Eurozone starting to resemble a blasting zone, says fund boss

Kavanagh doesn't hold out much hope that problems on the continent can be solved; breakup of the euro 'doesn't bode well'

Jun 1, 2012 @ 2:49 pm

By Jeff Benjamin

All the king's horses and all the king's men are not likely to be able to hold the eurozone together, according to Dave Kavanagh, president of Dearborn Capital Management LLC, a $1 billion managed-futures firm.

“There has been an enormous amount of brainpower that has gone into solving the debt problems in Europe, and they haven't figured it out yet,” he said. “It appears to be a recurring theme, and I don't know how you can fix the problems over there.”

Mr. Kavanagh added that he believes “the powers that be have wanted to kick the can down the road, with the idea that by 2013, the banks will have built up their balance sheets to the point where they could absorb a sovereign-debt hit.”

On the specific subject of Greece's abandoning the euro in favor of its own currency, Mr. Kavanagh said: “A breakup of the euro doesn't bode well for the rest of Europe.”

Closer to home, he acknowledged that the recent U.S. employment and economic growth data represent “bad news, because the numbers don't lie.”

The reports show that only 69,000 jobs were created in the U.S. in May, and that the economy is on pace to grow by 1.9% this year, which is down from the previous estimate of 2.2%.

“I don't mean to be all gloom and doom, because I have heard arguments for why the market is underpriced and you could have a 30% rally,” he said. “But the numbers are all pointing toward a lack of confidence by investors, because we're a consumer-driven economy, and consumers aren't spending.”

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