Word: weiss
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...that fear is everywhere, how does Weiss feel? In some ways, more fearful than ever. Speaking over the phone from his office as markets plunge around the world, Weiss, 61, says: "The possibility of a total financial collapse is higher than at any time I've ever seen. We just don't know how bad things could...
...bankruptcy. According to data provided by Bloomberg using a model devised by JP Morgan, the price of this insurance currently implies that the odds of banking giant Morgan Stanley defaulting in the next five years are 45%. For Citigroup, another financial linchpin, they're 21%. "This is astonishing," says Weiss. "If Citigroup fails, it could be disastrous...
...Weiss believes these banks are far less likely to run aground than the panic-induced price of credit-default swaps would suggest. But since the demise of Bear Stearns and Lehman Brothers, "people have no idea how sound banks are," he says, so "the whole financial system is locking up." The U.S. government's rescue plan should help, and Weiss thinks there's a fair chance that the busted assets it's buying to prop up the system will rise sharply in value as everything stabilizes. But he's by no means confident that the $700 billion bet will...
...Given this extreme uncertainty, Weiss is sitting on more cash than ever before. One reason is that he expects further mayhem as leveraged hedge funds are hit increasingly hard by margin calls and shareholder redemptions, forcing them to sell investments to raise cash. Yet amid the panic, Weiss admits he's turning bullish: "People are freaking out, and it's a good time to make money when everybody is freaking out." One shell-shocked area where he's finding extraordinary bargains: illiquid funds with troubled investments in property. "You might very well lose all your money," says Weiss, "but there...
...past, he's made a fortune with similarly contrarian bets in devastated emerging markets, most memorably in Russia after it defaulted on its debt in 1998. At the time, says Weiss, the entire Russian stock market was valued at about half the price of the U.S. company Home Depot. Now, markets in countries like Russia, China, Vietnam, Brazil and India - all adored by investors until recently - have crashed. But Weiss still isn't ready to plunge in. "I don't think the emerging markets are cheap enough yet," he says. "I don't think people hate them enough...