Too few “mud Marines” were slogging through bond prospectuses in the run-up to the European sovereign-debt crisis, according to Jack Malvey, former chief fixed-income strategist at Lehman Brothers Holdings Inc.
A focus on major indicators allowed investors to overlook evidence that nations including Greece, Portugal and Spain were struggling to contain their budget deficits, Malvey told Tom Keene in a Bloomberg Radio interview.
“The markets over the last several years have been really portrayed through a macro lens,” Malvey said. “There were not enough mud Marines in the less glamorous detail trenches, for example reading bond prospectuses.” Those who focused on the details ended up the “distinct winners” in the fallout from the crisis, according to Malvey.
European policy makers unveiled last week an unprecedented loan package worth almost $1 trillion and a program of bond purchases to stop a sovereign-debt crisis that threatened to shatter confidence in the euro.
The European Central Bank said today it will offer term deposits for the first time tomorrow to mop up 16.5 billion euros ($20.4 billion) of bond purchases settled up to May 14.
Greece’s Prime Minister George Papandreou has raised taxes, cut wages and reduced government spending to contain a deficit that reached 13.6 percent of GDP last year, more than four times the European Union limit.
“It’s interesting that this all went off over the course of the last four or five months,” Malvey said. “Why weren’t we focused on this two or three years ago? Again, the micro details would have been important and helpful here.”
Malvey, 58, left his post as head of total-return strategy at Barclays Plc in January 2009. He joined the firm when it acquired Lehman, which collapsed in September 2008.
Institutional Investor magazine ranked Malvey and his team as third best in fixed-income research for general strategy in 2008. It was the first time since 1997 that Malvey didn’t take the top spot. He was also ranked as the best in the high-grade corporate sector from 1995 through 1997.