In the Belly of the Beast #3

The next guy many had come to see. He deals mostly with distressed securities and I thought him the least impressive of the speakers. He has opened a London office to deal with the coming debt problems in Europe. The banks must recapitalize either by selling stock and diluting the current owners (some of whom are governments) at low prices or by shrinking the balance sheet by selling declining assets.

The next guy was interesting, interested and intense. He was 30% in cash. He is hiring lawyers to figure out how the European governments will invalidate the Credit Securities Swaps and their holders. Being early in the distressed securities market is usually a mistake because, in a distressed market, the buyer is usually yourself; you can't sell to yourself. Worried about the "double decker bonds" which buys the Brazilian currency and shorts the high yield Brazilian bond. He shorted Japanese utilities because he thought the Chinese economy would decline and then the tsunami hit, ruined the utilities and made him look like a genius.