Japonica’s Kazarian: “Why and How I Bought Billions in Greek Bonds”



In a video interview with Greek Reporter, Japonica’s founder Paul Kazarian explains his billion dollar investment in Greek bonds and talks about his accounting technique that rates Greece as A+.

Paul Kazarian has had a thing for Greece since he studied philosophy, and especially likes Plato. But the owner of Japonica – whose name comes from the street where he grew up and not from Japan as many believe – proved his love even further by becoming one of the largest Greek bond holders. When the bonds were rated junk, Kazarian, who’s of Armenian heritage, was seen with suspicion in the beginning as he bought billions of dollars in Greek bonds, according to his company’s legal disclosure.

“Japonica is one of the larger if not the largest holder of GGBs (based on market intelligence collected during the Dutch auction and after excluding an estimated €4 to €6 billion owned by the Greece public pension funds.”

But why did he do it? The answer may surprise you since it seems just as another challenge for Kazarian.

“We buy billion dollar companies and we turn them around. On February 27th my dad passed away and I had taken a year off from my company to take care of him. So when when we lost him I said to myself what am I going to do now? I said where is the biggest turmoil? So I left the next morning.”

And of course as an investor he was looking for profit but where did he see it when credit agencies were burying Greece?

Japonica’s founder says that Greece is the victim of bad accounting and to convince people of his theory he even financed a campaign with the title “Greece is A+” in some of the world’s biggest newspapers.

Watch the video interview below:

Kazarian came to Greece initially to buy companies but said he was surprised when he realized there weren’t adequate financial statements. When he started researching the economy he said he found “this huge economic differences between reality and accounting.”

“The safest thing time to invest is when there are economic anomalies, not just speculation,” he said.

“That’s what we did. We started buying bonds at the time of the double election (May 2013) at 11.40 [cents to the dollar] and we are one of the largest private Greek bond holder if not the largest.”

He also developed his own accounting method that uses “very tough international standards” and this is why he says that Greece is A+. “I spent tens of millions of dollars to develop this method, something that agencies cannot do,” he stated.

When asked if the ratings agencies should be trusted, he said that “They were the ones that had Greece as A+ in 2009 when economic reality was really bad.”

Kazarian goes further than just buying the bonds but says that he intends to keep them until maturity. However, he admits that he could exchange them for assets, something he has done before with company shares.

Japonica’s owner has been going back and forth between Greece and the US and he says that he is here to stay and help the crisis-hit country by also investing in companies and its real economy.


9 COMMENTS

  1. There is nothing to comment on this…The man doesn’t know and understand the Greek culture together with politics…The man is not that intelligent…Many Greeks have lost 27% of their investment in Greek bonds and they are fighting to get their loss back from the government in the meantime investors are not near enough to invest in Greece…I wonder what is his logic behind buying Greek bonds??? I myself would not buy any Greek bonds, why??? Corruption in Greece is widely spread all over which makes Greece is a dangerous place to invest…Moreover, strikes, demonstrations and government brutocracy is killing all chances for investors, entrepreneurs and individuals to approach this country for investment purposes…The country is not safe economically and no political stability which makes it unstable for investment…

  2. Our government is slowly cleaning up its act. Our next problem is cleaning up the extreme left and right. Rather than focuss on their own productivity they are shamelessly still demanding handouts while generating political instability with inflammatory rhetoric. This is also encouraged by foreign nationalists hostile towards greeks. (e.g. Skopians troll this website pretending to be “Greeks”)

  3. “However, he admits that he could exchange them for assets” — possibly not bad considering he bought them at .114 / 1 eu. If he can do that when the economy has shrunk by 30-50%, he’s still a winner.

    Weren’t GGB paying 35% last year on a 10 year maturity length? Anyway, he’s a gambler.

  4. Greeks and Armenians share the same gene pool. I’m proud of this. My great grandfather was Armenian.

  5. Via Bloomberg’s David Powell,

    Deflation in Greece continues to push the embattled country further into a state of insolvency.

    The EU-harmonized measure of the headline consumer price index declined 2.9 percent year over year in November, according to data released by the National Statistical Service of Greece on Monday.

    The gross domestic product deflator dropped 3 percent year over year during the third quarter of 2013, according to Bloomberg Brief calculations based on the levels of nominal and real GDP. The decline in prices is likely to have been greater than the economists of the International Monetary Fund had forecast. In the public sector debt sustainability analysis published in the latest review of Greece’s bailout package, they assumed the GDP deflator would measure minus 1.1 percent in 2013. It was released in July.

    The official inflation forecasts for the following years also appear high. The economists assumed the GDP deflator would measure minus 0.4 percent in 2014, 0.4 percent in 2015 and 1.1 percent in 2016. Those figures may fail to materialize as a result of spare capacity in the economy.The unemployment rate measured 27.3 percent in August, the latest reporting period.

    That compares with a recent peak in May of 27.5 percent, which was the highest level since the birth of the monetary union. The Organization for Economic Cooperation & Development estimates the non-accelerating-inflation rate of unemployment to be 15.6 percent. That’s a gap of 11.8 percentage points. A period of sustained deflation appears likely.

    The experience of Japan demonstrates the difficulty of overcoming deflation. Nationwide Japanese CPI, excluding food and energy prices, slipped into negative territory in September 1998, measuring minus 0.1 percent year over year. It failed to move into positive territory for almost 10 years, hitting 0.1 percent year over year in June 2008.

    In addition, spare capacity was much less in Japan than it is in Greece. The unemployment rate in the former never rose above 5.5 percent during the period. That compares with the latest estimate of NAIRU for Japan from the OECD of 4.3 percent.

    Deflation raises the real interest rate on Greek debt. For example, the average real interest rate would rise to 5.7 percent from 3.6 percent in 2013, to 4.8 percent from 3.1 percent in 2014, to 4 percent from 2.6 percent in 2015 and to 3.2 percent from 2.1 percent in 2016, according to Bloomberg Brief calculations. Those figures assume the GDP deflator troughs at its present level of minus 3 percent in 2013 and rises to minus 2 percent in 2014, minus 1 percent in 2015 and 0 percent in 2016.

    Deflation also weighs heavily on the pace of nominal GDP growth. It would fall to minus 7.1 percent from minus 5.3 percent in 2013, to minus 1.4 percent from 0.2 percent in 2014, to 1.9 percent from 3.3 percent in 2015 and to 3.7 percent from 4.8 percent in 2016, assuming the real GDP growth forecasts from the latest IMF review of the Greek economy and the aforementioned alternate inflation profile.

    The nominal size of the Greek economy would be much smaller in 2016 under the alternate inflation scenario. It would measure 199.2 billion euros using the baseline scenario of real GDP growth and inflation from the latest report of the IMF. It would measure 187.5 billion euros using the baseline scenario of real GDP growth from the latest report of the IMF and the alternate inflation profile.

    A shrinking economy increases the relative size of a country’s sovereign debt. Greece’s debt-to-GDP ratio would measure 158.3 percent in 2016 under the baseline scenario of the IMF and 168.9 percent for the same year under the alternate inflation scenario.

    Greece appears highly unlikely to be able to reduce the domestic price level in order to restore competiveness and simultaneously avoid a second restructuring of its sovereign debt.