Many of the world’s smartest investors were taken by surprise after Greeks overwhelmingly voted on Sunday to reject further austerity measures. Still, most are betting that the European Central Bank will prevent the crisis from spreading.
BlackRock Inc. and TCW Group are among money managers predicting that the potential fallout from the Greek crisis won’t roil the broader markets. Investors including Bill Gross of Janus Capital Group Inc. and Rebecca Patterson, chief investment officer of Bessemer Trust, said a key date for Greece will be July 20, when the country has to pay 3.5 billion euros back to the ECB.
Below are excerpts from interviews and notes from investors and analysts following Greece’s “no” vote on Sunday.
* Russ Koesterich, global chief investment strategist, BlackRock Inc.: “Europe is stronger than it was, its banks are better capitalized and the Greek debt is held by public institutions. Even if Greece leaves the euro, this is not going to be a Lehman-style event.”
* Stephen Kane, group managing director, U.S. fixed income at TCW Group Inc.: “This has been the slowest moving train wreck in history. It has played out over weeks. The markets have been well-prepared for the negative news.”
* Dinakar Singh, former Goldman Sachs Group Inc. partner and co-founder of hedge fund TPG-Axon Capital: “I think the market obviously now appreciates the risk of Grexit but is also recognizing that the actual impact is minimal.” “For markets, the economic contagion worry is very far-fetched. Candidly, if anything, the reaction over the past week has already been too severe. Fundamentals are improving in other countries. Banks are well capitalized across Europe. Sovereign QE and other programs are in place. And, most importantly, banks are now supported directly by ECB.”
* Bill Gross, manager of Janus Global Unconstrained Bond Fund: “Grexit is a 70 percent-80 percent probability.” “You’re seeing massive support behind the scenes of course on the part of the ECB. You’re seeing central governments throwing everything they have at the markets and keeping them calm.”
* Willem Buiter, chief economist at Citigroup Inc.: “Overall, the NO vote implies that Grimbo (Greece in limbo) is a near-certainty and Grexit (Greece euro area exit) risk has risen. But even then, formal Grexit could still take months or even years to happen.”
* Christopher H. Turner, chief administrative officer and a managing director in capital markets at Warburg Pincus: “This outcome was unexpected by most here, but obviously very much in the realm of the possible -- kind of like Donald Trump running for president.” “We don’t see this outcome having a direct or material effect on our funds.”
* Hans Humes, founder of Greylock Capital Management: “No question about it in the short term. Tsipras won this.” “There’s latitude for the Greeks to go back to the Europeans and present them with something that’s a little bit more palatable. Tsipras can sign something now.”
* Rebecca Patterson, chief investment officer at Bessemer Trust: “In our view, Greek banks hold the key to how things play out. Greek bank capital has fallen quickly, even with withdrawals for most depositors now limited to 60 euros per day. The banks need emergency liquidity assistance (ELA) from the ECB to meet the country’s cash needs. So far, the ECB is continuing to provide assistance; however, another default by Greece could force the ECB to reconsider.” “What if there is no deal? Without a deal, it is difficult to see how Greece stays in EMU for long. Default on the July 20 ECB payment seems likely, as is continued closure for local banks, which in turn will be faced with a number of options, none attractive.”