Just over a month ago, Kyle Bass discussed why he was long effectively "long Greece."
Bass penned a Bloomberg editorial in which the hedge fund founder and CIO called on the IMF to stop bullying Greece - publicizing the fact that he is now effectively long Greece. Greek government bonds have performed reasonably well so far this year: They’re up about 16%, and if Bass is right, they could have another 20% to 30% over the next 18 months if the IMF abandons its insistence on austerity and acknowledges that debt relief will need to be part of the long-term alleviation of debt. Bass added that, in the near future, voters will elect a more business-friendly government that will help reestablish the country’s creditworthiness, much like the government of Mauricio Macri did for Argentina.
I think you also have an interesting political situation in Greece where I think there's going to be a handoff from the current Syriza government to kind of a more slightly-center-right but very economically independent new leadership in the next, call it, 18 months.
And so, I think you asked why now? And I think you're starting to see green shoots. You're starting to see the banks do the right things finally in Greece and you are about to have new leadership.
So, I think that you're going to see - and if you remember Argentina as Kirschner was going to hand-off – hand the reins over to someone that was much more let's say focused on business and economics than being a kleptocrat, I think you're going to see something again slightly similar in Greece where you have leadership today that might not be the right leadership and the government-in-waiting, I believe, and I think you know Mr. (Mitsutakous) - I think you're going to see something great happen to Greece in the and next, kind of, two years.
Then, just yesterday, the founder and chief investment officer of Hayman Capital Management, which manages an estimated $815 million in assets under management, told CNBC that he's been invested in Greek bank stocks that are trading at a quarter of book value.
According to Bass, foreign investors are waiting on the sidelines for a tectonic political shift to take place in 2018. The country is now preparing to end its international bailout program next year, with more than €320 billion (US$372 billion) in national debt. On Monday, Greece announced it will distribute 1.4 billion euros ($1.63 billion) as a social dividend to pensioners and others hit hard by the country's austerity program.
"My best guess is a snap election for prime minister will be called between April and September of next year and Prime Minister Alexis Tsipras will lose power.
"When that happens, there will be a massive move into the Greek stock market. Big money will flow in as investors feel more confident with a more moderate administration.
"It's going to take Kyriakos Mitsotakis, president of New Democracy, the Greek conservative party, to be voted in as prime minister to reform the culture and rekindle investor confidence," said Bass.
"I have no doubt €15 billion in bank deposits will come back to Greek banks if he's elected. The stock and bond markets will also jump following the election."
All of which brings us to today.
Greek bank stocks crashed over 8% today - plunging to the lowest since July 2016...
And in context, that's not good...
However, Bass is not pertrubed. As he explains, economic activity will get reenergized with the right leadership. The sectors global investors are eyeing right now are real estate, energy and tourism.
"There is so much potential," he said. "Pimco, Lonestar, KKR are all looking to buy commercial properties in Greece."
He also noted that the country will have marquee privatizations over the next two years.
"From my perspective, we have to fix two things in Greece for the market to take off," Bass said. "First, Greeks have to stop evading taxes. Second, they have to start repaying their loans."
Well if you believe him - you just got an 8% discount on your entry.