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Interesting Sign Of Trouble Ahead For Miracle Economy

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http://today.reuters.co.uk/investing/finan...CTURING-JOB.XML

Goldman Sachs hires distressed company specialist

Wed Jul 5, 2006 12:00 PM BST162

LONDON, July 5 (Reuters) - U.S. investment bank Goldman Sachs Group Inc. (GS.N: Quote, Profile, Research) has strengthened its European restructuring unit,
as banks anticipate higher interest rates will lead to more companies struggling to avoid bankruptcy.
Australian native Lachlan Edwards, 39, will be based in London, reporting to Tim Flynn and Doug Henderson, the bank's co-heads of European leveraged finance, Goldman Sachs said in a statement on Wednesday.

Could the big banks be seeing a little further ahead than the sheeple?

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http://today.reuters.co.uk/investing/finan...CTURING-JOB.XML

Goldman Sachs hires distressed company specialist

Wed Jul 5, 2006 12:00 PM BST162

LONDON, July 5 (Reuters) - U.S. investment bank Goldman Sachs Group Inc. (GS.N: Quote, Profile, Research) has strengthened its European restructuring unit,
as banks anticipate higher interest rates will lead to more companies struggling to avoid bankruptcy.
Australian native Lachlan Edwards, 39, will be based in London, reporting to Tim Flynn and Doug Henderson, the bank's co-heads of European leveraged finance, Goldman Sachs said in a statement on Wednesday.

Could the big banks be seeing a little further ahead than the sheeple?

From the article:

A series of strong economic figures from the euro zone recently has led to speculation that interest rates will rise in the future after years of low-cost borrowing. In the U.S., the Federal Reserve increased interest rates a 17th straight time on June 29.

There is clearly a view that there is too much debt around in some companies and that even small rises in interest rates might put these companies in trouble.

However, do bear in mind the subtext here. Again fron the article:

Investment banks like Goldman Sachs are expanding into the distressed debt market on a view that any economic slowdown could increase advisory mandates and trading opportunities.

Hedge funds, including Polygon, have benefited from trading in distressed energy companies, such as Drax (DRX.L: Quote, Profile, Research) or British Energy Group Plc (BGY.L: Quote, Profile, Research). These funds bought debt at a fraction of their value when the companies were unprofitable in 2002 and 2003, only to sell it at as high as four times its value when the businesses recovered.

Let me spell it out : GS ain't big on insolvency, but it is on buying up the debt of distressed companies.

We already know that hedge funds are attracting stupid amounts of money to invest. GS are merely looking to cash in on advising these funds how best to exploit debt-distressed companies - that is to say - buy their cheap equity or their cheap debt paper.

The message is hedge funds will be bottom fishing, perhaps on a scale we've never seen before .... but in the meantime, expect GS to be leaking spun stories about the perilous state of xyz's finances .. only to see them advising on xyz's takeover by a hedge fund a few months later.

Of course the good news is that hedge funds ain't in the market for 1 Acacia Ave: the euity on that one can go to hell in a handbasket!

Edited by Sledgehead

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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