Timeo Danaos mutua publica ferentes – I fear the Greeks bearing sovereign debt, as Virgil might have written had he been a financial hack today and had had to use my Latin dictionary to come up with a rough approximation of “sovereign debt”. Under the circumstances, I think “state loans” comes close enough.
What Virgil actually wrote was “Timeo Danaos et dona ferentes” – “I fear the Greeks even when they bear gifts” – and he gave the words to Laocoon, the only Trojan not entirely comfortable with a giant wooden horse materialising outside the gates of his home town one morning. Nobody listened to him, the horse was filled with Greek soldiers and the rest is history. Well, myth.
As you may be able to tell, I am wavering about this column because, deadlines being what they are, it will be published a week after I write it – and a week is occasionally a long time in the eurozone. Still, on the plus side, it does offer the opportunity to trot out a couple of debt-related acronyms you may or may not have seen.
First there is Pigs, which denotes some of the shakier corners of the eurozone, in Portugal, Ireland, Greece and Spain – or, if you wanted to add in Italy and risk sounding like the Mexican bandit in The Three Amigos, Piigs. Better still is the collective term for the paragons of financial prudence that are Spain, Turkey, the dear old UK, Portugal, Italy and Dubai – the Stupids.
Tee hee – but, as I said, a week is occasionally a long time in the eurozone and who knows what might have happened to Greece by the time you read this? Riots on the streets and a collapsed economy? Or a bailout from the European Central Bank, the European Union, the International Monetary Fund or all three?
Hey, maybe the country will be taken over by one of the big private equity firms – I mean, those boys know a good deal when they see one, right? No, you’re right, there has not been a huge amount of evidence of that in recent years.
Scrap the taking-Greece private plan. But those other scenarios are valid enough and that is one of the interesting aspects of this whole episode – how the two extremes of possible outcomes have been mirrored by the polarisation of views among bond fund managers.
Some have gone on record as saying they would not touch Greek bonds with a bargepole while others reckon it is worth a punt because, even if a default wiped out about a quarter of contractual payments, it would still yield an investment return approximately equivalent to German bunds at today’s yields.
Or, of course, you could just buy German bunds in the first place and give your blood pressure a break. Yes, I know the Greek debt crisis is more a matter of politics than investment and the bigger players in the eurozone are going to move mountains to ensure their little experiment in fraternal togetherness doesnot start to unwind.
But ignoring Greece has the financial standards of Portsmouth FC, ignoring the other eurozone members turned a blind eye to this in their eagerness to welcome fresh blood, ignoring the re-emergence of moral hazard on a national scale and ignoring that, as Axa’s Theo Zemek puts it, somebody is going to have to pay the piper – ignoring all that, is this the sort of risk-taking you want your sovereign debt managers to get involved with? Well, OK – just so long as you are comfortable.
Maybe the pro-Greek debt managers are so certain of their maths and the probability of a bailout they would argue one should not look a gift horse in the mouth. But then, if the Trojans had looked their gift horse in the mouth, they would have spotted the soldiers hiding inside and Virgil really would have needed another job.
Now, if I might end on a shameless plug, I shall shortly be chairing the Unique Boutiques roadshow that brings fund managers from Baillie Gifford, Cavendish Asset Management, Liontrust, Pictet and SVM to venues in Stirling, Harrogate, Knutsford, Birmingham, Bristol and London between March 2-10. To register or find out more, please call 0800 019 9110 or visit www.unique boutiques.co.uk.
Julian Marr is editorial director of marketinghub.co.uk