Clarium's Thiel Says Dollar Is Undervalued as Deflationary Period Looms

Peter Thiel, the head of Clarium Capital Management LLC who was a founding investor in PayPal Inc. and Facebook Inc., said the U.S. dollar is undervalued.

“People are universally bearish on the dollar and the U.S., and it seems to me it’s wrong,” he said today in an interview on Bloomberg Television’s “InBusiness With Margaret Brennan.” “We have another big dollar sell-off today, but on any fundamental basis, it is way too cheap.”

The euro today touched its strongest level against the dollar since April. The dollar fell 1.1 percent against the euro to $1.3469 at 3 p.m. in New York, from $1.3314 yesterday. The U.S. currency has been losing value against the euro since June 7, when the European currency was at $1.19.

“I would be very worried about moving money to emerging markets, gold, things like that,” said Thiel, who has been wagering that the U.S. is entering a deflationary period, which would lead to falling stock prices and a stronger dollar.

Federal Reserve Bank of Richmond President Jeffrey Lacker said today that inflation of about 1.5 percent is consistent with the central bank’s mandate for stable prices, and he doesn’t see a risk of deflation.

Lacker, speaking to reporters after a speech in Frankfort, Kentucky, said the record from the 1950s and 1960s shows inflation can run between 1 percent and 1.5 percent for “quite some time” without causing deflation, or a persistent decline in prices.

Founding Clarium

Thiel, 42, founded Clarium Capital in San Francisco in 2002, overseeing about $7 billion at its 2008 peak. It managed about $1 billion as of June.

After graduating from Stanford Law School in 1992, Thiel clerked for a federal judge in Atlanta, traded derivatives for a Credit Suisse Group AG unit and practiced securities law at New York firm Sullivan & Cromwell LLP before setting up a hedge-fund firm under his own name in 1996. The firm, Thiel Capital Management LLC, invested in the predecessor to PayPal, the Mountain View, California-based online-payment-processing company that EBay Inc. bought in October 2002 for about $1.5 billion.

Thiel invested $500,000 in Facebook, the social-networking site created by Harvard University dropout Mark Zuckerberg, in 2004 and the following year co-founded a venture-capital firm called the Founders Fund. That firm’s principals include Ken Howery and Luke Nosek, both co-founders at PayPal, as well as Sean Parker, who helped start Facebook and Napster, the music- sharing website.

To contact the reporter on this story: Katherine Burton in New York at kburton@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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