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Published: Wednesday June 27, 2012 MYT 8:17:00 AM

Steinhardt says hysteria on Europe unwarranted


Michael Steinhardt, one of the legends of the hedge fund industry, thinks there's too much hysteria these days about the euro zone blowing up.

"My feeling is that the present mentality is worse than the realities," said Steinhardt, who retired from the hedge fund business in 1995 after running up an extraordinary two-decade record of double-digit returns. "I would've guessed the euro will survive and somehow, some way."

Today, Steinhardt, named by The Wall Street Journal as one of the greatest investors of all time, is chairman of WisdomTree Investments, an exchange-traded fund firm. In an interview on Tuesday with Reuters, he took a notably contrarian view from all the doom and gloom prognostications about the collapse of the euro zone or the potential failure of European banks.

"Some institution will be found that will do what has not been done yet to provide financing for most, all, some of the places really in need of it," said the 71-year-old investor.

He said Europe's mounting debt crisis already is being reflected in financial markets to a "meaningful degree."

Steinhardt spoke during a week when there are low expectations for an upcoming European summit in Brussels on Thursday and Friday. Those diminished hopes of European leaders being able to solve the continent's woes helped drive Spanish short-term borrowing rates to their highest levels in more than six months when the country sold just over 3 billion euros ($3.8 billion) of three- and six-month debt.

But Steinhardt said "the markets are so negative in their betting" on the euro and European equities that it could be time to consider investing in them.

Just recently, George Soros, another investing legend, said in an interview with Bloomberg that, if European leaders cannot reach an agreement for dealing with the euro zone's fiscal problems it could be "fatal."

"I'm applying historic logic," he added. "Most of the time, you make money by understanding how the market is placed and what the market is thinking."

Over his 27 year career, Steinhardt returned an average of 24 percent per year, net of fees. After Steinhardt closed his hedge fund in 1995, he devoted himself entirely to philanthropy. He founded the Michael H. Steinhardt Foundation in 1994.

Steinhardt said he is "more long than short" in equity markets and is still betting against short-term Treasuries.

"I am still short two-year Treasuries," he said, adding: "It has not worked out."

He believes the risk-reward ratio is attractive as interest rates are at record lows.

"There is a general sense that the economy is lousy and blah blah blah, and the markets are positioned as such," Steinhardt added. "I'm going the other way." - Reuters

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