Court Dude is not Finance Dude. So it is with some significant degree of cross-eyed bewilderment that recent events in Europe - most dramatically, the impending default of the country of Greece on its $400 billion sovereign debt - have been observed by this spring chicken.
The guy who should perhaps be known as Finance Dude is a 40-something Texan by the name of Kyle Bass. In late 2006, according to a new book by Michael Lewis called Boomerang: The Meltdown Tour, Finance Dude bet big that the sub-prime mortgage bond market in America would collapse. He was one of the only people in the world to do so. In 2008, the collapse happened. He and his hedge fund made hundreds of millions of dollars.
In late 2008, Finance Dude invested a significant proportion of that money in betting that whole countries are about to collapse – specifically, Greece, Ireland, Italy, Portugal, Spain and even (believe it or not) Switzerland!
Apparently, this is because the Global Financial Crisis, the good ole GFC, was never actually averted – it was simply delayed. People believed that their governments could borrow whatever was needed to rescue their banks. The problem now is – the governments themselves have ceased to be credible.
Apparently, this is because the Global Financial Crisis, the good ole GFC, was never actually averted – it was simply delayed. People believed that their governments could borrow whatever was needed to rescue their banks. The problem now is – the governments themselves have ceased to be credible.
According to Lewis, if and when Greece defaults, Finance Dude will make somewhere around $700,000 for every $1100 investment he made in Greek Government default insurance back in late 2008. To make the same bet today would cost not $1100 but $230,000. And the bookies for the bet? Goldman Sachs, J.P. Morgan, and Morgan Stanley - all Wall Street banks that have recently been bailed out by their government!
Strange days indeed...
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