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John Roque - Europe is Uninvestable & Gold is the Antidote

With gold near $1,770, silver around $34 and stock markets around the world plunging yesterday, today King World News interviewed John Roque, Managing Director of WJB Capital Group out of New York. KWN wanted to get John’s thoughts on where he sees opportunities on both the long and short side of the markets as well as gold. When asked about stocks, Roque responded, “First of all, Eric, I think it’s a little ridiculous that the market believes a change in Italian leadership improves things in that part of the world. Also, I think it’s important to note that the S&P failed at its downward sloping 200 day moving average which is in the 1,275 area.”

John Roque continues:

“Until we can move above that area (S&P 1,275) I think it’s right to continue to sell rallies and to be dubious on any big move to the upside. So that’s an area of resistance and it’s an important level that we need to pay attention to.

My take, to be quite plain, is that Europe is uninvestable. I think it’s uninvestable from the long side and largely uninvestable from the short side because of the tremendous volatility.

Now don’t get me wrong there are plenty of stocks that we’d rather be short, but I don’t think you can be short those stocks while having to worry about covering them intraday. This tremendous volatility on the intraday moves is designed to shake most people out. That’s why I think you are either on the sidelines or you have to be committed to being short because you think this is a bunch of baloney and it’s going to fail.”

When asked about the US dollar Roque replied, “I want to be long the dollar. I think it’s the best house in a bad neighborhood. I can also take a look at many other currencies that I would rather be short vs the dollar. So I want to be long the dollar here and I believe that’s unpalatable to most people. You might not like the dollar, but it’s probably in a better position now than the euro is.”

Roque had this to say about gold, “If I’m long gold I’m happy with it and leaving it alone. I would love to see gold consolidate a little bit, but I think given the action in gold and the volatility, it should be a hold in your portfolio. It’s the antidote to governments and fiat currencies. Gold also helps to assuage fears with regards to other assets.”

When asked if the stock market would continue to plunge, Roque answered, “It’s too hard for me to figure. I think at the very least, Eric, we are going to be in a sideways, very volatile trading range. We still have a 950 target (23% lower) on the S&P and it looked like we were going to get there in early October....

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“So we have a target of 950 that is yet to be satisfied and we’re still sticking with it. I think that the downside is unresolved and not to be flip about it, but it’s ok if we get there over time. I don’t think we need to get there immediately to wring out the excesses, but I believe that it will be more harmful if it takes longer for us to get there.

If you want to be long something, be long volatility. I think this tremendous chop continues, up 1%, down 1%, up 2%, down 2% etc., so I want to be long volatility.”

Regarding bonds Roque stated, “We continue to want to be long the 10 and 30 year (US) Treasuries. We also pay a lot of attention to the G7 bond markets and the market that we want to be short here is the French bond market. The ten year yield for France acts differently than the ten year for Canada, Germany, the US, the UK and of course Japan.

Now we know what Italy’s yield has done and that was setting itself up for the prior six to eight months to have a big breakout. France’s yield is not there yet but I think if you are looking to be short bonds, I would look to short France. As I said, the yield there is acting differently than those other countries I mentioned.”

Eric King

KingWorldNews.com

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