Greenlight Capital is betting on the possibility of a major currency collapse and a surge in interest rates, the hedge-fund firm's manager David Einhorn said Monday, according to MarketWatch.
Greenlight has been buying physical gold this year because Einhorn is concerned that efforts to save the financial system and fuel economic recovery are undermining the value of such currencies as the U.S. dollar.
On Monday, he said Greenlight has added new trades to this investment theme, buying long-dated options on much higher interest rates in Japan and other developed regions -- effectively giving the firm the chance to make big profits from a jump in rates. The options, bought from major banks, are tied to interest rates four to five years out, Einhorn noted.
"Japan may already be past the point of no return," he said during a presentation at the Value Investing Congress in New York.
The dollar collapse scenario that concerns Einhorn is certainly part of a double edged sword. It could happen, just keep in mind that at this point it has to come from international panic, since Bernanke hasn't printed any money since February.
The smart way to play this market is to bet on volatility. Which ever way the pendulum is going to swing it is going to swing dramatically. Obviously if there is a dollar collapse, it will be huge. But a strengthening dollar will also be a major move in the other direction. Bet the volatility.
Robert, quantitative easing is a form of money creation. Quantitative easing occurred after February, so I do not understand how you can say that money printing has not occurred.
ReplyDeleteRobert, quantitative easing is a form of money creation. Quantitative easing occurred after February, so I do not understand how you can say that money printing has not occurred
ReplyDeleteWhere do you see this quantitative easing after February?