Shorting the Euro: A Good Bet if Not for the DOJ

Every crisis comes with political baggage. This morning, the US Justice Department is said to be “requesting” that certain hedge funds reveal their bets against the euro.

Under pressure from their EU counterparts, say rumors making their way around the Internet, the Department of Justice is tracking down fund managers who attended a particular dinner in February hosted by Monness, Crespi, Hardt & Co., a NYC brokerage firm. The managers there supposedly discussed taking short positions in the euro and in US banks while going long the Canadian dollar…all fantastic trading ideas, if you ask us.

But such “counterproductive” trading, as Ben Bernanke put it Monday, is irritating the masters of the universe. The Justice Department wants to investigate whether sharing such information amounts to collusion, and wants to crosscheck the trading histories of each firm.

(Hmmmn… We’re having a dinner tonight with several of our Agora Financial colleagues and analysts. We’ll no doubt be discussing gold, the euro, Wall Street banks and the Canadian dollar. Should we too be worried?)

On the blacklist: Greenlight Capital, SAC Capital Advisors, Soros Fund Management and Paulson & Co., all of which have announced large gold positions in the past year.

Last October, we saw Greenlight’s founder David Einhorn give a speech at the Value Investing Congress in NYC. He railed against the Fed and outlined his philosophical position in buying gold as an insurance against financial calamity. It wasn’t notable for what was said, we remember writing at the time, but who was saying it and where.

We also thought Mr. Einhorn was begging for an audit…or worse. Heh. We’ll let you know if these blogosphere horror stories have any merit.

Addison Wiggin
for The Daily Reckoning