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by Ashraf Laidi
Posted: Feb 20, 2010 5:00
Comments: 30765
Posted: Feb 20, 2010 5:00
Comments: 30765
Forum Topic:
EUR
Discuss EUR in this thread
http://www.zerohedge.com/article/john-taylor-worlds-largest-currency-hedge-fund-sees-euro-dropping-120-august
great call for the Euro - u picked up the downtrend in the 1.48 area I think.
I checked your commentary for eurodollar in march 09, and also in dec 08. Spot on - u picked up the trends for dollar weakness. also in the summer last year, when the euro was around 1.35, u placed a year end 09 target of 1.57. All these r great calls.
now, for the current weakeneing of the euro - i think the underlying issue is more the strength of the US recovery than the greece issue. Monthly unemployment numbers r turning positive as well as strong gdp numbers in the US. whether it is the stimulus or inventory rebuild, there is tracktion in the US. On the other hand Euro at 1.50 was stalling the Euro recovery. Also, there was not as much a stimulus in eurozone as was in US.
Going forward, what can turn the dollar down?
would it be slowdown - double dip recession for US? would it be sharp rise in long term rates triggered by weakening treasury sales? or would it be the fed tightening too early or would it be the US housing correcting further. I have no idea - perhaps none would occur.
But this is clear to me that large budget deficits in the US are not sustainable.
Also, china and india have taken jobs permanently out of the US. there r no new innovation cycles where the US is on the leading edge and this ultimately will lead to decline in real purchasing power of the average american. on top of this, the socializing of healthcare will add further drag.
So, personally, I do not see how a sustainable recovery out of the US will emerge.
I have only 10% of my assets in dollar - all else in euro.
I have lived five years in US and five years in europe. I do see some impact of india - china - globalization in europe but it is not as huge as US. 80% of walmart products are coming out of china and walmart sells maybe 350 billion$ of stuff in US.
France, germany, holland, finland are competitve even at euro 1.5. meanwhile, spain, italy, greece become somewhat competitive at euro 1.20 or much more at euro parity to dollar. a weakeinng euro is automatically going to improve the regional economy.
Europe is not america. bikering between 25 countries is normal. this is how europeons r. this is what americans do not understand - how can diversity work? americans just think in one way and they think the whole world works like that - this is specially true of the american economists who r calling for the breakup of the euro these days. this is actually quite silly.
If greece had its own currency, what would happen? like UK its currency would go down. well, the euro is going down - and that is sufficient to trigger growth in the long term.
Why is going to the IMF such a big deal? IMF will come in and give money at 3% at the same time putting harsh terms to cut the deficit. this is what greece needs. in the long term, this is a better solution than germans or the french paying for greek retirement.
so, overall, i am comfortable holding the euro. i would love to hold the renminbi but its not available. i am still not convinced for the dollar. actually looking at all this, it makes sense that gold should be going to 2000 or 5000 in the next few years.
good work -
though i am not sure why u provide this free service
j
thanks
Ashraf
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