By Shiyin Chen and Haslinda Amin
May 12 (Bloomberg) — Investor Jim Rogers said Europe’s bailout of indebted nations to overcome the sovereign-debt crisis is just “another nail in the coffin” for the euro as higher spending increases the region’s debt.
The 16-nation currency weakened for a second day against the dollar after rallying as much as 2.7 percent on May 10, when the governments of the 16 euro nations agreed to make loans of as much as 750 billion euros ($962 billion) available to countries under attack from speculators and the European Central Bank pledged to intervene in government securities markets.
“I was stunned,” Rogers, chairman of Rogers Holdings, said in a Bloomberg Television interview in Singapore. “This means that they’ve given up on the euro, they don’t particularly care if they have a sound currency, you have all these countries spending money they don’t have and it’s now going to continue.”
U.S. and European stocks fell yesterday on concern the plan to rescue debt-laden governments in the region will fail to reverse the euro’s worst start to a year since 2000, forcing the European Central Bank to keep rates at a record low for longer.
New York University professor Nouriel Roubini said Greece and other “laggards” in the euro area may be forced to abandon the common currency in the next few years to spur their economies. The euro will remain the currency for a smaller number of countries that have “stronger fiscal and economic fundamentals,” he said in an interview on Bloomberg Television.
Greece’s budget deficit of 13.6 percent of gross domestic product is the second-highest in the euro zone after Ireland’s 14.3 percent. As part of the bailout plan, Spain and Portugal also pledged deeper deficit reductions than previously planned.
The euro weakened against 13 of its 16 major counterparts and fell to $1.2644 from $1.2662 in New York yesterday. Last week, the currency fell to the weakest level against the dollar since January 2009 as stocks dropped globally and borrowing costs soared in nations from Greece to Portugal and Spain.
Economic growth in the nations that share the euro will lag behind the U.S. by almost 1.5 percentage points next year, Bloomberg surveys of economists show.
All paper currencies are being “debased,” with the euro currency union at risk of being “dissolved,” Rogers said, adding that he continues to own the dollar, the Swiss franc, the Japanese yen and the euro.
“It’s a political currency and nobody is minding the economics behind the necessities to have a strong currency,” Rogers said. “I’m afraid it’s going to dissolve. They’re throwing more money at the problem and it’s going to make things worse down the road.”
Shorting Emerging Markets
Investors should instead buy precious metals including gold or currencies of countries that have large natural resources, Rogers said. Among other asset classes, he favors agricultural commodities as the best bet for the next decade as well as silver because prices haven’t rallied.
Rogers started short-selling emerging markets in the past two weeks after last year’s rally, he said. Still, the investor will seek to add to his Chinese holdings if shares fall further.
Chinese stocks are the world’s second-worst performers this year as government officials sought to curb accelerating inflation and speculation in the nation’s real estate market. The Shanghai Composite Index yesterday entered a bear market after falling 21 percent from its Nov. 23 high.
To contact the reporter on this story: Shiyin Chen in Singapore at firstname.lastname@example.org
Last Updated: May 11, 2010 23:32 EDT
May 12 (Bloomberg) — Jim Rogers, chairman of Rogers Holdings, talks with Bloomberg’s Haslinda Amin in Singapore about the $1 trillion European loan package to stop the sovereign debt crisis, and the outlook for the euro. (This is an excerpt of the full interview. Source: Bloomberg)