Tags: robertson | rogers | rates

Contrarians Prep for Massive Rate Hikes, Sliding Dollar

By Ellen Chang and Dan Weil   |   Monday, 05 Oct 2009 03:15 PM

Julian Robertson, founder of Tiger Management, the former hedge fund firm, is protecting himself against the possibility of foreign buyers halting their purchases of U.S. Treasury securities.

Meanwhile, commodities guru Jim Rogers is reiterating his warning on the U.S. dollar, predicting hyperinflation due to government overspending and easy monetary policy.

Robertson has acquired “curve caps,” which function much like leveraged put options on long-term government bonds, Bloomberg reports.

“They would insure us in the event of massive rate increases,” he said.

Robertson has previously said that if China and Japan stop buying U.S. bonds, the country could experience financial “Armageddon.”

The Treasury Department may need to get new investors by increasing interest rates, he said.

Robertson now only invests his own money in 40 independent hedge funds that he advises in return for a portion of profits.

In January, he predicted that long-term interest rates would increase to a minimum of 7 percent during the next three to five years.

Other investors looking for a safe haven have bought Treasury inflation-protected securities, or TIPS, the Wall Street Journal reports.

During 2009, TIPs funds have records huge levels of investments, including some weeks of reporting over $400 million in sales. Investors also have rushed into commodity funds and gold funds.

Investment guru Jim Rogers says the United States risks hyperinflation, thanks to the government’s massive fiscal and monetary stimulus.

That stimulus also will continue to hurt the dollar, he told CNBC.

"There's no question the U.S. is vulnerable to hyperinflation down the road or certainly the inflation we saw in the 1970s, I would expect that to come back in the foreseeable future, certainly in the next few years," he said.

Consumer price inflation peaked at 13.3 percent in 1979, according to government data.

Rogers says current government figures, which show consumer prices fell 1.5 percent in the year through August, understate inflation.

"The true inflation rate in America? It's certainly at least 6 or 7 percent,” Rogers says.

“The U.S. government lies about it, as you know. Everybody who shops knows that prices are up.”

As for the dollar, easy Fed monetary policy is a major problem, he says.

“America is debasing its currency at a terribly rapid rate. . . It is helping in the short term. But longer-term, I’m extremely pessimistic and worried about the fate of the U.S. dollar, because those people in Washington are doing their best to debase it.”

While inflation stands as the crucial long-term issue, bond giant Pimco’s Bill Gross says deflation still represents the short-term concern.

“There has been significant flattening on the long end of the (yield) curve,” he told Bloomberg.

“This reflects the re-emergence of deflationary fears.”

© 2017 Newsmax. All rights reserved.

1Like our page
2Share
Headline
Julian Robertson, founder of Tiger Management, the former hedge fund firm, is protecting himself against the possibility of foreign buyers halting their purchases of U.S. Treasury securities.Meanwhile, commodities guru Jim Rogers is reiterating his warning on the U.S....
robertson,rogers,rates
447
2009-15-05
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved