INTERNATIONAL. Investment gurus Jim Rogers and Marc Faber agree to various degrees on many issues but the one thing uniting them this week is the future direction of the US dollar. They see a correction looming in the US currency.
Both Faber and Rogers have been warning about the effects of monetary and fiscal policies on the US economy, since the current rally has been mostly based on printed money, a kind of 'reverse Robin Hood policy' of governments, to steal from the peasants to give to the rich.
As with Faber, Rogers is mostly to be seen being interviewed on CNBC and Bloomberg Asia or Europe as they both live in Asia now and since their views are to put it mildly, somewhat negative on the prospects of a sustainable US recovery.
Marc Faber the Swiss fund manager and Gloom Boom & Doom editor said in a video interview Thursday at Barron's Art of Successful Investing conference that the US dollar is probably at a low point and could have “some kind of rebound”, but it remains in a “structural long term bear market” in terms of purchasing power.
Sadly, other currencies are not any better either, Faber said.
Legendary global investor and chairman of Singapore- based Rogers Holdings, Jim Rogers said a rally in the dollar may last for “a while” as equity and commodities markets decline.
Speaking in an interview with Bloomberg television in Singapore, Rogers said: “Everybody is pessimistic on the dollar. Whenever you have everybody on the same side of the boat, you know what you have to do. We may have a rally in the dollar, a decline in commodity prices or stock prices for a while.”
Rogers reiterated a long-held belief that printing money to help revive the economy would weaken the greenback and Treasuries. So any rally in the dollar won’t be sustainable, he says.
The dollar has weakened so far this year versus all but one of its 16 major counterparts, including a 5.7% drop against the euro. The currency traded at US$1.4812 per euro Thursday, after gaining 1.5% over the previous three days.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major US trading partners, fell to 76.090 yesterday, from 81.308 at the end of last year.
“The dollar is overdue for a rally,” Rogers said.
Investors have been reducing bets that the dollar will decline versus the yen and the euro. The difference in the number of wagers by hedge funds and other large speculators on an advance in the euro compared with those on a drop -- so- called net longs -- was 36,033 on October 20, compared with net longs of 43,367 a week earlier. Similarly, net yen longs were 31,185 on October 20, from 33,339 a week earlier, according to Bloomberg.
Rogers also said that he “certainly wouldn’t be buying US Treasuries” and “couldn’t imagine lending money to the US government for long periods of time.”
In his Barron's interview Faber also said there was “some kind of protectionism” going on in the world, for example the US, but he does not believe currency devaluation would solve anything as some tend to believe.
Since most investors are underweight on emerging markets, Faber recommends that now is a good time to increase the holding in emerging market stocks in countries such as Thailand and Vietnam, as price levels are still low and could “hold there for a long time.”
Faber also says cash at current zero percent rate is less attractive than equities in the long run.