Feb. 27 (Bloomberg) -- Hayman Advisors LP, the firm that earned $500 million betting on the U.S. subprime mortgage-market collapse, says Europe’s monetary union is about to fall apart.So a "growing number of investors" are seeing a greater likelihood of the Eurozone breaking up. If so, you would think these investors would be adjusting their portfolios accordingly. There is an intrade contract that indicates the probability of a nation dropping its use of the Euro by December 31, 2010 has not change much since July 2008 (see figure below). This contract suggests that a "growing number of investors" may be a bit of an overstatement. Or maybe this contract is to thinly traded to truly reflect the increased fear about the Eurozone. Any thoughts?Richard Howard, a managing director for global markets at Dallas-based Hayman, said Germany may opt to shore up its own economy, Europe’s biggest, rather than bail out fellow euro nations such as Austria, Italy and Spain as their banks sag under the weight of bad debts. That might lead to defaults and compel Germany to renounce the euro, he said.
“People said subprime could never blow up but it did and now they’re saying the exact same thing about the eurozone,” said Howard. “There’s no stopping what is now a downward spiral.” He declined to discuss his investments.Hayman joins a growing number of investors seeing the possibility of a breakup of the $12 trillion euro bloc, conceived more than 10 years ago to cut unemployment, tame inflation and create a rival to the dollar. Societe Generale SA said this week Germany may refuse a bailout in an election year. ABN Amro Holding NV said Feb. 17 the crisis is “Europe’s subprime.”
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The breakup may occur as investors shun all but the safest government bonds, said Hayman, which in 2006 was among the first to bet against Wall Street’s rush to securitize the debt of the least creditworthy U.S. borrowers, correctly predicting a slump in home values that sparked the global credit crisis.
Investor demand for the lowest-risk securities already drove the difference in yield, or spread, between Greek, Austrian and Spanish 10-year bonds and German bunds, Europe’s benchmark government securities, to the widest since the euro’s debut.
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It's not just "a number of investors" but a large number of its citizen exporters (voters) who want to devalue their currency to stimulate exports like in the old day. I'm thinking of opening an intrade account.
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