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Metallica: Bearish on Euro, Bullish on Rocking Out

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If you managed to get hedge-fund legend George Soros, Brazilian supermodel Gisele Bündchen, and the heavy-metal band Metallica in the same room, you'd find that the conversation might turn to...

...the euro?


Today, the Wall Street Journal reported that Metallica is shaking up its tour schedule in reaction to the eurozone debt crisis:

Metallica's longtime manager, Cliff Burnstein, is accelerating the band's tour plans to avoid getting sucked into Europe's debt troubles. With the gloom among investors spreading to richer countries such as France, Mr. Burnstein is worried that the euro will tank, making it harder for concert promoters in the 17 countries that use the currency to pay Metallica's fees.

As it turns out, Metallica's been quite active in the foreign-exchange markets, using derivatives to hedge against exchange-rate shifts, and from the looks of it, they've got a pretty specific macro view:

The euro is what Mr. Burnstein fears the most. "Over the next few years, the dollar will be stronger and the euro weaker, and if that's the case, I want to take advantage of that by playing more of these [European] shows now, because they will be more profitable for us," he said.

But what makes this really interesting is that the reporting on Metallica's foreign-exchange department is awfully reminiscent of a Bloomberg story from November of 2007 discussing supermodel Gisele Bündchen's disdain of the US dollar.

In that piece, her sister and manager Patricia was quoted as saying "contracts starting now are more attractive in euros because we don't know what will happen to the dollar" -- a view shared at that time by Berkshire Hathaway's (BRK-A) Warren Buffett and PIMCO's Bill Gross.

In fact, Gisele was demanding to be paid in "almost any currency but the U.S. dollar."

Let's see how that worked out.

Here's a chart showing the US Dollar Index' subsequent performance:

Gisele was right for a few quarters before the dollar skyrocketed 27% off its lows to head back towards its 2006 highs. And as we stand today, the dollar is slightly above where it was when the Gisele story hit -- showing that supermodels may not be the best source for foreign-exchange strategy.

Can thrash-metal pioneers Metallica do better in the foreign-change markets?

It's tough to say.

After all, even Wall Street's supposed best and brightest have been having a tough time making money trading, resulting in layoffs at firms like Goldman Sachs (GS), Morgan Stanley (MS), and Credit Suisse (CS).

So maybe, just maybe, the media putting the spolight on a heavy metal band's view on a currency is more a contrarian indicator than anything else -- just like when Gisele balked at the US dollar.
POSITION:  No positions in stocks mentioned.