Founder Of $30 Billion Hedge Fund BlueCrest Says Most Euro Banks Are Insolvent; Euro Situation Much "Worse Than 2008"

Tyler Durden's picture

The Founder of one of the world's largest asset managers, the $30 billion hedge fund BlueCrest, Michael Platt, spoke to Bloomberg TV and cut right to the chase, saying most of the banks in Europe are insolvent and the situation in the region is "completely unstable." On how he approaches market risk: ""I do not take any exposure to banks at all if I can avoid it.  All the money at BlueCrest Capital Management is in Two-Year U.S. government debt, Two-Year German debt, we have segregated accounts with all of our counterparties.  We are absolutely concerned about the credit quality of the counterparties." On investing in illiquid assets, Platt said he "would not touch them with a barge pole" and that "the major opportunities will come post-blowout." Something tells us Russia and China know this all too well, and realize that the best time to "invest" in Europe is after the single (or multiple) bankruptcy. Which incidentally, as Kyle Bass said yesterday, after the "blowout" is when the ECB will finally step in as well, at which point the entire world will go all in on that now infamous 2-7 offsuit. And his view on how that bluff will end: 'In my opinion, what's going on now is significantly worse than 2008."

Platt on Europe's sovereign debt crisis:

"The level of concern of what we have about what is going on in Europe is absolutely huge.  When you evidence all over the markets that they are pricing for the potential of the eurozone break up, it is contrary to what everything is set by policy makers and by central bankers. We distill it down essential fact that we continue to focus on at BlueCrest Capital Management - if you look at the debt of Italy at 120% of GDP, which is increasing at a real rate of 5%, and if you look at the GDP, which now is forecast next year to be declining, arithmetically their debt is going to blow up.  And we don't see anything happening at the policy level that gives us any indication that there's anything that's going to convert this situation from where it is now to a much more substantial and real crisis in the future."

On whether a blow up of Italy will force a breakup of the Eurozone:

"We need much more radical measures to prevent this from happening.  If Italy and Spain are forced to roll their debt over, if they have to pay rates between 5 and 7% for this, then the situation in Europe is unsustainable.  We're not going to have any euro bonds, we're not going to have a full political and fiscal union where the transfers will take place.  It seems what we're going to have is an attempt to control the European situation through continued austerity, which is pro-cyclical.  As the economy slows down, we end up with more austerity which creates more slowdown.  We also have a requirement for banks to increase capital, therefore we're looking at a 3 trillion euro takedown in European balance sheets.  There's basically nowhere I can see where we can get any growth from."

On whether cultural and political divides between nations in Europe have played a role in the crisis:

"Absolutely, it's about the cultural and political divide.  The reality is that there is no willingness within the Eurozone to share wealth.  In the United States, if California is having a really difficult time, the rest of the United States will send money to California.  This is not the case in Europe.  There is no willingness to transfer money across boundaries in a long-term and sustainable way."

"The market prices the probability of a euro breakup to be distinctly non-zero, despite what the politicians say.  I believe that the eventuality of a European breakup is so awful, that more and more drastic measures will take place as time goes by.  The ECB is probably the only institution that can tackle this problem, but it doesn't have a mandate to do so…As time goes by, my view of what's required is a radical change of policy from the ECB to tackle this problem."

More on Europe's problems:

"The probability that the market is putting on a Eurozone breakup, in my opinion from evidence I'm seeing from option pricing across the different markets, is steadily rising…We're going into 2012, and in our opinion, it's only going to get worse."

"There is a sensible argument you should not price and the whole loan in response to where the government trades because the government has the ability to remove assets and put them on their own balance sheets."

"The problem with Europe is that almost every part of it has gone wrong now.  The banks are undercapitalized…If banks were hedge funds, and you mark them to market properly, I would say that probably most of them are insolvent.  [Most of the banks in Europe are insolvent right now] if they were marked like I am at a hedge fund, yes."

On whether BlueCrest's relationship with banks has changed:

"I do not take any exposure to banks at all if I can avoid it.  All the money at BlueCrest Capital Management is in Two-Year U.S. government debt, Two-Year German debt, we have segregated accounts with all of our counterparties.  We are absolutely concerned about the credit quality of the counterparties."

On whether he's afraid of taking risk right now:

"Absolutely.  The main thing that's driving our decision about where to lend money or where to place our funds under management, the vast majority is dollars which we keep in two-year notes.  We have a chunk of euros, which we keep in German two-year paper.  We're not interested in taking any peripheral debt risk at all and we're not interested in taking any bank credit risk right now."

On the United States and Germany:

"I think they're the best of the bunch.  I feel pretty good about the United States.  I don't really have an issue because I think the complete control that the authorities have, particularly the Fed and its bond buying program, we do not have issues about having money in Two-Year securities in the United States.  In Europe, you've got to put your euros somewhere.  It is a much more difficult place to make a decision.  Two-year German notes seem like a reasonably safe bet right now, certainly compared to anything else."

On making money in a crisis:

"The most important thing to remember about crises is you do not make your money going into the crisis.  When you go into a crisis such as 2008, markets trade against positions. People have positions on and people need to get risk off.  All the things that people thought were a good idea start going into reverse.  The big money you make in trading is more in the aftermath of the crisis.  In 2009 we made 60% with no down months on our master fund."

On whether BlueCrest is looking at illiquid investments:

"I would not touch an illiquid product with a barge pole, to be honest. We're going into an environment where banks need to delever.  Illiquid assets will be coming on to the streets everywhere.  The price of liquidity in my opinion will go up.  I don't want to own any illiquid assets whatsoever. The strategy at BlueCrest is to be in super liquid products, things that can be turned around in a day."

"It would have been the end of my business in 2008 had I done such a thing.  Anyone who had an illiquid position within their hedge funds, there were runs on those hedge funds because people wanted to get the cash out and not be side pocketed with the illiquids.  In 2008 I paid out $9.5 billion to the street because I was the only hedge fund that was up a lot and completely liquid.

On whether we'll see a repeat of the 2008 credit crunch and whether those that hold illiquid assets will get crushed:

"That's what I think, yes.  I think so.  In my opinion, what's going on now is significantly worse than 2008…The European debt situation is fundamentally completely unstable.  The process of refinancing your debt with a real rate of 5 when you have negative GDP growth, and we are heading into a recession in Europe, arithmetically can turn all of the countries in Europe, given enough time, into Greece."

On how closely tied America's futures and the potential for investment are to Europe's debt crisis:

"Clearly it would be a huge drag on the U.S. economy.  We're talking about in Europe is a situation of instability driven by pro cyclical policy, removing the ability of banks to invest in sovereign debt.  We're talking about pro-cyclical policy of governments not being able to deficit spend by law. We're talking about existing deficits that need to be closed. We're talking about an increase in the amounts that governments will have to find when they're
Forced to refinance their rolling over paper this year at real rates of interest, which are way beyond anything they will ever be able to achieve in terms of growth."

On how BlueCrest continues to make money through the slowdown:

"Because we are traders and do not take any credit risk and we're super liquid.  In the time that BlueCrest has been around, we have made $17 billion of trading profits for our investors…so in an environment like this where we are a very secure trading strategy, taking no credit risk, not buying anything illiquid, that is the kind of thing investors frankly really want to hear from someone like me."

On where he's seeing investment opportunities:

"I think the major opportunities will come post the blow up.  I think for the time being you want to keep it quite simple.  You do not want to take any credit risk.  I think volatility in certain markets is very underpriced compared to what's potentially about to happen.  I think if we go into a crisis scenario, things like German bunds could be more expensive than they are right now.  And I think as the crisis intensifies through the process of governments refinancing and deficits becoming more unstable and growth deteriorating in particular, I think those kinds of trades will play out in the market and be profitable."

On moving BlueCrest from London to Geneva:

"I did not really want to be exposed to the Eurozone. I don’t want to be exposed to regulation coming out of the Eurozone.  Most of my clients come from the United States.  I am not really marketing to the Eurozone anyway.  So it didn't make much sense for me to be in the Eurozone as a business."

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doomandbloom's picture

collapse, female dogz

trav7777's picture

this guy has "segregated accounts"...ROTFL, that sounds safe

Mr Lennon Hendrix's picture

All of your monies have been rehypothecated!

RickyBobby's picture

Funny, a Goldman Sachs ad intro to the video.

Pladizow's picture

Bass, Hendry and this guy - vs.- Kramer, Gartman, and Kass!

Choose wisely!

kito's picture

this guy sees printing as the solution to europe, which side is he on again?

Ahmeexnal's picture

Actually, printing would liberate the world from the shackles of fiat. Let the euro hyperinflate into oblivion. The USD would follow within 3-6 months.
It clear he's a goldbug.

kito's picture

hey ahmeexnal, hope your property search in ecuador is working out for you. whatever printing is done by the ecb, which i still doubt will happen, would be offset by massive deleveraging and currency destruction. highly unlikely printing would lead to hyperinflation.   i dont see 600 billion euros of printing doing much except extending the day of reckoning another year or so..............

fonzanoon's picture

He is hiding in treasuries.....enough said.

tooktheredpill's picture

He certainly made quite an impression on the female host.

No mention of shorts. Guess he is not allowed to short the best ones.

Thx for posting Tyler.

snowlywhite's picture

dude, he's 30bln... How many things vaguely safe and liquid enough for 30bln do you know?


or you expect him to get a truck and park all his money in it?

Jay Gould Esq.'s picture

 "In the United States, if California is having a really difficult time, the rest of the United States will send money to California."

"Send" money -- that is, taxed -- and unwillingly, on the part of the American Taxpayer. Frankly, if Kaaleefornya ever did go into some form of default, I submit that the majority of Americans would say to Hell with Kaaleefornya -- Kaaleefornians voted themselves the profligate government they desired, and thus deserve...let them clean up the mess.

hedgeless_horseman's picture



In the United States, if California is having a really difficult time, the Federal Government will simply print more money to send to California.  Most Americans are blissfully unaware of the inflation tax, and are therefore none the wiser.  In Europe, however, the populace is very much aware of the inflation tax.  That is why you hear the Germans (that are not bankers or exporters) saying, "Nein!" to transfering wealth to other areas.  It is not that the Americans are more generous, it is simply that the Europeans are better educated on this matter. 

Ahmeexnal's picture

Actually, Ahnuld started printing his very own notgeld in the last years of his reign. Expect every state to follow this practice as the downward spiral enters the next phase of complete social breakdown.

toadold's picture

Well their are some  states (Texas, Georgia and about three others) that are prepared for a State gold backed or basket commodity money if the USD goes splat. 

GeneMarchbanks's picture


I'd also add that we've had many different generations live through hyperinflation. See: Weimar, Hungary, Yugoslavia.

JW n FL's picture



offshore internal repo's to get that JP Morgan 60 to 1 Leverage BITCHEZ!!!

Yes I agree! segregated accounts make everyone wayyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyyy more trust worthy!

ndotken's picture

sounds like someone is upside down and needs a win on a huge short to balance his books ....

Pladizow's picture

Did'nt he say he is 10% gross YTD?

ndotken's picture

good point ... hedge fund managers never lie /sarc

Ahmeexnal's picture

so why would Putin buy eurobonds?
the time to buy them is when there is blood in the streets.

Quintus's picture

Umm.  I think upon closer examination he would find that most European, US, Chinese, Japanese banks and basically all banks everywhere are pretty much insolvent to a greater or lesser degree.

This isn't really news.

Let's do away with Mark-to-Unicorn asset valuations and see who's really swimming naked, to borrow from Uncle Warren's phrase.

LawsofPhysics's picture

I agree.  The paper-pushing fucknuts are simply getting nervous and trying to take position that they think will get them out of the line for the guillotine in the future.

trav7777's picture

the SYSTEM is fucking insolvent.  Is that so hard for people to grasp?

tmosley's picture

Yeah, so hold dollars, lol.

Pladizow's picture

And what ever you do, Trany7777, dont buy gold?!?!

youLilQuantFuker's picture

Unless you own the physical black gold. Ergo, war female dogs!

blu's picture

How can it be insolvent if they still have cheques/checks?

Ralph Spoilsport's picture

Shorts on for barge poles bitchez!

CPL's picture

And out of the left field...wasn't he was talking about Greece.

GeneMarchbanks's picture

On moving BlueCrest from London to Geneva:

"I did not really want to be exposed to the Eurozone. I don’t want to be exposed to regulation coming out of the Eurozone.  Most of my clients come from the United States.  I am not really marketing to the Eurozone anyway.  So it didn't make much sense for me to be in the Eurozone as a business."

Hedge funds: a dying model.

London is in doo-doo.

narnia's picture

I agree.  This guy is a wanker investing a bunch of other people's money based on central wanker actions...  then goes on national TV lobbying for central wanker action.  

twotraps's picture

hate when those wankers manage 30B....hmm, how much is that in management fees?  Yeah, he's pretty fucking stupid.

Cdad's picture

Huh...Larry Fink must not be a follower of Michael Platt. 

HappyMan's picture

Hello everyone! My first post. Just wanted to say hi. I knew someone who worked at BlueCrest. They don't anymore. LOL.

blu's picture

First post? Then allow me the honor of being the first to call you a fucking moron sheeple troll in response.

Wow that felt great! And I still respect you.

Pladizow's picture

Fuck You, virgin poster!

quasimodo's picture

So much for THAT cherry staying intact

Jim in MN's picture

We will wipe that smile offa you face in time.

(actually, welcome to the madhouse, enjoy)

fuu's picture

Your smile makes me want to break something beautiful.

NotApplicable's picture

Welcome. We'll see just how long you remain happy.

Bonesetter Brown's picture

Welcome!  Don't let the harsh responses dampen your chipper mood.

Please contact your friend and get a run-down of his time at BlueCrest, then post your full findings here.

Don Birnam's picture

"Thank you sir ! May I have another ?"

Cognitive Dissonance's picture

Print baby, print. It solves all the problems at the expense of the plebs.

No problemo.

mayhem_korner's picture



We don't call it "printing" any longer.  It's now "rehypothecation of insolvency".

Zero Govt's picture

I thought Trichet sorted this out?

I'm confused, he said he'd returned staaabiiility to the Euro banking system... fuking brilliant those stress-tests, work of genius


Dr. Horrible's picture

If all banks had to mark to market......

I wish this rule was changed and we could see the real state of the banks.