Jim Rogers: Buy The Euro

[AvidFan]

http://www.cnbc.com/id/37593203

Now May Be the Time to Buy the Euro: Jim Rogers

Published: Thursday, 10 Jun 2010

By: Antonia Oprita

Everybody is so bearish about the euro that it looks like now is a good time to buy the single European currency, famous investor Jim Rogers told CNBC Thursday.

Rogers' long-term bet is on commodities, as he predicts that governments will keep printing money to get out of their debt problems and this will flare up inflation.

"I'm as confused as anybody else… I'm basically short stocks and long commodities and trying to figure out whether to add to the euro yet," Rogers told CNBC.

"Everybody is terribly negative on the euro right now, it's unbelievable how many bears there are and usually that indicates a rally," he said.

Other contrarian traders are considering buying the single European currency.

"The euro is failing to rally on good news — whether of an economic or a political nature," wrote Audrey Childe-Freeman, senior currency strategist for Brown Brothers Harriman, in a note to clients.

"In this context, it is rather controversial to be anything but a euro bear, but this may be the time to identify a few constructive developments and to get prepared for a potential correction" to the upside, Childe-Freeman wrote.

The euro was trading higher versus the dollar Thursday, ahead of the European Central Bank's monthly meeting on monetary policy.

But Rogers said his decision to buy the euro would not be based on the soundness of euro zone policies to contain debt.

"Basically it's a technical rally," he said. "Once a technical rally starts, who knows where it can go from that."

But the only big bull market he sees over the next decade will be in commodities.

Shorting One American Bank?

Central banks will start printing money again "because that's all they know to do, they don't have more sense than that" and inflation will rise, so owning any hard assets will be good, he predicted.

But investing in commodities is not a safe game and those who are thinking about getting into debt to take advantage of a bull market should always know very well the market they are buying into, Rogers warned.

"If you cannot spell commodities I wouldn't suggest buying commodities. Please, you'd better know what you're doing if you're going to use a lot of leverage," he said.

He does not own stocks of companies linked to commodities, because there are lots of risks associated with stocks.

"I actually own some Australian mining shares but I own them for 10-12 years and I'm not buying them now," he said. "Unless you're very, very good at stock picking, you should own the commodities themselves."

Rogers said he is shorting the technology sector, emerging markets and the US stock market.

In the financial sector, he said he was short "one major Western financial institution" with headquarters in North America. He was not short other banks, because their prices had not risen enough, he said.

His views on the financial sector are not optimistic and he believes Wall Street and the City are going to lose their appeal in the coming years as the economy turns more towards tangible goods.

"You should become a farmer, you should become a miner, go into the production of real goods," Rogers said.

The price of oil is likely to rise further because, following the Gulf of Mexico oil spill, there will be more restrictions on offshore drilling in the US and maybe elsewhere, he said.

BP is on Rogers' radar screen but he is not buying it yet and he does not have a price target where it would be a good buy. "I wouldn't judge it on price, I would judge it on time," he said.

If there is a slowdown in the US and in the euro zone, it is also going to affect China, he predicted.

[R K]

Hamilton has a good paper on doing just that i.e. short dollar long euro

http://www.zealllc.c...010/eurobuy.htm

edit: btw, if he's right, and if much of the stocks sell off and gold buying has been due to eurozone fear then it could have significant implications for those markets too. That 116/118 area looks like the likely support. 1% or so below recent lows.

edit2: take a look at all the 'euro is dead' type threads on the first two pages of this forum (mostly from RB). Parallels with March '08 when the dollar his 72 and gold was going to the moon at 1000. You couldn't move for dollar is dead threads then either.......

Edited June 10, 2010 by Red Karma

[sbn]

can somebody pls argue against. this guy thinks almost exactly like me

[The Eagle]

I was just considering that, but IMHO it's still too early (but then I'm not a professional investor/gambler).

I was expecting the Euro to drift to 1.15-1.10.

---

Edited June 10, 2010 by wise_eagle

[deflation]

I think it's at about it's 'natural' level right now.

I use the my indicator, first brought in by my mother in the 1970s that 200 spanish pesetas to the £ was about right. The fact that they went into the € at 166, it's a rule of thumb I think is as good as any of the 'experts' out there. So €1.21 is as Goldilocks said, 'just right.'

The £ v the € is up 10% in the last 3 months but I doubt it'll carry on much higher without a rise in IRs.

[Mega]

Goldman told everyone yesterday to SELL the Euro......................so its time to buy!

Mike

[DisQ]

Goldman told everyone yesterday to SELL the Euro......................so its time to buy!

Mike

good point

[DisQ]

Hamilton has a good paper on doing just that i.e. short dollar long euro

http://www.zealllc.c...010/eurobuy.htm

edit: btw, if he's right, and if much of the stocks sell off and gold buying has been due to eurozone fear then it could have significant implications for those markets too. That 116/118 area looks like the likely support. 1% or so below recent lows.

edit2: take a look at all the 'euro is dead' type threads on the first two pages of this forum (mostly from RB). Parallels with March '08 when the dollar his 72 and gold was going to the moon at 1000. You couldn't move for dollar is dead threads then either.......

agreed 100%

[Number79]

Hamilton has a good paper on doing just that i.e. short dollar long euro

http://www.zealllc.c...010/eurobuy.htm

edit: btw, if he's right, and if much of the stocks sell off and gold buying has been due to eurozone fear then it could have significant implications for those markets too. That 116/118 area looks like the likely support. 1% or so below recent lows.

edit2: take a look at all the 'euro is dead' type threads on the first two pages of this forum (mostly from RB). Parallels with March '08 when the dollar his 72 and gold was going to the moon at 1000. You couldn't move for dollar is dead threads then either.......

and gold is now sitting over $1200, recent buying may have been due to euro fears but the rise has been fairly constant.

I am beginning to wonder if we will go from currency to currency with fear and problems. I am looking for a healthy correction in metals either late june or august which may tie in well with a euro recovery if it happens, which currency will be on the radar next I have no idea but I think gold will get more interest again as a result.

[The Eagle]

Better still : Buy the Swiss Franc

Versus what the dollar?

Definitely not versus the euro.

[porca misèria]

Sure, if your home currency is $ then € is looking better than it has in a long time.

Not so convinced about buying from £ any more.

[JPJPJP]

its just a timing thing surely

EURUSD will go up and down, though not necessarily in that order and who knows by how much

Its 1.207 ish just now and I think there is more chance of it going lower in the short term (next couple of weeks) than higher

but, if I knew, I wouldn't be posting here would I?

[boynamedsue]

I've just bought a load of Euros, changing out of Thai Baht. Price is fantastic, it can't get any lower in THB.

[plummet expert]

can somebody pls argue against. this guy thinks almost exactly like me

$1.18 was the launch price of the Euro. If it breaks below that on some bad news sure to arrive about Euro govt or bank lies over debt/exposure, then it may well head for parity. At present the markets seem to fear a Eurozone meltdown more than the US and the USD tends to start any fallout/ stockmarket crash by first moving up strongly as sellers opt for USD cash. As the likelihood of a strong correction is certainly there, you would be brave to invest in the Euro rather than the USD just now.

Is that a resonable counter argument?

[sbn]

$1.18 was the launch price of the Euro. If it breaks below that on some bad news sure to arrive about Euro govt or bank lies over debt/exposure, then it may well head for parity. At present the markets seem to fear a Eurozone meltdown more than the US and the USD tends to start any fallout/ stockmarket crash by first moving up strongly as sellers opt for USD cash. As the likelihood of a strong correction is certainly there, you would be brave to invest in the Euro rather than the USD just now.

Is that a resonable counter argument?

Yup - good enough for me! I was going to buy some eur with my usd - but you've changed my mind - thanks

[Deckard]

Hamilton has a good paper on doing just that i.e. short dollar long euro

http://www.zealllc.c...010/eurobuy.htm

edit: btw, if he's right, and if much of the stocks sell off and gold buying has been due to eurozone fear then it could have significant implications for those markets too. That 116/118 area looks like the likely support. 1% or so below recent lows.

edit2: take a look at all the 'euro is dead' type threads on the first two pages of this forum (mostly from RB). Parallels with March '08 when the dollar his 72 and gold was going to the moon at 1000. You couldn't move for dollar is dead threads then either.......

mmmm.... he might be right in the short term (although the article is dated May 21 and he's been wrong for three weeks already) - but I think we are witnessing a major reversal in the EUR secular bull started in 2001.

Buy the Euro for the medium-long term? It just doesn't make sense from a risk/reward perspective IMO.

A dead cat bounce to 1.25/1.26 is entirely possible, sure - but to me that would just be an opportunity to go short again.

The reality is that the PIIGS were beign absolutely slaughtered by EUR/USD at 1.50, and French officials have recently been on the wires saying France was also unhappy with the strong Euro.

The Eurozone is embracing deflation, in the form of sweeping budget cuts, which will have a profound impact on growth prospects for years to come. They need a weake(er) Euro, and will not fight it, when push comes to shove.

Any further bad news from Spain/Italy and the Euro will plummet through 1.18 like a hot knife through butter.

And if Asian central banks start to lighten their Euro denominated positions, then dollar parity is definitely a possibility.

[Realistbear]

http://uk.finance.yahoo.com/news/pound-rises-with-equities-reuters_molt-462d5dd7cd27.html?x

Pound rises with equities

Neal Armstrong, 13:08, Thursday 10 June 2010

LONDON (Reuters) - Sterling rose on Thursday, supported by European equity market gains and as investors took the view that bad news for the pound was largely priced in.

IMO the equity markets are overly optimistic that the debt troubles are in the past. As for sterling, the spotlight should bo there soon--maybe after 22nd June and the grim growth prospects posteuphoria of the election.

Behind the scenes, the Eurocrats do not seem to be expressing much exuberant optimism but rather bracing for more bad news to come:

http://www.bloomberg.com/apps/news?pid=20601085&sid=a3ny.oPxuHPQ

June 10 (Bloomberg) -- European Union President Herman Van Rompuy said the 750 billion-euro ($905 billion) rescue package would be expanded if it doesn’t quell the debt crisis, becoming the first EU leader to float the idea of a larger fund.

Edited June 10, 2010 by Realistbear

[Deckard]

Brilliant article on the Eurozone imbalances, courtesy of ZH

Differences within the Eurozone are extreme. Ireland saw its nominal GDP drop by 10.2% last year, a decline similar to those experienced in the Great Depression, while the German economy recently grew at a nominal rate above 3%. An independent economist calculated that the value of the euro would have to be $0.31 to balance Greece’s international position, and the number for Spain was $0.34, while Germany could effectively compete in the international marketplace with a euro over $1.80. Despite the ECB pegging the refinancing rate at 1.00%, two-year benchmark government rates for Germany are way below that at 0.48%, but way above it at 7.91% for Greece, Ireland 3.37%, and 3.20% for Spain. Ireland has been living with annual deflation for the last 16 months, while German lawmakers are worried about inflation. These differences have become more dramatic in the past few months and most independent observers forecast that trend to continue. By any economist’s measure this is not an optimal currency zone. But the economists are not in charge, the politicians are, and these politicians have spent their entire careers following their conception of the European currency. Their reputations and the European myth depend on the survival of the euro, and those who doubt its viability are enemies who deserve to be ground into dust. There is one overarching problem that the defenders of the euro cannot overcome: in its current form, the euro’s survival is economically impossible. Prior to the Greek crisis, the market did not understand this, but now it does. And you cannot put the genie back in the bottle.

If part of the euro is worth $1.80 and another part is worth $0.31, how do you value this currency today, while it’s still in one piece? That is the crux of the matter. The uncertainty around this issue is what has caused billions of euros to flee into the security of the Swiss franc. The Swiss authorities have intervened, buying so many euros that their reserves expanded by 45% of their GDP since the start of this year. Despite that massive intervention, the Swiss franc has climbed by 10% against the euro since mid-December. There is no sign of change. As the politicians are completely in control, the schizophrenic euro could go on for years with the economic dislocations becoming more and more intense. Little explosions are likely. Certainly, the Swiss are in a terrible position (see Switzerland Surrounded Again, April 29, 2010) as the euros will keep flowing in. The Swiss franc might gain another 10%, destroying its export base, but the Swiss could change the rules to protect themselves. Although the European political elites are totally committed to the euro, the man on the street is different. The European political peace is a compromise between entrenched elites and the highly entitled masses first formulated by Bismarck over 120 years ago. The withdrawal of those entitlements in order to save the euro could easily upset this historic deal. If those in power continue to ignore the needs of the people, neither the euro nor the current political structure will survive in its current form.

[Realistbear]

Brilliant article on the Eurozone imbalances, courtesy of ZH

Succinct and deadly accurate.

I agree in particular with this bit

:

Their reputations and the European myth depend on the survival of the euro, and those who doubt its viability are enemies who deserve to be ground into dust. There is one overarching problem that the defenders of the euro cannot overcome: in its current form, the euro’s survival is economically impossible. Prior to the Greek crisis, the market did not understand this, but now it does. And you cannot put the genie back in the bottle.

[Guest sillybear2]

Jim Rogers went short USD (long EUR) before Greece blew up, ouch.

He does have a point though, California is every bit as f***d as Greece is and that state makes up 13% of US GDP with a $20bn budget deficit, Greece is only 3% of Eurozone GDP.

Edited June 10, 2010 by sillybear2

[JustYield]

Jim Rogers went short USD (long EUR) before Greece blew up, ouch.

You managed to pin him down on an actual trade?

[Realistbear]

Jim Rogers went short USD (long EUR) before Greece blew up, ouch.

He does have a point though, California is every bit as f***d as Greece is and that state makes up 13% of US GDP with a $20bn budget deficit, Greece is only 3% of Eurozone GDP.

Jim ("Jimbo" to his inner circle) has always been a $ bear and has been burned a lot in recent years--betting vs. the $ and then going long on the Euro. I did the opposite and went long on the $ and ignored the Euro and sterling. That said, the times are a changin so it may soon be the time to diversify a bit out of $ and buy sterling after a correction of another 10% or so on CABLE.

CA went down because of overpriced houses not infrastructure issues. Their housing market will bottom in a couple of years and the highly developed industry in that State will pick back up where it left off (Pharmaceuticals, Biotech, IT, Defence, Massive agriculture and a young population).

[lets get it right]

You have to hand it to these half-wits - they seem to freely admit they have no idea what is going to happen next - yet they still make a living from telling other people what to do with their money or, worse, managing the investments for them.

Jim Rogers 'I'm as confused as anyone else'

'Everyone thinks the Euro is going down - for a lot of good reasons - so, hey, let's buy the Euro on the basis that there is no logic in the way any market behaves ...'

You couldn't make it up. They could, though.

[Guest sillybear2]

You managed to pin him down on an actual trade?

http://www.youtube.com/results?search_query=jim%20rogers%20dollar&search=Search&sa=X

Dollar is doomed, dollar is doomed, dollar rally ahead, dollar doomed!

Edited June 10, 2010 by sillybear2