Return of the hedge fund vigilantes?

Are we seeing a return to those wild days of currency trading that vexed smaller nations 10 years ago? Who can forget the public spat featuring the then prime minister of Malaysia calling currency trading (currency trading news) activities by the likes of George Soros "immoral" and a "menace?" Soros (George Soros news) responded with some choice words, calling him a "loose cannon." But there's little doubt that currency crisis in Asia ushered in years of extreme economic pain and austerity.

Which brings us to the EU. Traders and hedge funds (hedge fund news) are starting to turn their attention to deficit woes in not only Greece but also Portugal, Ireland, Spain and other countries. The finance folks have a lot of tools at their disposal these days to make bets via CDSs and currency products. The effect in theory could be quite dramatic. Some think the damage they could do to a country would be quite like the damage they did to Bear Stearns (Bear Stearns news) and Lehman Brothers (Lehman Brothers news).

The New York Times reports that four hedge funds--Greenlight Capital, SAC Capitol Advisors, Paulson & Company and Soros Fund Management--are being probed in order to look at their bets against the euro. Apparently, the four funds participated in a dinner event devoted to new ideas, and the idea of shorting the euro was discussed, however briefly. This could get interesting. The tension is rising in Europe. The Greek drama may well turn operatic. 

For more:
- here's the article

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