are BTFDing...

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.

and Allianz, PIMCO, and Putnam...

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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Tue, 06/16/2015 - 14:54 | 6202831 JustObserving
JustObserving's picture

These investors know that they can always buy a few key decision makers should things go against them.

With fraud, all things are possible.

Tue, 06/16/2015 - 14:58 | 6202845 Clueless Economist
Clueless Economist's picture

Very Sad News - Kirk Kerkorian has died. The legendary "man of the people" has passed.  His tragic death will be mourned by millions.  On a happy note, his good deeds will live on forever.  Rest in peace great human!

Tue, 06/16/2015 - 15:03 | 6202874 JustObserving
JustObserving's picture

Only the good die young.

KK died at 98

Tue, 06/16/2015 - 15:14 | 6202928 green sheen
green sheen's picture

Whatever you do don't blame the juice
https://youtu.be/llbzUyv1CLU

Tue, 06/16/2015 - 15:07 | 6202899 disabledvet
disabledvet's picture

Read a good story about the paternity suit he got (wrongly) hit with. I think his widow is in her twenties so she got her lottery ticket.

 

I find it interesting that no one is factoring in the collapse in the euro with this Greek Tragedy either.

 

Hope springs eternal with this crap.

 

Indeed "will Greece die just in time too?" does come to mind.

Tue, 06/16/2015 - 15:16 | 6202950 lordbyroniv
lordbyroniv's picture

Slaughter-house 5 is one of my favorite books.  RIP.

Tue, 06/16/2015 - 15:01 | 6202867 TheMeatTrapper
TheMeatTrapper's picture

6) Can kicked ad infinitum 100%

Tue, 06/16/2015 - 15:44 | 6203045 in4mayshun
in4mayshun's picture

I am so sure that this will be another non-event, I am seriously considering a futures account to take advantage of the upside jolt the markets are going to see next week. They will piece this farce back together even if it takes duct tape and bailing wire.

Tue, 06/16/2015 - 14:57 | 6202850 Dr. Engali
Dr. Engali's picture

I'm sure they are protected with portfolio insurance..... Hey, wait. Where heve I heard that term before?

Tue, 06/16/2015 - 15:42 | 6203037 zvzzt
zvzzt's picture

...uuuhhmmm,....,. in some school in Norway? What can go wrong with insurance. these guys know what they are doing and can acurately manage risk 

/sarc

Tue, 06/16/2015 - 14:58 | 6202855 Bighorn_100b
Bighorn_100b's picture

What's losing a billion between friends. Win some you lose some.

Tue, 06/16/2015 - 15:01 | 6202870 Bill of Rights
Bill of Rights's picture

Isn't it funny how we continue to use the phrase " Investors "

Tue, 06/16/2015 - 15:04 | 6202891 A_latvian
A_latvian's picture

Wouldn't it be awesome if this was all a Tsipras game to drive the market down, have his leftist cronies BTFD at the 11:59:59th hour, and then boldly announce: "We have come to an agreement! Austerity for all!" The market would skyrocket, reaping amazing profits, and then the promised "austerity" wouldn't even have to happen because he could just write checks drawn on the crony accounts!

That would be awesome!

Tue, 06/16/2015 - 15:43 | 6203043 zvzzt
zvzzt's picture

getting a huge smile after reading! thanks for that! that indeed, would be awesome - and funny as hell

Tue, 06/16/2015 - 15:04 | 6202892 Seasmoke
Seasmoke's picture

Would love to see Wilbur Ross bankrupt and living in a van under a bridge

Tue, 06/16/2015 - 15:09 | 6202906 disabledvet
disabledvet's picture

Jus say "Model S" probably evokes a wince and a preternatural reaching for the antacids.

Tue, 06/16/2015 - 15:10 | 6202909 youngman
youngman's picture

the game changed in 2008...now all bets are backed by the government..no losses allowed anymore

Tue, 06/16/2015 - 15:40 | 6203031 rqb1
rqb1's picture

That might change this weekend. 

Tue, 06/16/2015 - 15:13 | 6202930 CHX
CHX's picture

Greece is like a 4-times leveraged ETF with a built-in decay function that will guarantee you loose all money if you trade badly or wait for the moonshot that never arrives. 

Tue, 06/16/2015 - 15:17 | 6202954 exartizo
exartizo's picture

Dear Mr. Ross:

Its called Default Musical Chairs.

Really no different from going to Vegas.

Don't be the one who can't find a "chair" Mr. Ross.

Tue, 06/16/2015 - 15:17 | 6202957 Dre4dwolf
Dre4dwolf's picture

"should Greece really implode"

Really? Shit imploded like a year ago, its just been red-tape and grumbling for the past  8 months or so.

If people still think they aren't ditching the Euro, than you have some really delusional people out there with A LOT TO LOSE.

 

 

Tue, 06/16/2015 - 15:44 | 6203044 MasterOfTheMult...
MasterOfTheMultiverse's picture

PIMCO is probably not second world's largest Greek bondholder ex-ECB. According to BIS/Economist, US banks hold ~5% of Greek debt, highest estimate $11bn ( http://www.economist.com/node/15908288 , alas, numbers are 5 years old but can be verified on Bank of International Settlements (http://www.bis.org/). After ECB ($45bn), most Greek bonds are actually held by national institutions like Greek public sector funds ($30 bn), Bank of Greece ($13.2 bn) and Eurobank EFG/Ergasias owned by Spiro Latsis and family ($9bn): http://investmentwatchblog.com/barclays-releases-updated-report-on-top-4... who conveniently fled to Switzerland in case shit hits fan. Thus, Greek default would hit Greece's national 1% whole lot harder than it would hit US pensioners.

Tue, 06/16/2015 - 15:51 | 6203073 Dien Bien Poo
Dien Bien Poo's picture

Pimco. Buyer of rubbish. Greece, OGX. its all the same. I hope they get carried out.

Tue, 06/16/2015 - 16:41 | 6203218 paint it red ca...
paint it red call it hell's picture

No news here, it was decided no later than summer 07 that Working Joe and Saving Sally are the bag holder's designate...

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