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The Wall Street Journal
FEBRUARY 18, 2010
by Gregory Zuckerman and Kate Kelly

Some hedge funds have started to adjust their investment strategies as European officials voice harsher criticism of investors who have used exotic investments to bet against the debt of countries like Greece, traders said.

Elected leaders in France and Germany have highlighted what they view as a potentially destabilizing but largely hidden influence of banks, hedge funds and other investors in the markets for Greek sovereign bonds.

The officials have taken the strongest aim at the use of credit-default swaps, insurance-like contracts that pay out when an issuer defaults, and rise in value as credit conditions deteriorate. One recent report in Spain’s El Pais newspaper said the country’s intelligence service is investigating “speculation” in Europe’s markets.

Some players whose strategy was to purchase credit-default swaps that would pay out in the event of a Greek default got spooked last week by talk that European officials might try to make such swap trades illegal in the future. Though investment strategies are constantly in flux, given the potential precariousness of that market, some hedge funds began shifting toward a more currency-driven strategy, say people familiar with the matter.

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The Wall Street Journal
FEBRUARY 5, 2010
by Gregory Zuckerman

Countries have dealt with debt woes before.

But the latest fears about government debt now riling some European markets are being fueled by a relatively new trading tool that lets investors bet against nations’ bonds.

Credit-default swaps, or CDS, enable investors to protect themselves from a default of the debt of a range of nations or wager on the likelihood of such a scenario.

In recent weeks, prices for CDS contracts have soared as investors snapped them up on worries about the bulging debt of nations including Spain, Portugal, Greece and Latvia. The CDS moves—highly visible and widely watched—have compounded the angst of stock and bond investors, analysts say, helping to pressure global markets.

On Thursday, the cost of CDS contracts that insure the debt of a number of euro-zone members with large budget deficits rose again. The annual cost of insuring €10 million ($13.9 million) of Greek government debt against default for five years rose €26,000 to €423,000 Thursday. Stocks fell sharply in Europe and the U.S.

CDS are contracts that serve as insurance on all kinds of debt. With sovereign debt, if a nation defaults the CDS buyer would get paid by the seller of the CDS insurance. Though government defaults are rare, the value of CDS contracts rise and fall to reflect investors’ outlook on the bonds they are designed to insure.

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The Wall Street Journal
SEPTEMBER 27, 2009
by Gregory Zuckerman

On the heels of one of the worst years in stock-market history, some experts say investors should shift more money into a surprising area: emerging markets.

For years, shares and bonds from emerging markets made investors wary. Sure, their growth often could be much stronger than that of developed economies, partly because of robust population growth and steadily improving standards of living. But countries such as Brazil, Mexico, China, South Korea and many in Africa often were handicapped by heavy debt, weak currencies, poor corporate governance and high volatility.

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The Wall Street Journal
AUGUST 30, 2000
By GREGORY ZUCKERMAN

The numbers hardly tell the story.

Today, the Dow Jones Industrial Average stands roughly 2000 points below where it was on this end-of-summer weekend one year ago. No one knew then, of course, but the U.S. stock market and the world economy were just days from historic calamity, unprecedented in the lives of anyone born in the last 80 years.

And today? We are nearly six months into one of the most impressive bull markets in memory; the Dow has risen 46% since early March. The Nasdaq Composite Index is up 60%.

Go figure. It’s been a year of horrors and opportunities for investors.

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