According to a number of hedge fund managers, the Eurozone debt crisis is far from being resolved and the current Japanese programs to boost its economy can result in major issues in the long run. These hedge fund heads are viewing the current rallies that have been recurring in the past year is but a cover-up for the bank managers failures to address both local bank debt issues and to the larger extent, Europe as well.
One of the fund managers, Galia Velimukhanetova, a GLG fund manager under the organization of hedge fund manager Manchester Group said, "(A Cyprus-style bailout) will probably happen somewhere in Europe again." These remarks were made during the GAIM conference held in Monaco last Tuesday.
She added, "Germany is going to have to spend more than 10% of its GDP to support transfer union... They may ask for concessions - a haircut for debt, deposit measures to contain a capital flight."
She further added, "Our best investment idea would be (to) short domestic financials of peripheral European countries. There is a real asset quality problem in those financial institutions. We've done a lot of analysis. Non-performing debt... in Italy is high teens, in Spain is high single digigs or low double digits. However usually after the audit, these things double or triple."
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