Tags: Mauldin | Japan | France | Greece

John Mauldin: France Is the New Greece

Tuesday, 05 Feb 2013 07:40 AM

By John Morgan

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Money manager John Mauldin has a dark view of the economic future of France and says he has placed a big short bet on the Japanese market, according to an interview with The Globe and Mail.

Mauldin, noted for his often-bearish take on global investments, believes France has emerged as a significant threat to the eurozone because of its mounting economic and fiscal ills.

“France is going to be a basket case within two years,” he told The Globe and Mail. “France is the new Greece. The markets will start recognizing it later this year or next year. … They’re going to keep promising, just like Greece was promising.”

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

According to Mauldin, an author and president of Millennium Wave Advisors, France is not serious about reducing its spending, and is on a path to cuts in its credit ratings and rising interest rates on its sovereign debt.

“France will blaze its own path to economic chaos,” Mauldin predicted. “[French President Francois] Hollande seems to have a good mental map for that journey and a good head start.”

In one of his January newsletters published by Business Insider, Mauldin predicted of France: “They will lose their AAA rating, which they will claim is a conspiracy against them and completely unjustified. And when their interest rates climb by 2 percent they will demand that the ECB [European Central Bank] buy their debt, just as the ECB is doing for Spain and Italy.”

As for Greece, Mauldin expects the status quo to endure.

In another January newsletter, he wrote, “Exiting the euro at this time would only double the disaster. They must now finish what they began. As we will see … , this may be the story all over Europe. The cost of breaking up the euro, or of a country leaving on its own, is simply now too high. For better or worse, the marriage must endure.”

Turning to Japan, Mauldin told The Globe and Mail he is backing his pessimism there with a large, longer-term short bet — amounting to 20 percent of his pension funds — against the yen and the Japanese stock market.

Mauldin said 2013 could be the year that “Japan at least begins its descent into that dark night, from the twilight that has been its economy for 20 years.”

Mauldi once dismissed Japan has “a bug in search of a windshield.”
He wrote earlier this month, “This is going to be a long-term trade, so no need to rush out and short the yen this morning.”

“And for the record, I will be putting this trade on slowly, because the yen market and the Nikkei have moved a lot already. I think this may be one of the most asymmetrical trades I have seen, but this will require endurance, not speed.”

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

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