The Greek Bankruptcy: One Year Later - Exposing The Charlatans Formerly Lost In Translation

What a difference a year makes. It was just over a year ago that Greece received its first (and certainly not last) $1 trillion + bailout package from the EU, the ECB and the IMF. Just over 12 months later, all those who peddled Greek bonds to the rest of the world (ahem Germany) are now furiously backtracking, having finally realized what we, and everyone else with half a brain said from the beginning: it's over for Greece, for the eurozone in its current configuration, and for the single currency. But fine, let's kick the can down the road for a few more months, which will allow banks, with access to interest-free central bank capital, to literally steal Greece's soon to be privatized assets for pennies on the dollar, and then send the carcass, now picked dry, to the international bankruptcy court. In the meantime, we would like expose all the idiots, who like various anchors on Comcast's bubblevision channel, pitched Greek paper to hapless investors, only to see losses (this is not some speculative asset - this is fixed income) of over 40% in one year, and for some reason continue to have a podium from which to spread their lunacy, greed and outright stupidity.

From "We are buying Greek Governmen Bonds!", published in Handelsblatt May 3, 2010: On this day, the German financial newspaper “Handelsblatt” launches a multi-page call to lure unsuspecting citizens into buying Greek government bonds. Gabor Steingart, editor-in-chief, opens the indecent proposal with the following words (loose translation):

Handelsblatt-Aktion: Wir kaufen griechische Staatsanleihen!
Gabor Steingart, editor-in-chief, Picture: Handelsblatt

“As the largest financial newspaper in the Euro region, Handelsblatt wants to be a voice of reason during these turbulent times. (…) The Greeks are sinners, but they are repentant sinners. The rescue package agreed on by the international community this weekend takes this into account. However, governments alone cannot save Greece. A stabilization can only be achieved if Greece can access capital markets. What is needed is a contribution of major banks. What is also needed is a sign of trust by the citizens of Europe. This is the purpose of our action call “I am buying Greek government bonds”. Last Friday, as a sign of responsibility, I have ordered EUR 5,000 Greek government bonds.”

What follows is a parade of German dignities.

First to praise the virtues of Greek government bonds is Hans Eichel, former German Finance Minister:

Handelsblatt-Aktion: Wir kaufen griechische Staatsanleihen!

Hans Eichel, former German Finance Minister. Picture: Handelsblatt

For the first time in my life I am buying government bonds – Greek government bonds! Because we have to keep the Euro-zone together. The Greek population has to bring great sacrifices, there is no way around that. But we should show our solidarity.”

Handelsblatt must have summoned every single pied piper available over that weekend (or was it the other way ‘round – was Handelsblatt summoned by the pied pipers?). Eichels virginal foray into government bonds is seconded by Bert Ruerup, former government advisor (“I have bought Greek government bonds at the beginning of the year and will continue to do so”), Gustav Horn, Director IMK Institute for Macro-economic Research (“I bought Greek government bonds since I can’t leave our currency’s fate in the hand of speculators”) and Wolfgang Kirsch, CEO DZ Bank (“I own Greek government bonds because I believe in the idea of a unified Europe”).

Manfred Lahnstein, former Finance Minister, felt like he had to lean out of the window a little bit further:

Handelsblatt-Aktion: Wir kaufen griechische Staatsanleihen!

Manfred Lahnstein, former German finance minister. Picture: Handelsblatt

“I am ready to buy a reasonable amount of Greek government bonds. I am doing this because I have confidence in the creditworthiness of Greece and the strength of European and international guarantees. I am doing so in order to also set a small sign against arrogance and thoughtlessness our Greek partners are treated with by parts of politics and media.”

Condolences go out to Werner Bahlsen, CEO of Bahlsen GmbH (“Today I bought Greek government bonds for EUR 100,000”). Not because of his reasoning (“we must not leave the country to speculators!”) but because of all the Choco Leibnitz one could have bought with that money.

Handelsblatt-Aktion: Wir kaufen griechische Staatsanleihen!

Werner Bahlsen, CEO Bahlsen GmbH, Picture: Handelsblatt

Deputy editor-in-chief Peter Brors gives free advice as he specifically addresses the retail investor reluctant to fall for the scam: “Greek government bonds for you as a private individual? Yes, of course! EUR 2,500 for Athens and a first-class yield for me.”

We will spare readers the embarrassing statements by the rest of the 20+ celebrities. Remarkably, the only sane person in the asylum seems to be troll-like Hans-Werner Sinn, head of IFO Institute for Economic Research: “It’s okay to be partial for Greece. But I cannot recommend buying Greek government bonds in good conscience. Instead, I would recommend vacationing in Greece. That way, you know you’ll get something in return for your money.”

Handelsblatt-Aktion: Wir kaufen griechische Staatsanleihen!Hans-Werner Sinn, IFO Institute. Picture: Handelsblatt

If Greek government bonds were so attractive at 9% yields (and a national duty for Germans to pile into), where is the call to gobble up those gems now at 17%? Or maybe better to see bond express in price terms...

As Lighthouse Investment Management's Alex Gloy points out: "I am not holding my breath for Handelsblatt to revisit this blatant display of licking their advertisers’ boots (banks, insurance companies, consultancies). Usually, advertisements are marked as such. Cigarette companies have to display prominent health warnings on their products (“Smoking kills”). Next time, Handelsblatt should label each page accordingly: “Following the investment advice of these politicians and bankers might kill your performance”.

Last but not least, perhaps it is time to revisit the performance of the Norway Sovereign Wealth Fund:

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.

“The point is, do you expect these guys to default?” said Harvinder Sian, senior fixed-income strategist at Royal Bank of Scotland Group Plc, in an interview. “Norway has taken the view that they will not. The Greek holdings are particularly interesting because the consensus in the market is that they will at some point restructure or default.”

Norway says its long-term perspective will protect it from losses. “One could say we are investing for infinity,” Johnsen said in an Aug. 27 interview...

Who would have thought infinity could come so fast (and at a 36% annualized loss). And what, we wonder, would Alanis Morrisette say about this: "Norway Stops Aid Payments To Greece"...

with Alexander Gloy