Sunday, 23 October 2016
Last updated 1 day ago
Dec 15 2011 | 1:52pm ET
BlueCrest Capital CEO Michael Platt thinks most European banks are insolvent, says he wouldn’t touch illiquid assets with a “barge pole” and expects “the major opportunities will come post-blowout.”
Platt made the comments during his first-ever live TV interview, given to Bloomberg News.
Asked about Europe's sovereign debt crisis Platt, who runs Europe’s third-largest hedge fund, characterized his level of concern as “absolutely huge.”
"We distill it down essential fact that we continue to focus on at BlueCrest Capital Management—if you look at the debt of Italy at 120% of GDP, which is increasing at a real rate of 5%, and if you look at the GDP, which now is forecast next year to be declining, arithmetically their debt is going to blow up. And we don't see anything happening at the policy level that gives us any indication that there's anything that's going to convert this situation from where it is now to a much more substantial and real crisis in the future."
The problem with Europe, he says, is that “almost every part of it has gone wrong now. The banks are undercapitalized…If banks were hedge funds, and you mark them to market properly, I would say that probably most of them are insolvent.”
As for opportunities, Platt says the most important thing to remember about crises is “you do not make your money going into the crisis. When you go into a crisis such as 2008, markets trade against positions. People have positions on and people need to get risk off. All the things that people thought were a good idea start going into reverse. The big money you make in trading is more in the aftermath of the crisis. In 2009 we made 60% with no down months on our master fund."
For now, he says, BlueCrest’s strategy is to be “in super liquid products, things that can be turned around in a day.”
"I would not touch an illiquid product with a barge pole, to be honest. We're going into an environment where banks need to delever. Illiquid assets will be coming on to the streets everywhere. The price of liquidity in my opinion will go up. I don't want to own any illiquid assets whatsoever.
"I think the major opportunities will come post the blow up. I think for the time being you want to keep it quite simple. You do not want to take any credit risk. I think volatility in certain markets is very underpriced compared to what's potentially about to happen. I think if we go into a crisis scenario, things like German bunds could be more expensive than they are right now. And I think as the crisis intensifies through the process of governments refinancing and deficits becoming more unstable and growth deteriorating in particular, I think those kinds of trades will play out in the market and be profitable."