European leaders will likely agree to devalue Greece’s debt by about 60 percent and ask the country to leave the eurozone, but not the EU because of political considerations, veteran US bond fund manager Dan Fuss told a forum on the global economy in Taipei yesterday.
“Greece is likely to take a vacation from the eurozone to solve its debt crisis,” said Fuss, vice chairman of Boston-based bond fund firm Loomis Sayles & Co.
Fuss voiced worries about the idea of kicking Greece out of the EU altogether, as some have suggested, saying that such a move could upset peace in the Mediterranean region given the abundant natural resources found underwater.
Photo: CNA
European leaders would likely agree to devalue Greece’s debt by 60 percent as they try to address the issue before a summit in Brussels today.
“I believe that what will be announced at the end of trading tomorrow in Europe will be something of the nature that the euro region pays the debt of the Greek government,” Fuss said. “It’s really critical that Greece remains in the EU from a political perspective.”
Fuss, who oversees US$150 billion in fixed-income assets for his company, said he, unlike most market economists, is rather optimistic that the US economy might expand 2 percent in the fourth quarter and grow 3 percent next year.
Fuss ascribed his optimistic views to improving retail sales, housing and employment figures.
He said the US Federal Reserve is also braced for a fresh round of quantitative easing to help stimulate growth based on the comments its made on the markets and economy.
Another round of quantitative easing would weaken the US dollar, which is likely to stay flat against other foreign reserve currencies, such as the euro and Japanese yen, Fuss said.
The US dollar might depreciate versus the Australian, New Zealand and Canadian currencies, while China’s yuan remains steady because of government intervention, he said.
Fuss said his firm had sold US Treasuries in August and had stayed in US corporate bonds and non-US government bonds since.
“We’ll probably stay away from US Treasuries until they are relatively cheap again,” he said. “There has been a sell-off recently, but they are still very expensive.”
Fuss, who began his investment career in 1958, is widely regarded as one of the savviest US bond managers, investing in out-of-favor securities that eventually paid off handsomely.
He said China’s economy, which the government had tried to cool, using numerous measures, was a source of worry.
“I’m always worried about China,” he said. “I suspect ... that not all the problems of the bad loans were fully reported.”
He declined to say whether he had invested in China, but according to Natixis, Loomis’ agent in Taiwan, none of the company’s funds held China investments.
The US should withdraw a bill that would punish countries that keep their currencies undervalued because it addresses the wrong issues and might harm the US economy, he said.
The bill would allow US manufacturers to seek duties on Chinese imports on condition they can prove business was hurt by an artificially low yuan.
The US Senate approved the legislation on Oct. 11, which now has to be presented to the US House of Representatives.
“Many of us, myself included, would like to see the proposed legislation withdrawn,” Fuss said.
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