Lord Rothschild's £130m euro bet
Filed under: Investing
Banking dynasty head Lord Rothschild has taken a -7% net short position on the currency, up from -3% at the end of January. Rothschild isn't alone in shorting the euro. The beginning of the end for the troubled currency?
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Currency analyst Richard Driver from CaxtonFX says Rothschild's move looks an adept one, despite recent talk of ECB action. "The euro is incredibly volatile currently. He's [Rothschild] taken the view that the euro will weaken. Our own analysis is in line with that. He obviously feels its worth it. So do we."
European politicians failure to deal with the euro's problems is seeing several high-profile bankers and investment companies short the currency. Some banks are so worried about the situation they are severing connections with their own subsidiaries.
Der Spiegel claims Germany's Commerzbank and Deutsche Bank are increasingly prefering "to see their branches in Spain and Italy tap into ECB funds, rather than finance them themselves".
Last week oil giant Shell disclosed it was intending to invest some of its vast €13.8bn cash reserves in US government bonds or sink them into US bank accounts rather than risk the reserves sitting in Europe.
German real estate prices are on the up as investors seek safe havens and tangible assets. Lord Rothschild is far from alone with his new position. Earlier this year JPMorgan Asset Management head, Mary Callahan Erdoes, said that shorting the euro was a strong investment idea.
All in the timing
Currency investing, like commodities, is high risk; timing is all. And when governments get involved, it makes it especially dicey. (Lord Rothschild, of course, can afford his bet.)
Greek Prime Minister Antonis Samaras, ahead of talks on its bailout, has again called for more time for tough spending cuts and reforms. Patience is wearing thin though and there is real fear that the Greek spending reforms come way, way too late.
Meanwhile Germany continues to profit from the euro: interest rates are low and its exports remain therefore competitive. But Angela Merkel is also warning that "time is of the essence". Has Lord Rothschild got his timing right?