Texan hedge-funder gets rich on Euro troubles

The early winners of the Greek deficit debacle are emerging. Mark Hart III, a 37-year-old hedge-funder in Fort Worth, Texas, has made hundreds of millions betting on Europe's deepening debt crisis.

In the past, Hart has urged investors to buy gold to hedge against tough times; in 2007, he made $300 million betting against US sub-prime mortgages. His bet anticipating weak European states would have trouble meeting debt obligations may be his most important yet. Last week, Hart's Corriente Advisors agreed to pay out $320 million to investors won on bets against European bonds.

According to the Wall Street Journal, Hart noticed it cost the same to insure Greece's debt as it did to protect Germany's - suggesting investors viewed the nations as equally unlikely to default.

Hart saw an inconsistency. Germany and France, for instance, carried less debt and ran more robust economies than southern European firms like Greece or Portugal.

He foresaw that once the global economy slowed, Greece, Spain and other weaker nations would have to pay more to borrow and more to insure their borrowing against default.

With partner Louis-Vincent Gave, a former French army lieutenant, Hart formed a dedicated fund with a message to investors that European debt was "the other shoe to drop".

Sources suggest Hart still holds significant contracts insuring the debt of various European nations in various funds. But he's not prepared to talk about his strategy publicly and expects his investors, who have been told they can expect more bad news from Europe, to remain silent as well.

With speculation mounting that Italy may yet turn out to be the Eurozone nation with the deepest deficit problems, Hart informed clients that Europe's sovereign debt problem is "widespread and is not isolated to a single issuer”.  

Meanwhile, Hart and Gave have set up a fund to bet that the Chinese economy is over-stimulated and heading for a
significant crash, as predicted in my report yesterday.

Not that Goldman Sachs may care. The trouble-making bank landed itself in more PR hot water yesterday when managing director Gerald Corrigan made the unfortunate comment that the billions of euros in debt that Goldman helped to conceal for Greece was "a rather small amount". ·