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Alternative Market Briefing

The Big Picture: Are European problems more political in nature than economic?

Tuesday, October 01, 2013

amb
Gene Salamon
An Opalesque column for global macro investors.

This paper was authored by Gene Salamon, Founder of Three Bridges Capital, an independent investment management firm based in New York City.

In my nearly two decades of investing in Europe I have never seen a more exciting time to be a fundamentally-driven stock picker. The severe de-rating of Europe over the past four years has created an unprecedented opportunity for investors. As the apocalyptic tail risk fears created by macro headlines emanating from the periphery of Europe fade, investors are finally able to look directly at the region’s underlying companies and recognize their healthy profitability and depressed valuation. And, after six years of weak economic and financial data, Europe is finally in recovery mode. Although it will unlikely be a global growth engine any time soon, a stable to gradually improving economy adds further momentum to the potential for fundamental stock picking throughout the region.

How did we get here?

While Greece has been the primary focus of scary European headlines in recent years, the crisis actually began in Dubai. On the 26th of November 2009, Dubai World, the investment vehicle for the Emirate, proposed to delay for six months a payment on $26 billion of debt, raising the risk of the largest government default since the Argentine debt restructuring in 2001. The news spooked markets gl......................

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