Sunday, November 11, 2012

One For Brave Investors and Soldiers?

Adam Uren of This is Money reports, One for the brave investor? New hedge fund looks to make gains on Greek tragedy:
There was a time in the not too distant past that investing in Greece would be the equivalent of staking money on John Terry being named Sports Personality of the Year.

But Dromeus Capital has become the latest fund manager to take a risk on investment opportunities on offer in the beleaguered nation.

Although Athens still smoulders from a series of violent clashes on Wednesday, after a €13.5 billion government austerity package was passed, Dromeus has created a new hedge fund that aims to make something positive from the Greek omnishambles.

The Geneva-based fund has started raising money this week to invest in Greek equities and bonds and is expected to drum up €200 million.

However, there is no word yet on minimum subscriptions, which this being a hedge fund are likely to be large, so smaller investors should hold fire before they go gaga for Greece.

They are not the only ones who are turning their attentions back to the Eurozone, with Money Mail reporting this week that nearly £100 million had been pumped into Europe by fund managers and professional investors looking to cash in on the Spanish and Greek debt crises which has seen share prices plummet.

And This is Money’s Andrew Oxlade has been persuaded to ‘dip a toe’ into Europe, point out that those who backed the European stock market during the May to June low are now sitting on a 25 per cent rise.

But Dromeus’s hedge fund is a gamble, according to chief executive Achilles Risvas, who told the FT that Greece dropping out of the Eurozone could lead to 50 per cent losses.

On the flip-side, Greece remaining in the Eurozone could double investors’ money in the space of a year.
You can read more about the Dromeus Greek Advantage Fund in this Reuters article, but let me tell you where the real money is going to be made in Greece. It's not going to be in paying some hedge fund 2 & 20 for beta. The real killing is going to be made in private equity.

Ekathimerini reports, eight suitors for state's OPAP stake:
Greece’s most prized state asset, gaming company OPAP, has attracted no fewer than eight bids for the sale of a 33 percent stake, the Hellenic Republic State Development Fund (TAIPED) announced late on Friday.

The offers are from BC Partners, Emma Delta Ltd, the Gauselmann-Playtech-Helvason consortium, the Intralot Holdings Luxembourg-Intralot Investments Ltd consortium, Primrose Treasure Ltd, Third Point LLC, TPG Capital, and Triple Five World Group Properties Ltd.

TAIPED head Yiannis Emiris expressed satisfaction at the number and quality of bids, saying, “We are happy with the response of the investment community and its confidence in the country despite this difficult juncture.”

The privatization’s consultants will now examine the bids and in the next few days will submit their report to the board of TAIPED for the drafting of a short list, the fund said in its statement.

According to OPAP’s stock price, a 33 percent stake is valued at around 500 million euros, which the market deems a bargain.
If you know anything about Greeks and Italians, you'll know that they love to gamble. A 33% stake for 500 million euros is a steal for OPAP, which is why Chinese private equity has also expressed an interest in buying a stake:
Eight potential investors, including a Chinese conglomerate and private equity funds, have expressed interest in buying a major stake in Greek gambling monopoly OPAP, the country's privatisation agency HRADF said on Saturday. 
Among the firms responding to a November 9 deadline to express interest was a unit of Fosun International, one of China's largest business groups whose main shareholder is billionaire Guo Guangchang.

Athens is selling 33 percent, almost its entire stake in OPAP, one of Europe's biggest-listed gambling firms with a total market capitalisation of 1.5 billion euros ($1.9 billion) on the Athens Stock Exchange. Other potential bidders include private equity firms BC Partners and TPG Capital LP. Estonia-based Playtech, the world's biggest provider of online gaming software, teamed up with German gaming equipment maker Gauselmann AG to consider a bid.

OPAP is the crown jewel in Greece's privatisation programme for 2013, when the debt-laden country plans to raise about 2.6 billion euros by selling a string of state companies as part of its international bailout. Activist investor fund Third Point, whose hedge fund manager Daniel Loeb built a major position in distressed Greek government bonds in September, also expressed interest.

The other three bidders are a group advised by Greek shipping tycoon George Melisanidis and Czech investor Jiri Smejc; Greek gaming software firm Intralot, which is OPAP's technology provider; and Triple Five World Group Properties Limited. Greece, which aims to pick an investor for OPAP early in 2013, is advised by Deutsche Bank and National Bank of Greece.
Elite private private equity and hedge funds like TPG Capital, BC Partners and Third Point aren't bidding for Greece's "crown jewel" because they fear an imminent eurozone implosion. They're looking well beyond Grexit, bidding for it because they believe Europe will work through its mess and they and their investors stand to make huge profits in the future.

And it's not just Greece. Austerity throughout Europe is wreaking havoc on the social fabric but it will be a boon for private equity and hedge funds that know how to navigate the landscape. There is huge money to be made in Europe, which is why Canadian pension funds are flexing their buyout muscles there, eager to jump on distressed debt opportunities.


This is why I firmly believe that investors worried about Grexit, a hard landing in China, a eurozone implosion, or the US fiscal cliff, are all misreading systemic risk and they will underperform in both public and private investments. 

Importantly, in order to gauge risks properly, investors need to pay attention to what elite public and private funds are doing with their money, and ignore the "noise" in mainstream media.

While some claim this market decline has been in the works for a long time and it's just getting started, I say "bullocks!" and think that the so-called Obama correction is yet another buying opportunity. 

The dummies who blame it on Obama are out to lunch. As Michael  Hudson rightly notes, Obama's victory won't change a damn thing in Washington where fiscal hawks still run the show:
Obama’s two presidential victories represent an object lesson about how the 1% managed to avoid rescuing the economy – and especially his own constituency – from today’s rush of wealth to the top. Future political annalists will see this delivery of his voters to his Wall Street campaign contributors control as his historical role. In the face of overwhelming voter opposition to the Bush-Cheney policies, the President has averted popular demands to save the economy from the 1%. Instead of sponsoring the hope and change he promised by confronting Wall Street, the pharmaceutical and health care monopolies, the military-industrial complex and big oil and gas, he has appeased them as if There is No Alternative.

If the Republican accusations are correct in accusing President Obama of steering America along the “European” course, it is not really socialism. It is neoliberal financial austerity, Greek style. His task over the next two months is to avoid using deficit spending to revive the economy.

The neoliberals whom he appointed as a majority on the Simpson-Bowles Commission already have inflated their trial balloon claiming that the government must balance the budget by slashing Social Security, Medicare and Medicaid, not by restoring progressive taxation. My UMKC colleague Bill Black calls this the Great Betrayal. “Only a Democrat can make it politically safe for Republicans who hate the safety net to unravel it” he notes.

Having appointed the Bowles-Simpson commission members who seek to shift the tax burden off business onto consumers, the President will pave the way for Bush-type privatization. In his first debate with Mitt Romney, Mr. Obama assured his audience that they were in agreement on the need to balance the budget (his euphemism for scaling back Social Security, Medicare and Medicaid). By christening this “the Great Bargain,” President Obama has refined Orwellian doublethink. It is as if George Orwell went to work on Madison Avenue.
Those of you who think electing Obama will make a huge difference should read Michael's entire article here. I guarantee you it won't which is why I'm still bullish on banksters running the show. 

Speaking of banksters, another must read comment is Paul Krugman's latest, More on Invisible Bond Vigilantes:
I argued yesterday that even if the heretofore invisible bond vigilantes materialize one of these days, their attack won’t have the effects the deficit hawks imagine. Because America has its own currency and a floating exchange rate, a loss of confidence would lead not to a contractionary rise in interest rates but to an expansionary fall in the dollar.

Here’s a case in point of people getting this wrong: the letter by 15 financial CEOs (pdf) urging a quick resolution of the fiscal cliff.

The letter is actually kind of amazing in a bad way even before we get to that issue: the CEOs apparently can’t or won’t get their heads around the fact that the fiscal cliff issue is all about doing too much, not too little, to reduce the deficit. Somehow, by the fourth paragraph concerns about a rise in taxes and a fall in spending depressing demand have turned into bond-vigilante fearmongering, with a warning that Moody’s might downgrade US bonds and send interest rates up. Guys, that’s not what we’re talking about here.

But even if we accept the bait-and-switch, from fiscal cliffery to fear of what will happen if we don’t have a Grand Bargain now now now; and even if we ignore the likely market reaction to a Moody’s downgrade, which would probably be a collective yawn (remember that absolutely nothing happened when S&P weighed in); the logic is still wrong. Even if Moody’s succeeded in scaring people, this would mean a weaker dollar rather than soaring rates — and this would be good, not bad, for the US economy.

It’s scary to think that such muddled thinking has dominated “serious” discussion.
There is no serious discussion in Washington, which is why fearmongering over the fiscal cliff is dominating news coverage in mainstream media. In this environment, only brave (and smart) investors will make money.

Finally, it's Remembrance Day, so I leave you with some thoughts from one of Canada's most decorated soldiers, Tom Hoppe, who earned the Medal of Bravery and the affectionate nickname "Dances With Bullets" for his heroic August 1994 sprint into sniper fire to rescue three children pinned down in the civil war fury of Visoko, Bosnia.

Mr. Hoppe left his medals at home to protest and show his support for ex-soldiers who have launched court challenge against parts of the government's New Veterans Charter that was approved by all parties, enacted by the Conservatives in 2006 and defended by the government ever since:
The New Veterans Charter overhauled the way ex-soldiers are compensated and moved away from a pension-for-life system into a workers compensation-style lump-sum payment.

No matter how the government dresses it up, said Blais, the system has created two classes of veterans: those on the old system and those on the new system, who often get less and face a variety of caveats.

"We believe in one veteran, and one standard," Blais said.

"Justice is what those veterans [involved in the class-action lawsuit] are seeking. They do not want anything more than those that served at Juno Beach were accorded. They do not want anything more than those that fought at Dieppe, at Kapyong, at Vimy."

In an interview with The Canadian Press, Veterans Affairs Minister Steven Blaney said the government has been transforming the system, pointing to a recent $177-million injection of cash to halt a long-term disability clawback.

"We are just a phone call away" for help, Blaney said.

That didn't stop disabled veterans and military widows from unleashing a broadside of frustration Thursday on Parliament Hill, complaining of bureaucratic indifference and red tape that flies in the face of Blaney's reassurances.
Disabled vets 'struggling'

Few of the government's touted programs meant to help combat veterans find civilian jobs actually help the disabled, said retired master corporal Dave Desjardins, who suffers from an extreme lower-back injury.

Desjardins said he was proud to serve his country.

"What I'm not proud of, however, is how our government officials and senior military leadership can look directly into the camera (and) speak to the Canadian public about honouring our veterans at this time of year with implied conviction when they've clearly turned their back on us and continue to demonstrate (that) on a daily basis," said Desjardins.

He challenged Blaney to look him in the eye "and tell me you really care."

The government recently threw its weight behind a so-called "helmets-to-hardhats" program, which helps ex-soldiers get into the construction industry. That's a wonderful resource for someone without physical limitations, said Desjardins.

A number of officials "in expensive suits" are on the record as saying there are a number of opportunities for disabled veterans, but Desjardins said many of the head hunters discriminate in favour of officers, leaving non-commissioned members out in the cold.

"I'm here to ask those suits one simple question: Show me. Show me where those opportunities and jobs are — and I'm not just asking for myself, I'm also asking for the hundreds of other disabled veterans across Canada."

Tracy Kerr, wife of a triple amputee who fought in Afghanistan, said she and her family have battled for years to get basic needs, such as a lift to get her husband in and out of the bathtub.

"I've travelled seven hours to speak to the public about how we're struggling," said Kerr, from Sudbury, Ont., her eyes filling with tears as she spoke.

"I just want a quality of life, happiness for my family and when we make requests for his needs, to get them."

Jackie Girouard, whose husband was killed by a roadside bomb in Kandahar in 2006, said the families of many soldiers are denied access to the veterans independence program, which helps with yard work and light housekeeping.

She said policies that set time limits on accepting assistance, such as two years for education and job retraining, are insensitive and unrealistic.

"I was with my husband for 31 years, and I make no apologies for how long it took to me to get this far without my husband," she said.

"They could've said to me, 'Jackie, take your time and when you're ready come see us and we'll work together to help you achieve you and your family's goals.' Those words alone would have demonstrated to me that you care."
Disabled veterans and their widows were right to slam the Harper government before Remembrance Day. The disabled are treated like garbage in our society which ignorantly believes in the accessibility myth.

So on this Remembrance Day, I salute Tom Hoppe and other veterans, especially disabled vets, who fought hard to preserve our freedom and way of life and are now being dishonored in the most egregious way.