Big balls on Mike. Good luck to him, he’s put other people’s money where our mouths are. But with an estimated 2.49Bn worth of Irish government debt, he is now a player in a relatively thin market. So changing expectations about the value of that debt really matters. If some well circulated paper of record were to, I don’t know, hear somehow of his boldness, and readers of that paper were to, I don’t know, buy some Irish debt in herd fashion, then two things would happen. Mike would get ri-ach (not just rich), perhaps purchasing himself another famous architect-designed house, and Ireland would look much more attractive to foreign investors as the change in investor perception becomes the convention. Soros’ theory of reflexivity in action really.
One of the things I’m keen to teach students in financial economics is the role of market makers in price setting. Here’s a cool reading from a 1977 book on the subject from a physicist’s viewpoint: