Bill Ackman has no edge whatsoever in currency trading, yet he made a big call on long Hong Kong Dollar today. I hope he’s using options on the currency. Bill Ackman is an activist investor. He made more than $1 billion by making a small investment in General Growth Properties (GGP) and buying insurance against MBIA. Those were amazing trades. However, when it comes to currency trading ,we don’t see how Bill Ackman has any edge whatsoever. Jim Chanos has been short China for a very long time and he made a ton of money, but we don’t hear him saying anything about the Chinese currency or the Hong Kong dollar.
It’s also not a secret that Bernanke is printing money and the U.S. dollar is expected to decline. As a result of these expectations, hedge funds have been betting heavily on gold. Today Jim Chanos expressed his pessimistic views about the euro. Yesterday Julian Robertson stated that he is expecting Greece to default on its debt – yet he said he isn’t shorting the euro, he is shorting weaker European currencies like the Hungarian forint.
Bill Ackman assumes that the Chinese (and Hong Kong) currencies are undervalued and they will fight inflation by increasing the value of their currency. We don’t think Chinese people care much about inflation. If there is a country in the world which cares about inflation, it’s Germany – not China, Hong Kong, nor the United States. People were surprised a couple weeks ago when Brasil reduced the interest rates. Turkey did the same thing less than 2 months ago. And the Swiss didn’t let its currency appreciate any more. This is the beginning of a currency war and we don’t think Hong Kong will surrender that easily. But you shouldn’t trust us or actually anyone when it comes to currency markets. We are not experts, but neither is Bill Ackman.