Nomura, Goldman Move Investment Bankers to Asia to Tap Growth
The Bottom Line:
Nomura, along with Goldman Sachs, and Bank of America are moving their investment bankers who specialize in advising financial-services companies, to Asia. Banks and insurers in Asia have been selling a record amount of shares.
Buyout Firms’ Reinvention, With Wall St. Castoffs
Numerous firms on Wall Street, including Goldman Sachs and Citigroup, are unloading businesses to abide by the new banking rules.
Above: Riot police block a demonstrator in Athens.
NELSON D. SCHWARTZ and GRAHAM BOWLEY, The
New York Times, March 3, 2010
Is Spain the next Greece? Or Italy? Or Portugal?
Even as Greece pledged anew on Wednesday to rein in its
runaway budget deficit, briefly easing the anxiety over its perilous finances,
traders on both sides of the Atlantic weighed the risks — and potential rewards
— posed by the groaning debts of other European governments.
While investors welcomed news that Athens would raise taxes
and cut spending by $6.5 billion this year, analysts warned the moves might not
be enough to avert a bailout for Greece or to contain the crisis shaking Europe
and its common currency, the euro.
Indeed, some banks and hedge funds have already begun to
turn their attention to other indebted nations, particularly Portugal, Spain,
Italy and, to a lesser degree, Ireland.
The role of such traders has become increasingly
controversial in Europe and the United States. The Justice Department’s
antitrust division is examining whether at least four hedge funds colluded on a
bet against the euro last month.
“If the problems of Greece aren’t addressed now, there is a
risk the market will focus on the next weakest link in the chain,” said Jim
Caron, global head of interest rate strategy at Morgan Stanley.
Whatever the outcome in Athens, the debt crisis in Europe
threatens to tip the financial, as well as political, balance of power across
the Continent. With Germany and France emerging as the most likely rescuers,
leaders in Berlin and Paris could end up dictating fiscal policy in Portugal,
Ireland, Italy, Greece and Spain.
And in the months ahead, fears about the growing debt burden
elsewhere in Europe are likely to return, according to investors and
strategists. That is particularly worrying given that Western European
countries must raise more than half a trillion dollars this year to refinance
existing debts and cover their widening budget gaps.
The way fear can spread from capital to capital reminds Mr.
Caron of how the American financial crisis played out. “What people are
doing in the markets is no different from what they did with the banks,” he
said. “First it was Bear Stearns, then it was Lehman Brothers and
so on. That’s what people are worried about.”
France and Germany are emerging as the crucial backers of
any lifeline for Greece, but they have slow growth and budget troubles of their
own — deficits equaling 6.3 percent of gross domestic product in Germany and
7.5 percent in France. And among voters in both countries, “there is very
little appetite for rescues,” said Marco Annunziata, chief economist for
Unicredit.
The most vulnerable country after Greece, some analysts say,
is Spain, which has been mired in a deep recession. Facing an unemployment
rate of 20 percent, a budget gap of more than 10 percent of gross domestic
product, and an economy expected to shrink by 0.4 percent this year, Madrid has
little wiggle room if investors shun an expected 85 billion euros in new bond
offerings this year.
Spain’s neighbor Portugal is also vulnerable. Large budget
and trade deficits, combined with a shortage of domestic savings, leave
Portugal dependent on foreign investors. And, as in Greece, there may be little
political will to slash spending or raise taxes.
That’s in sharp contrast to Ireland, which had been a source
of anxiety last year. New austerity measures, including a government hiring
freeze and public sector wage cuts, have put it in a stronger position as it
raises 19 billion euros this year.
The Italian government is also heavily indebted — it has
more than $2 trillion in total exposure — but it is also in a slightly stronger
position than Spain or Portugal because its economy is expected to grow by 0.9
percent this year and 1.0 percent next year. In addition, its budget is not as
far out of whack, with the deficit this year expected to equal 5.4 percent of
G.D.P.
According to Kenneth J. Heinz of Hedge Fund Research, the
big hedge funds are now evaluating the response by other European countries in
extending a lifeline to Greece before they probe weaknesses and opportunities
in other countries.
Hedge funds, banks and other institutions are still wagering
on a drop in the euro as well as the British pound.
Those trades have been controversial for months in Europe.
But the debate shifted to the United States on Wednesday, after it emerged that
at least four hedge funds had been asked by the Justice Department to turn over
trading records and other documents. That request followed a dinner in New York
last month where, among several other subjects, representatives of some of
these hedge funds discussed betting against the euro.
The funds that received the letters — Greenlight Capital,
SAC Capitol Advisors, Paulson & Company and Soros Fund Management — are
among the best-known names in the hedge fund universe. Greenlight and SAC
declined to comment, as did the Justice Department. Paulson & Company,
whose representatives did not attend the dinner, also declined to comment.
In a statement, Michael Vachon, a spokesman for Soros Fund
Management, denied any wrongdoing and said, “It has become commonplace to
direct attention toward George Soros whenever currency markets are in
the news.”
The dinner, in a private room at the Park Avenue Townhouse
restaurant in Manhattan on Feb. 2, involved about 20 people and was
characterized as an “ideas round table” by several who attended. But people
present at the dinner or knowledgeable about the discussion said the idea of shorting
the euro occupied only a few minutes of the conversation.
The presentation on the euro, by SAC, lasted less than five
minutes, according to these people.
Notes provided by one of the firms that attended the dinner
summarized the discussion on the euro state: “Greece is important but not that
important; instead you have to start thinking about every other country. What’s
after Greece? Spain, Ireland, Portugal.”
James S. Chanos, a hedge fund investor who has not been
making bets on the euro, defended the positions taken by hedge funds, calling
the inquiries into their activities “witch hunts.”
“Hedge funds and short-sellers are being blamed for the
failings of other people,” he said. Nevertheless, the anxiety in Europe is
reflected on the Chicago Mercantile Exchange, where trading in futures on
the euro soared to a record $60 billion in February — up 71 percent from a year
ago.
“The Greek story is putting downward pressure on the euro,”
said Derek Sammann, a managing director at the CME. According to CME data,
hedge funds are in their most bearish position in a decade in shorting the
euro, said Mary Ann Bartels of Bank of America Merrill Lynch.
“They have been short for a while, but in the past two weeks
have really pressed it,” she said.
The Wall Street Job Report 