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Jim Rogers on Greece Bankruptcy & Euro: My Take (Updated Mar. 23, 2010)
By Economic Forecasts & Opinions
(Mar. 23, 2010 - Updated the euro section that in the interview at 2:14, Jim Rogers said "I own the euro, have massive short positions on the euro, but I usually like to be on the other side of big short positions". So, this could be interpreted as Rogers may want to add some long positions on the euro. It was initially reported simply that Rogers owns massive short positions.)
After the Business News Network (BNN) interview on Mar. 18 (see previous post), famed currency and commodities investor Jim Rogers made an appearance at Bloomberg the following day (clip below).
While he still maintains the call of another even deeper recession in the next few years, and $2,000 gold in ten years, he did say expect a gold bubble by the end of the bull market. In addition, Rogers also talks about the euro and prospect of Greek Bailout.
There Will Be A Greek Bailout
Rogers sees either the European Union (EU) or the International Monetary Fund (IMF) will bail out Greece. However, Greece should be let bankrupt, so the member countries in the monetary union could get a wake up call and be more disciplined about spending. Then, the euro could conceivably compete with the dollar, which is unlikely the situation now.
CDS Good For Greece Now
The credit default swaps (CDS) are actually good for Greece right now, as they provide some incentive for investors to finance Greek debt. Speculator is not the root cause of the Greece debt crisis as they are just reacting to what the Greece politicians have done. The proposal to ban CDS in Europe is unlikely to help with the deep debt hole Greece has dug itself into.
On The Other Side of "Massive Euro Shorts"
Rogers says he usually likes to be on the other side of "massive amount of short positions" of euro, but does not have any positions in sterling. He believes the prospect of sterling is "very bad" on a long term basis due to huge balance of trade deficit. He does not expect to own sterling "in his life time."
My Take on The Euro
Broad based euro weakness is still expected in near to medium term, against dollar, yen and especially the commodity currencies. However, a Greek bailout resolution should eventually surface despite the spat within the EU. From this perspective, the euro is currently oversold and should have a snap back when the bailout finally emerges.
Technically, a break above $1.38 levels would confirm and trigger the bullish momentum. On any pullback, a dip below the $1.34 levels should be taken as a sell signal.
Equities - Correction Coming
Rogers says he is not buying equities right now "anywhere in the world". But he sees a potential correction coming, and might get into the markets if correction is around 20% or 30%,.
With $100,000, Rogers would invest ...
Agriculture commodities would be good to invest now as they are still off the all time high. Precious metal wise, silver, palladium and platinum seem more reasonably priced as compared with gold. Energy wise, he would invest in natural gas instead of oil now for Rogers.
But Base Metals Not A Buy Now
While he admittedly does not pay attention to iron ore, since it does not have a futures market, he does think steel is of huge demand with constrained supply. However, he will not buy into base metals right now as the prices have sky rocketed. He has investment in base metals, which has appreciated well, but he will not sell them right now. On copper, he made a "hold" recommendation.
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Rogers does not say he has large shorts on the Euro.
in fact, he says the opposite. He owns the Euro bc he likes to be on the other side of massive short positions.
I agree. He says (you)"Have massive shorts on the EUR, and I like to be on the other side". and effectively "I have really big positions in the EUR". You can see when he is talking about the GBP that when he says "own" he means long.
It's unfortunate that he "ate" the word You at the start of his massive shorts sentence.
Bottom line: He is LONG the EUR looking for a pop when the Greece mess is resolved by a bailout of some kind.
US dollar down, US market up. US dollar down, US market up. Jimmy knows full well the market is propped by Ben and his M1 machine. The correlation is so strong now it's palpable. He also knows not to short this market.
When the M1 machine stops, say goodbye to your 201k.
On a long enough timeline the growth rate for every monetary measure drops to zero.
Greece is Idaho, exactly Jim. So what about the doelarr? CA is no Idaho. Bund or CA IOU? Easy monie.
20%-30% waves on the horizon.
Gold boat/silver life preserver.
CA has what $85 bb in debt. Greece has $300 bb. CA has a lot more than 10 mm in pop like Greece and is a greater proportion of world GDP. Not comparable, IMO. - I agree there is an issue in CA (add other states at will here) - but not on the level of Greece within the EU.
The Bundesbank expressed considerable concern about whether the IMF's support for troubled countries such as Greece are even legitimate. A financial contribution from the fund to address structural problems such as budget deficits were "not consistent with its monetary mandate," the new monthly report says. The capital of the fund consists primarily of foreign currency reserves of its member countries to diminish its credit facilities, according to the verdict of the central bankers. The mandate of the fund is only help to overcome short-term balance of payments problems and to cover a temporary foreign currency needs.
http://www.ftd.de/politik/international/:euro-krise-trichet-schuetzt-griechen-vor-merkel/50091864.html