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At hedge fund confab, talk of devaluing the euro
May 9, 2012 / 7:11 PM / 6 years ago

At hedge fund confab, talk of devaluing the euro

LAS VEGAS (Reuters) - Economists gathered in Las Vegas for a hedge fund conference were focused on the crap games going on in Europe.

“Europe is a huge mess,” Jeremy Siegel, professor of finance at the Wharton School of Business in Philadelphia, Pennsylvania said at the annual Skybridge Capital hedge fund conference here.

Concerns about contagion from the Greek debt crisis to countries such as Spain and Portugal, have resurfaced Siegel said. After elections this past weekend, Greece is facing the prospect of another round of elections if a government cannot be formed.

He said he believed the European Central Bank would eventually intervene in currency markets to reduce the euro’s value. It is currently trading at $1.2962, after hitting a three-and-a-half month low against the dollar on Tuesday.

“My forecast is ultimately the ECB, in an attempt to save the union, will lower the euro. We could see the euro going down to $1.10 or maybe even parity, as a last-ditch effort to save the periphery,” he said.

The subject of economic distress across Europe, and the possibility of a Greek exit from the union was a popular topic.

“The euro zone is a slow-motion train wreck and is eventually going to collapse,” said economist and New York University professor Nouriel Roubini. It is a refrain he has articulated for many months, along with calls that eventually Greece and other countries will leave the euro zone, which he said would be disorderly and upend financial markets.

Roubini, Siegel and other panelists believe the U.S. Federal Reserve will maintain its policy of near-zero interest rates through 2014 or even 2015.

Bob Browne, chief investment officer of Northern Trust Company, predicted no rate rises until 2015.

“The risk of a hike by major central banks, we don’t think will be on table for 2013 or 2014,” Browne said. “The rate of a risk hike by the ECB is zero.”

Siegel said a third phase of quantitative easing from the Fed was not likely.

“There is virtually no chance,” said Siegel. “Inflation isn’t low enough and growth isn’t low enough.”

Reporting by Katya Wachtel; Editing by Leslie Gevirtz

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