Archive for June, 2015

War on Cash: So governments can track, tax and confiscate your money

From Bill Bonner, Chairman, Bonner & Partners:

The Dow is back under 18,000 points. Meanwhile, gold continues to wander around, apparently lost. More on that below…

Our long-term stock market indicator, developed for us by our chief researcher and former ValueLine stock market analyst Stephen Jones, is flashing a warning.

It looks at the price of stocks relative to the economy that supports them…

And right now, it tells us to expect an average annual loss of 9.6%, after you account for inflation, over the next 10 years.

SEE ALSO: Dr. Ron Paul Describes Exactly What America’s Next Crisis Will Look Like

Don’t Count on Your ATM Cards

Will this indicator be proven correct?

We will wait to find out…

Yesterday, came a report that the prime minister of Poland, Ewa Kopacz, has urged Poles traveling to Greece to take “a larger amount of cash” with them.

Why?

Because the situation could be “very dynamic,” she says.

“Please do not count only on your ATM cards and on ATMs, but take a larger amount of cash with you.”

It’s not the dynamic situation that would worry us. It’s the dynamite that lies beneath the whole world’s money system.

It is a system that is fundamentally flawed. It depends on the intelligence and integrity of its custodians. Not that we think Madame Yellen is dumb. Nor do we doubt her honesty.

But she is, after all, only human.

And centrally planning an $18 trillion economy – by manipulating asset prices and interest rates – is a super-human undertaking.

The odds that something will go wrong?

100%…

READ MORE: Why America is NOT Normal – Dr. Ron Paul’s 8 facts prove how bad things really are

Controls on Cash

A reader asks a good question:

I have a question about the recommendation to hold cash.

If countries are putting controls on real cash and banking, in what form should a person hold cash? U.S. dollars or some other currency. If we truly go to a “cashless society” what good would having a hoard of cash do?

We would like to have a better answer, but we only have the one we have.

Money is always a convention. It is an understanding. People recognize money as a stand-in for wealth.

Since the beginning of civilization, people have experimented with different kinds of money. They ended up – almost always and almost everywhere – with gold and silver.

Why?

Because they were handy. And because they were hard to produce. They were cash that governments could not easily control. No super-humans were needed to manage them.

Governments – the people who are able to boss other people around – always want to control money. They put their faces on it. They mint it. They clip coins. And they print pieces of paper and call it money.

But they could never completely control cash. People hoarded gold. They hid it. They ran away with it. They used it to make trades between themselves… regardless of what the feds said. And when the feds’ money went kaput – which it always did – they turned back to gold, because they knew they could trust it.

And now, the feds are making a new attempt to bring money totally under their control.

For example, under the pretext of cutting funding for terrorists, the French government already has a law in the pipeline banning cash transactions of over €1,000 ($1,120).

There’s nothing stopping governments from banning cash transactions altogether… and ending the usage of paper money.

Economists pretend it is a matter of convenience to the consumer (no more waiting for the clerk to make change for the fellow in front of you).

… or they try to sell it as a useful macro tool for central planners (they will be able to stimulate demand by imposing negative interest rates)…

… or they say a cashless world will be safer – you won’t be held up at gunpoint, and terrorists will find it harder to get financing.

But the real reason is control. If governments can eliminate cash, they can easily track, tax, and confiscate your money.

When You Need a Stash of Cash

And if the feds can control your money, they will be able to control you.

Do you voice an opinion they don’t want to hear? Do you belong to a group they want to get rid of? Do you want to know what happened to your tax money?

Watch out… With a keystroke, you could be “disappeared.”

“Sometimes, when the government tells you to do something, it’s best to do the opposite,” says a French neighbor.

In 1944, her father was the adjutant mayor of a small town in southwestern France. The Allies had landed in Normandy and the Germans were pulling their forces back to the Rhine.

Our friend tells the story:

Someone had blown up a German truck as it went through town. People were doing that. Taking pot shots at the Germans. The SS didn’t like it. They would gather up the mayor and a few other people. If they didn’t turn over the guilty person, they would kill the mayor. Or sometimes the whole town.

My father got a message that told him he was supposed to go to the town square. Instead, he went into the woods. It’s a good thing he did. Otherwise, I wouldn’t be here.

When do you need a stash of cash? When the feds try to outlaw it.

RELATED: Is this China’s plan to destroy the U.S. Dollar?

Hold some dollars. And some gold.

We realize that our answer to the reader’s question is insufficient. After all, what good will cash be after it is declared illegal?

We’re not sure. Maybe we’ve spent too much time in Argentina, where people have more supple and more subtle attitudes to monetary regulations.

Trading pesos for dollars, on the black market, is illegal. Do it and they take you for a scofflaw. Don’t do it and they take you for a fool.

More to come on this in future updates. Stay tuned…

Regards,

Bill

Crux note: We’ve been getting a lot of questions from readers about the monetary catastrophe Bill sees coming. So, we’ve decided to unlock an issue of The Bill Bonner Letter and make it available – for free – to all readers. It deals specifically with the crisis Bill sees coming… and what he recommends you do to prepare. Get Bill’s full report here.

Tuesday, June 30th, 2015 Invest, News, Wealth Comments Off on War on Cash: So governments can track, tax and confiscate your money

STUDY: U.S. manufacturing costs now about even with China’s

From Harold L. Sorkin, Bloomberg:

An entire generation of Americans has come of age laboring under the assumption that the U.S. can’t compete in the manufacturing arena with low-cost competitors such as China and Brazil. That may have been true a decade ago, but it’s no longer true today.

I recently completed a review of manufacturing costs in the top 25 export economies with my colleagues Justin Rose and Michael Zinser. Our research shows that when the most important economic factors are considered—total labor costs, energy expenses, productivity growth, and currency exchange rates — Brazil is one of the highest-cost manufacturing nations in the world, Mexico is cheaper than China, China is virtually even with the U.S. (as are most of the traditionally “low-cost” countries of eastern Europe), and the low-cost leader in western Europe is none other than the country that launched the Industrial Revolution: the United Kingdom.

So throw away the old playbook. Welcome to the new era.

SEE ALSO: Dr. Ron Paul Describes Exactly What America’s Next Crisis Will Look Like

The country with the lowest manufacturing costs, we found, is not China. It’s Indonesia, then India, Mexico, and Thailand. China comes next — with Taiwan’s costs just a tad higher and the U.S.’s a bit more than that, ranking America No. 7 in our study.

As Chinese labor costs rise, American productivity improves, and U.S. energy expenses fall, the difference in manufacturing costs between China and the U.S. has narrowed to such a degree that it’s almost negligible. For every dollar required to manufacture in the U.S., it now costs 96¢ to manufacture in China, before considering the cost of transportation to the U.S. and other factors. For many companies, that’s hardly worth it when product quality, intellectual property rights, and long-distance supply chain issues are added to the equation.

For the record, the countries with the highest manufacturing costs of the 25 nations we studied were Australia, Switzerland, Brazil, France, Italy, Belgium, and Germany — all of which have costs 20 percent to 30 percent higher than the U.S.’s.

Previous cheaper havens, including Brazil, China, the Czech Republic, Poland, and Russia, experienced a significant increase in relative manufacturing costs since 2004 because of some combination of sharp wage increases, lagging productivity growth, unfavorable currency swings, and dramatic increases in energy costs.

Several countries that were relatively expensive a decade ago, most in western Europe, have become more expensive compared with America. Manufacturing costs in Belgium and Sweden rose 7 percentage points from 2004-2014 relative to the U.S., and in France and Italy they rose 10 percentage points. Largely because of productivity gains, the U.K. held its own.

The two countries making the greatest strides in manufacturing competitiveness were Mexico and the U.S. The key reasons were stable wage growth, sustained productivity gains, steady exchange rates, and the big energy advantage the U.S. has captured since the shale-gas boom began.

The new data are more than food for thought; they’re food for action.

READ MORE: Why America is NOT Normal – Dr. Ron Paul’s 8 facts prove how bad things really are

Many companies continue to make manufacturing investment decisions based on conditions from a decade or more ago. They still see North America as high cost and Latin America, eastern Europe, and Asia, especially China, as low cost. The new data show there’s a competitive marketplace of manufacturing opportunities today, with high-cost and low-cost countries virtually everywhere.

When companies build new manufacturing plants, they’re typically placing bets for 25 years or more. They need to carefully consider how relative cost structures are changing and how these changes are likely to continue in the future.

Tuesday, June 30th, 2015 Invest, News, Wealth Comments Off on STUDY: U.S. manufacturing costs now about even with China’s

Ron Paul: Obamacare is not socialist… it’s corporatist

From Ron Paul at The Ron Paul Institute for Peace and Prosperity:

By ruling for the government in the case of King v. Burwell, the Supreme Court once again tied itself into rhetorical and logical knots to defend Obamacare…

In King, the court disregarded Obamacare’s clear language regarding eligibility for federal health care subsides, on the grounds that enforcing the statute as written would cause havoc in the marketplace. The court found that Congress could not have intended this result and that the court needed to uphold Congress’s mythical intention and ignore Obamacare’s actual language.

SEE ALSO: Dr. Ron Paul Describes Exactly What America’s Next Crisis Will Look Like

While Obamacare may be safe from court challenges, its future is far from assured. As Obamacare forces more Americans to pay higher insurance premiums while causing others to lose their insurance or lose access to the physicians of their choice, opposition to Obamacare will grow. Additional Americans will turn against Obamacare as their employers reduce their hours, along with their paychecks, because of Obamacare’s mandates.

As dissatisfaction with Obamacare grows, there will be renewed efforts to pass a single-payer health care system. Single-payer advocates will point to Obamacare’s corporatist features as being responsible for its failures and claim the only solution is to get the private sector completely out of health care.

Unfortunately, many Republicans will inadvertently aid the single-payer advocates by failing to acknowledge that Obamacare is not socialist but corporatist, and that the pre-Obamacare health care system was hobbled by government intervention. In fact, popular support for Obamacare was rooted in the desire to address problems created by prior government interference in the health care marketplace.

Republicans also help the cause of socialized medicine by pretending that Obamacare can be fixed with minor reforms. These Republicans do not understand that replacing Obamacare with “Obamacare Lite” will still leave millions of Americans with inadequate access to quality health care, and could strengthen the movement for a single-payer system.

Republicans’ failure to advocate for a free-market health care system is not just rooted in intellectual error and political cowardice. The insurance industry, the pharmaceutical industry, and the other special interests that benefit from a large government role in health care are just as — or perhaps even more — influential in the Republican Party as in the Democratic Party. The influence of these interests is one reason why, despite their free-market rhetoric, Republicans have a long history of expanding the government’s role in health care.

READ MORE: Why America is NOT Normal – Dr. Ron Paul’s 8 facts prove how bad things really are

Those who think a Republican president and Congress will enact free-market health care should consider that the last time Republicans controlled Congress and the White House their signature health care achievement was to expand federal health care spending and entitlements. Furthermore, Richard Nixon worked with Ted Kennedy to force all health care plans to offer a health maintenance organization (HMO). Even Obamacare’s individual mandate originated in a conservative think tank and was first signed into law by a Republican governor.

Instead of Obamacare Lite, Congress should support giving individuals direct control over their health care dollars through individual health care tax credits and expanded access to health savings accounts. Other reforms like long-term group insurance could ensure that those with “pre-existing conditions” have access to care. Another good reform is negative outcomes insurance that could help resolve the medical malpractice crisis.

America’s health care system is just as unsustainable as our foreign policy and our monetary system. At some point, the financial and human costs of Obamacare will prove overwhelming and Congress will be forced to replace this system. Hopefully, before this happens, a critical mass of people will convince Congress to replace Obamacare with a truly free-market health care system.

Tuesday, June 30th, 2015 Invest, News, Wealth Comments Off on Ron Paul: Obamacare is not socialist… it’s corporatist

It’s official: China stocks are in a bubble… Here’s what to do

From Dr. Steve Sjuggerud, Editor, True Wealth:

Dong Jun recently shut down his factory in China and let all 100 workers go.

He says he makes more money trading Chinese stocks than he does manufacturing lighting equipment…

“Manufacturing is a very hard business these days,” Jun told the Wall Street Journal. “I want to make some money from the stock market and use the profits to restart my manufacturing business later, when the economy turns for the better.”

Jun still shows up almost daily at his manufacturing plant… But he spends his day trading stocks.

So far so good, he thinks…

SEE ALSO: Dr. Ron Paul Describes Exactly What America’s Next Crisis Will Look Like

China’s benchmark CSI 300 index is up 126% over the past year. And the more tech-heavy Shenzhen stock market is up 158% in the same time frame. He’s getting rich.

Why bother with all the hassle of employees and manufacturing when you can make more in the stock market – right?

This reminds me of a story I heard here in Florida during the housing bubble…

“I’m going to quit this plumbing job,” my colleague Matt Badiali’s plumber told him. “I’m making more money buying and selling houses than I ever could make by fixing toilets.”

Can you spot the flaw in the plumber’s plan? It’s the same flaw Jun has in his plan…

The plumber’s plan was built on ever-higher home prices. His success flipping houses reaffirmed his plan. Jun is experiencing the same thing with Chinese stocks right now.

But house prices don’t go up forever. And neither do stock prices.

Nine months ago, I said Chinese stocks were our best chance for 100% gains in the next two years. This might have been the most optimistic view about Chinese stocks on the planet at the time…

Chinese stocks are now up an astounding 126% in just the last 12 months. Clearly, there are some excesses in the market now.

The big question is, what do we do now?

READ MORE: Why America is NOT Normal – Dr. Ron Paul’s 8 facts prove how bad things really are

This is a bubble,” Peter Churchouse recently wrote to his Churchouse Letter subscribers.

Peter is a good friend of mine… He has spent more than three decades in Hong Kong, specializing in Asian real estate. In that time, he has seen every type of boom and bust possible in the Asian markets. (I urge you to check out his excellent work here.)

Readers of the Churchouse Letter who took Peter’s advice to buy local Chinese “A-shares” last fall, before they climbed, have made big profits. Now, Peter is tweaking his advice:

“Six months from now, the market could double up, or be down 50%. Nobody can ever call the top of a market like this one… I’m therefore tightening the trailing stop on my China A-Share recommendation.”

Peter gave the right advice to his readers. Now, you need to do the same. You need to protect yourself.

As Peter said, there could be more gains on the table… or the bottom could fall out.

So how do you handle that?

The right way to do it is by following a strategy we use in my True Wealth Systems letter…

By using this strategy, you could have turned $10,000 into $82,000 since 2012.

And in tomorrow’s essay, I’ll show you exactly how we did it.

Good investing,

Steve

P.S. While Chinese stocks are an incredibly volatile market, right now is a great time to invest in China. And on October 20, there will be a huge announcement that could dramatically change the global economy… and could generate huge profits for investors who take my advice.

Whether you invest in the stock market or just have money in a bank account, this announcement will affect you personally. I recently put together a video presentation explaining exactly what’s going to happen. Watch it here.

Tuesday, June 30th, 2015 Invest, News, Wealth Comments Off on It’s official: China stocks are in a bubble… Here’s what to do

Why ‘FDIC-insured’ doesn’t mean your money is safe

From Bill Bonner, Chairman, Bonner & Partners:

The Dow ended the week back above 18,000 points, despite all the hand-wringing over a potential Greek default.

Gold fell back below the psychologically important $1,200-an-ounce mark.

It is a wait-and-see period.

We are waiting to see what will happen with Greece, for example.

SEE ALSO: Dr. Ron Paul Describes Exactly What America’s Next Crisis Will Look Like

A Heinous Accusation…

But before we get to the Greeks, we rise to our own defense.

Last week, a reader leveled a heinous accusation – a dirty blow, beneath the belt, outrageous, and hideous.

He implied we were a closet Democrat.

Can you imagine?

Our escutcheon sullied… our dignity impugned… our intelligence and savoir faire challenged in such a defamatory manner!

Wrote Diary reader Bud S., in response to our recent series, “The Good, the Bad, and the Ugly” (To catch up, here’s Part IPart II,  Part III, and Part IV):

Commenting on Bill’s current list of ugly people, it seems like the common denominator is that they’re all Republicans.

Hmmm… How can you have a list of ugly people without a Clinton or an Obama on it?

Hmmm… very interesting, guess you can make of that what you will.

Let us assure readers we are not now, nor have we ever been, a Democrat. Not even with a small “d.”

We confess that in our youth – our lungs filled with the gas of civic virtue and our head with delusions of democracy – we once pulled the lever for Jimmy Carter.

As presidents go, he was not the worst. But we quickly realized our error and swore off voting forevermore – a pledge that we have solemnly honored ever since.

If our barbed words seemed to prick Republicans lately, it is only because – at least as far as the zombie wars are concerned – they are the loudest and dumbest jackasses in the field.

Yes, there are plenty of Democrats in this pasture, too. But you get the impression that their motives are purer. They are just in it for the money. And the Imbecile Vote – which is, of course, decisive.

READ MORE: Why America is NOT Normal – Dr. Ron Paul’s 8 facts prove how bad things really are

Showdown in Europe

Back in Europe it is like a showdown in an old TV Western.

Greece on the one side… Germany on the other.

Each in the street, facing off, waiting for the other to blink an eye or draw his gun.

And waiting… And waiting…

One deadline passes. Another approaches.

If we had money in Greece, we’d definitely want to make sure our passport was up-to-date and our savings were outside of the country.

Apparently, there are a lot Greeks with the same idea. The Wall Street Journal reports that cash outflows from Greek banks doubled in the last four days. The smart money is voting – to leave.

Big banks are private businesses. But they are so closely connected to the government and so heavily regulated that they may as well be public utilities.

Banks are responsible for creating roughly 90% of the money supply. They do this by simply lending money into existence.

Banks are also tools for “public policy” implementation – that is, for clumsy and counterproductive central economic planning. They play an integral role in QE. And overnight lending rates between banks determine where short-term interest rates go.

The feds also bail the banks out when they get in trouble…

You may think you have “money in the bank.” You don’t. Your “deposits” are really loans to the bank.

You lend it your money. It agrees to pay you back – under certain conditions. And it can change those conditions when it has the backing of the feds.

RELATED: Is this China’s plan to destroy the U.S. Dollar?

Our Meeting with the President

As the crisis nears, first the feds will limit withdrawals to a certain amount per day. The amount will seem reasonable; most people will see the need and not be inconvenienced.

But a growing number will see the handwriting on the wall… and begin taking out as much cash as they can. Then the feds will reduce the maximum withdrawal limit. Then they’ll ban withdrawals altogether.

When your bank reopens, your deposits could be subject to a tax (a negative interest rate). Or they could be transformed into a different currency.

That’s what happened in Argentina at the start of the new millennium. And it’s what could happen in Greece too.

We were involved personally, in a minor way, in the Argentine crisis. It was the late 1990s. The government of Carlos Menem had pegged the peso to the dollar. But the Argentine version violated just about all the rules of how a currency peg should work. And the smart money was beginning to bet that he couldn’t hold the peg.

We visited President Menem in the Casa Rosada. (The U.S. has a White House. Argentina has a Pink House.)

“Are you going to keep the peg?” we asked.

“Of course, we’re going to keep it. There is no way we would ever abandon it. It is now the heart of our economy. It is why foreigners such as you are willing to invest in Argentina, because you know the currency is safe. It is the reason we have such a booming economy.”

A few months later, Argentina abandoned the peg. It closed the banks. People had tried to protect themselves from a devaluation of the peso by opening accounts in dollars. But when the banks reopened, they discovered that their dollars had been converted to pesos – with a 66% loss!

The important insight is that government and banks always work together to protect themselves – not you.

Is Your Money Safe?

We saw it happen in Cyprus, too. The government there (working with the big banks) changed the terms of the deal – suddenly and, for depositors, catastrophically.

It gave big depositors – with over $100,000 in the bank – a haircut and a shave equal to nearly half their money. Why?

The Cypriot banks had bought Greek government debt. The fall in value of those bonds (the Greeks couldn’t pay then, either) left the banks on the edge of bankruptcy.

The loss was very real. Who ended up paying for it?

The banks that made the bad investments? The government that regulated the banks and forced them to buy government bonds?

Nope. The depositors! Innocent, but perhaps naïve, the depositors got scalped.

And now, Greek depositors – the smart ones, at least – are taking precautions. They yanked out €3 billion ($3.4 billion) this week – or about one-quarter of all deposits for the year.

In the U.S., the FDIC guarantees individual deposits at member banks up to $250,000.

How good is that guarantee?

In a pinch, all sorts of things that you took for granted suddenly have question marks behind them.

What’s the bank’s collateral really worth? How much does the bank have in reserves? How much does the FDIC have? How long will I have to wait to get my money? What will it be worth then? What will I do in the meantime?

You may want to take precautions too.

Regards,

Bill

Crux note: If you think this kind of thing can’t happen in America, think again. In fact, it came within hours of happening just a few years ago. And it’s starting to happen again. Bill explains it all in his new investor presentation. You can view it here.

Monday, June 29th, 2015 Invest, News, Wealth Comments Off on Why ‘FDIC-insured’ doesn’t mean your money is safe

CHART: A possible breakout for this beaten-down commodity

From Chris Kimble at Kimble Charting Solutions:

CLICK ON CHART TO ENLARGE

SEE ALSO: Dr. Ron Paul Describes Exactly What America’s Next Crisis Will Look Like

The chart above looks at corn over the past 30 years and applies a two-year rate of change to it. Over the past two years, Corn is down around 45%… It has been a rough go of it for sure! Could that lead to future opportunities?

Below looks at the best performing assets over the past week, (calculated at 8:30 central Friday morning):

CLICK ON CHART TO ENLARGE

READ MORE: Why America is NOT Normal – Dr. Ron Paul’s 8 facts prove how bad things really are

If you like the idea of buying low and selling higher, you might want to look at the chart below:

CLICK ON CHART TO ENLARGE

One week DOES NOT make a trend.

At this time, corn futures look to be working on a breakout of a two-year falling channel, which is a positive for them. Corn now looks to be testing the top of a pennant pattern at this time. Should it break above this level, it could attract more buyers.

A large unfilled weekly gap remains just above the $6 level. “IF” corn would fill this gap, some big gains would take place!

We cover grains in the Sectors/Commodity Sentiment Extremes Report.

Monday, June 29th, 2015 Invest, News, Wealth Comments Off on CHART: A possible breakout for this beaten-down commodity

VIDEO: Jim Rogers on why the U.S. dollar may soon enter a bubble

From Adam Taggart at PeakProsperity:

Two years since his last interview with us, investor Jim Rogers returns and notes that the risks he warned of last time have only gotten worse. In this week’s podcast, Jim shares his rational for predicting:

  • increased wealth confiscation by the central planners
  • a pending major financial market collapse
  • gold’s return as the preferred safe haven investment
  • more oil price weakness, followed by a trend reversal
  • Russia’s rebound
  • a China bubble reckoning
  • agriculture’s long-term value
×





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SEE ALSO: Dr. Ron Paul Describes Exactly What America’s Next Crisis Will Look Like

Here’s the transcript of Chris and Jim’s conversation:

Chris Martenson: Welcome to this Peak Prosperity podcast. I am your host, Chris Martenson. You know, it was three years ago and then it was last year we ended up talking with legendary investor Jim Rogers, and it turns out everything that he told us about back then made sense and it came true. When we were talking with him last time I was a little bit credulous, but he said that he was bullish on Japanese equities precisely because they were debasing their currency. That turned out to be the correct view, of course. So now we are going to get to talk with him again. Jim, welcome to the show.

Jim Rogers: I’m delighted to be here, Chris. Good evening. Good morning.

Chris Martenson: Good evening. Good morning. You are in Singapore. I’m over here in the United States. About a half a world apart.

Jim Rogers: Morning here and evening there. Go ahead.

Chris Martenson: Here is what I wanted to get your views on – the Federal Reserve is at the end of its QE program. It looks like the U.S. markets are topping out. There is a lot of uncertainty in the markets. But let’s start with Japan. You were right to call a bullish call on Japanese equities then; where do you stand now?

Jim Rogers: Well, I’m still long Japan. I would like to buy more if I find the right opportunity and the right thing. I suspect – well, conceivably Japan is going to turn into a bubble again even though it has been 25 years since they had a bubble in Japan. Maybe they are overdue. Mr. Abe, the prime minister and the head of the central bank seem determined to do whatever it takes to drive things higher. They said they will print, their words, “unlimited amounts of money” so I am afraid it could turn into a bubble. In any case, I am still buying.

Chris Martenson: Well now Japan is an interesting case obviously. They are losing population at this point. What remains is rapidly aging. Does it make sense to try to pump things up given the demographics?

Jim Rogers: Well, Chris, Japan is going to be a disaster. Mr. Abe is going to go down in history as the person who ruined Japan. Twenty years from now people are going to look back and say “oh gosh well that was it. That was the end.” The end for everything you just got through saying. Their population is declining. Their debt is going through the roof. Their currency is being destroyed. None of these things are good to build an economy or to build a long-term future. But it is good for stockbrokers and good for investors because it does make stocks go up whether we like it or not. History will say Mr. Abe ruined Japan, but in the meantime he is getting stocks higher and higher.

Chris Martenson: Now how do you feel about United States equities given that same dynamic? Do you think the Federal Reserve is committed to do whatever it takes?

Jim Rogers: What I suspect will happen with the U.S. is the U.S. will have some kind of correction somewhere along the line for whatever reason and then everybody will call up after, I don’t know, the market comes down 9% or 13%, you make up the number. Everybody will call up Washington and say “oh my gosh, you’ve got to save us. Civilization is at risk. You are going to ruin your reputation and our lives and our world.” Those people in Washington are bureaucrats and politicians; they’re not terribly smart. So they will panic. They will give up and they will come to the rescue. I don’t know what they will do. They will do something to calm everybody down. Then I suspect the market will turn around and have another big rally. It may go on to new highs. It may even turn into a bubble depending on how panicked the people in Washington get. Then that will be the end. The market will make its final top. That could take weeks or months, but then the market will make its final top and that will be the end. And we will start to have serious stock market problems worldwide.

READ MORE: Why America is NOT Normal – Dr. Ron Paul’s 8 facts prove how bad things really are

Chris Martenson: And when you say – what is your timeframe for those serious stock market problems worldwide? Is this something that will take a year or two to resolve or is this something that might last the rest of my life? What are you talking about here?

Jim Rogers: Well the rest of your life, that would be wonderful. You are a young man. That would be terrific. Even the rest of my life would be terrific. No, no. I suspect in the next year or two we will see some kind of major, major problems – longer term problems in the world financial markets. I would suspect when we have this correction it is going to cause central banks to panic. That would happen in the next few weeks or month, and then we have the galloping to the rescue to save us all. That turns into a rally, a big rally that could last a few weeks or months. By 2016 I am sure we are all going to be moaning and groaning because there is going to come a time when there is not much the central banks can do when they have lost all credibility. When governments have lost all credibility. They will print and spend and borrow, but there comes a time when people are just going to say “we don’t want to play this game anymore.” And at that point, that is when the world has a serious, serious problem because there is nothing to rescue us.

Chris Martenson: Do you ever speculate about what those next things might be? I have heard lots of speculation. Potentially a debt jubilee. Maybe a tax rebate. Giving money to Main Street instead of Wall Street. If you could war-game that out and knew what they were going to do, would that change your investment strategies?

Jim Rogers: Well of course if I knew what they were going to do I would invest accordingly. One of the things they will probably do if it comes to it is they will take money away from bank deposits. They have already passed the regulations which said we can take money away from depositors now. They couldn’t do that before last time around. They did it in Cypress and did it in a few places, but in America it was not legal in the UK but it is now legal that they can take your money out of your bank account if they want to. If they decide to. Who knows what they will do. They may buy stocks. Some countries the central banks have been buying stocks. They could do all sorts of things. Mr. Bernanke once said that he would have the power to do anything he wanted. He could buy gold mines if he wanted to. He can do whatever he wanted. Who knows what they will do. They’ll get more and more desperate, but the more desperate that they get the more the world—other than rallies—the world is going to realize oh my gosh the game is up.

By the way, Chris, we may conceivably survive one more big financial problem. Big problem. Serious problem. Collapse if you will. If we do, if they come up with something to save us the next time around, the time after that, boy, there is nothing they can do then. I suspect the next economic collapse, financial collapse, will be the one they cannot deal with. If somehow they are miracle workers, be very, very careful. I would be worried about 2022 – 2023 because then the game will definitely be up if it is not up this time around.

Chris Martenson: Why do you hold that view? Is it because of all the debt outstanding or do you have resources in that view as well? What is really underpinning that view that we have got one, maybe two cycles left, but then we are in trouble?

Jim Rogers: As you know, we had a problem in 2008, which was the worst we have had in a long time. Much worse than the earlier financial crisis and that was because the debt was so, so much higher. Well, Chris, look out the window. The debt is everywhere now. It is staggering. There is no country in the world that has lower debt today than it had in 2008. The Federal Reserve’s balance sheet alone has quintupled, more than quintupled just in those few years. No. Things are getting much, much worse. All the countries that talk about austerity – they all have higher debt now than they did last year. They will all have higher debt next year than they had last year or this year. This is all a shell game. It’s a sham. The debt keeps going higher and higher and higher.

Chris Martenson: You mentioned the bank deposits now being seizable in the chain of dissolution and bail-ins and all of that. I have been a little surprised that gold hasn’t been slightly more popular, given that. I think people have turned to long-dated government bonds as a means of hopefully protecting their wealth. How do you see gold playing out in this particular story?

Jim Rogers: Well, I own gold. I own some gold and I never sold any gold. I’ve had gold for many years. But I have not bought gold in quite some time. Gold has been an anomaly. Gold went up 12 years in a row, as you well know, without a down year. Now that is very strange. That does not happen in markets. So the correction of gold is now going through and also is an anomaly if you ask me because we have to correct that huge move up of 12 years in a row. I don’t know how long it is going to last. I am not buying gold at this stage. I even hedged some of my gold. Not much, but some because I expect another chance to buy gold sometime in the next year or two if it happens. If it happens I hope I am smart enough to step in and buy a lot of gold.

Chris Martenson: And what are you seeing over there in Singapore around gold buying? I know I’ve read lots of stories—haven’t been there myself—about China and the Shanghai Gold Exchange over there in Asia. Obviously a love affair going on with gold. I have been surprised seeing how much gold has been going from west to east, that the price has been doing what it has been doing, but those are the markets. Have you noticed any increased attention to gold in Singapore or about the same?

Jim Rogers: There is more interest in gold. In China it was almost impossible to buy gold 15 years ago, even 10 years ago. Now there are gold shops everywhere in China. It is easy to buy and they have been buying. That is pretty much true of other places in Asia as well. When gold first collapsed there was a big move, a lot of people rushed to buy, but that has cooled off. I was just in China, in fact I saw a gold shop so I stopped to go in and see what was happening. There was not a soul in the shop except five staff members. They were very excited to see anybody. I even bought a few coins just to keep them happy. I bought three silver coins, I think, and one gold. It seemed to be the highlight of their day. It has certainly calmed down in Asia, the gold buying.

As I said, I suspect there is going to be another chance for all of us to buy gold. I don’t know why, Chris, gold has not had a 50% correction in many, many years. That is unusual because most things have 50% corrections every three or four or five years. It’s just the way the markets work. But gold has not. So back to my point: The anomaly is how gold has been acting for the last several years. There are still too many holy people who think that gold is mystical, that gold can never go down. We have got to wait for some of them to give up. We’ve got to wait for some of them to just throw gold out the window and say “she was dishonest. She lied to me. I’ll never touch gold again in my life.” Then we can have a bottom, and then maybe it will be time to buy a lot.

RELATED: Is this China’s plan to destroy the U.S. Dollar?

Chris Martenson: Let’s turn to one of my other favorite commodities that was dishonest and lied, which was oil. Coming down from a high of in the 110 zone and getting halved on the world market, what are you making of the oil markets here?

Jim Rogers: Well, you are right it was dishonest. What happened as you know, America was negotiating with Iran last summer and then the deadline came of July 31 and they both agreed to extend the deadline for a year. You can look at the charts and you will see that is when oil started going down because told America Saudi Arabia to dump oil to get the Iranians under control and the Russians. Saudi Arabia was very happy to do that because they need to do something about fracking. They cannot stop fracking, but they can bring a rationale, a sense to the fracking market. So they started dumping. You see the charts as well as I do. It looks to me that oil will probably be making a bottom sometime this year no matter what Saudi Arabia does at this point. I would not sell oil. As you know, Chris, the way markets work – usually – when something has a big collapse there is a dead-cat bounce, there’s a big bounce for whatever reason, and then a few weeks or months later the market tests the lows. I suspect there will be a test of the lows sometime in the next few weeks or months but that the lows will hold and then oil will go its merry way again.

The fundamentals of oil are such that the world has continued to use more oil than it has discovered. I mean yes, we are not discovering as much as we are using anywhere in the world except for fracking. And therefore world reserves, except for fracking, continue to decline. So the world oil problem is not pretty if you go out a year or two or a few years.

Chris Martenson: Yea, that was something that caught my attention even February of 2014, a full year and three months ago, when all the international oil majors were cutting their capital expenditures because they couldn’t both profitably search for oil and pay dividends. So they cut CAPEX in that story. That was with oil at 110. My concern is a couple two, three years out I think that shortage of CAPEX will translate into shortage of production. And oil is right now below its marginal cost of production. That seems like a pretty good place to think about getting in for any commodity, doesn’t it?

Jim Rogers: Well, normally, but I have been around a long time and I have seen plenty of commodities stay below the cost of production for longer than anybody would think is sensible or rational. Everything you said is correct and it will cause problems eventually whether the problems are this year or whatever. I do know it will be this decade, if not this year, because everybody has cut back and that is it. Even before the cutback the world was using more oil than it was finding every year and so world reserves continue to go into decline, except for fracking.

And fracking, of course, we now know the wells are very short-lived wells; these wells will dry up pretty quickly, so fracking is not as wonderful as we thought. Most of the frackers had negative cash flow. They only survived by rushing around drilling, drilling, drilling more wells, which is why production is still going up. That is going to change very soon.

Chris Martenson: I agree. I agree. The negative cash flows—it was like they were making it down on volume. It was a strange, strange situation.

So Jim, as we turn our attention to Europe, obviously—I am almost tired of analyzing what Greece may or may not do. It is a rumor a day. But do you have a point of view on where Greece is headed and how this might turn out?

Jim Rogers: Well, first I’ll tell you what should happen, what would be best for Greece and the world. What would be best would be if Greece went ahead and went bankrupt and defaulted on its loans, because they can never pay them off no matter how much phony bookkeeping or sleight of hand you want to use. So it is impossible. They should just go ahead and go bankrupt. I would not leave the Euro if I were Greece. That would make it even worse for Greece. They should go bankrupt, stay in the Euro, and default on their loans. They may get thrown out if they default on their loans. But Chris, you know many American states have gone bankrupt in our history. They didn’t get thrown out of the U.S. Many counties, many cities; it’s not the end of the world. You don’t have to leave just because you go bankrupt. That would be the best solution. Will that happen? Probably not. I’m sure something is going to come along to make everybody say things are okay.

One situation is Greece—the center of the Orthodox Church is in Greece. The Russians are also Orthodox. Who knows? Putin is doing all sorts of things with the church these days. Putin is going to ride to the rescue of the Greeks. It will make him look good. It will poke the Americans and the Europeans in the eye. Who knows what may come out. I suspect something will come up which will make everybody say things are okay even though they’re not.

Chris Martenson: If Greece does default, as far as I understand nearly all the debt has been sequestered in the ECB so it is just an explosion on a central bank balance sheet, which is not really a market moving event is it?

Jim Rogers: Yes. It will move to market, I assure you. At least for an hour, if not for a week. It will have some effect because many people will panic. Somebody is going to lose no matter what happens. Greece is a very, very small economy in the world context. Very small in Europe. Very small even in the Euro context. Tiny. But it will make headlines and it will cause some dislocations in the market for a while.

Chris Martenson: Now, you brought up Russia and I have been intrigued by watching Russia going under sanctions and things going quiet a little bit. Do you have a sense—is Russia going to be brought back into the fold or do you think this coldness is going to persist for a while?

Jim Rogers: I’m buying Russia. I’m bullish on Russia at this point. Will it be brought back into the fold? Not at the moment. There are some bureaucrats in Washington. They caught the lady on the telephone plotting for the illegal coup in Russia or in the Ukraine. So she and her friends obviously have an axe to grind to make sure that Russia is still a bad guy. I don’t think you are going to see anything solved any time soon with the U.S and the West.

It is bad for the U.S; it is bad for the West. Many Western companies, European companies, are already suffering because of the sanctions. Certainly suffering as much as the Russians if not more. Worse still, Chris, is we are now driving the Russians and the Asians together and the Iranians and everybody else. Yes, it is a temporary blow to Russia but unfortunately in the long term it is going to make Russia stronger because they are going to be even tighter with the Chinese, the Iranians and any other Asian countries. That cannot be good for the U.S.

Chris Martenson: I agree. It was an amazing pivot that Russia did after being annexed and pushed away by the U.S trying to isolate it, seeing the gas deals that Russia struck with China—extraordinary. $400 billion, 38 billion cubic meters, just an astonishing set of figures on that. Then they struck a second deal. And now we have China looking to lay claim to what they hope are hydrocarbon resources in the South China Sea with the Spratley Island deal. United States there poking at China on this. China is seeming to be pretty firm about this. Do you think China is going to stick to its guns and lay claim to those islands or is there room for negotiation here?

Jim Rogers: Well lay claim— Chris if you go back and look at an old map — Rand McNally is the quintessential American company. Rand McNally maps from like 1947 show the Spratley Islands as part of China. We’re doing a little revision of history here all of a sudden in the U.S. Get out some old maps. Old American maps. Not old Chinese maps. Old American maps and you will see that the Spratleys were always considered part of China. Why America is doing all of this? I have no clue other than maybe we think that we should control the world and everybody should jump up. We have a lot of bureaucrats in Washington who need something to do, need to make themselves important.

I know China is not going to give in. They have been around a few thousand years. They are firmly convinced—partly because of American maps—that the Spratleys are theirs. I would hate to see us all go to war and do something foolish over a few rocks in the middle of the ocean, whether it’s with the Koreans and the Japanese or the Chinese. They are all fighting over some rocks in the water. It is a shame somebody can’t sit down and sort of divide it up and say, God, there’s no sense spending billions of dollars on tanks and planes and killing thousands of millions of people. Let’s sort this out. You may remember that 500 years ago, when there was a big dispute in the western hemisphere about whether the Spanish or the Portuguese should own it. They were about to go to war. They went to the Pope and the Pope divided it up. I wish we could find somebody who is as well thought of as the Pope in 2016 or 17 who could sort this out. I know the Chinese are not going to give up. I know the Americans keep trying to throw their weight around. And I don’t know what business it is of the U.S, but someone in Washington thinks it is.

Chris Martenson: I totally agree with you on that. Jim, as a final question here then – I have a lot of people (myself included) pretty confused on how to invest in this environment. Frankly, from my point of view, it seems more like a speculator’s environment rather than an investor’s environment. People throwing TA out the window wondering when fundamentals will matter again. How do you go about investing in an environment like this?

Jim Rogers: Well fortunately or unfortunately this seems to be a market where momentum is what everybody is playing. I have seen a little bit of it in the past. Not as extensive as it is now, but you are right. About the only thing that seems to matter now is momentum for people.

But you are starting to see that go the other way. Germany has already rolled over. America is not doing very well. I don’t know how people should – what I am doing is I continue to buy China. China looks like an incipient bubble, which would be a shame because if it turns into a bubble I will have to sell my Chinese shares.

I continue to invest in Russia, although not at the moment because oil is, I suspect, going to be testing its bottom. Japan I am still involved in. What else am I doing? I own U.S. dollars. My U.S. dollar is my largest position. Not because I have any confidence in the U.S. dollar. It is a terribly, terribly flawed currency. We are the largest debtor nation in the world’s history. And the debt is going higher and higher and higher. But there is going to be more turmoil coming, Chris. And during periods of turmoil people flee to a safe haven. The U.S. dollar is not a safe haven, but many people think it is and they don’t know what else to do. So they will go to the U.S. dollar. They are not going to the Yen. They are not going to the Euro. We may even turn into a bubble in the U.S. I can conceivably see – and this is the scenario that might work out: The U.S. dollar, for a variety of reasons, turns into a bubble. That of course is not good for gold. Gold drops a lot, at which point I would have to sell my U.S. dollars and hopefully be smart enough to buy gold. If it works that way.

In the meantime, the Chinese market could be turning into a bubble. It looks like it might; I would have to sell my Chinese shares. I don’t know what I would do with the money at that point. If that happens, the Japanese market will be a lot higher. I don’t want to buy it that much higher. I have to sell it somewhere along the line.

We are always coming into interesting times. You say it is very difficult at this point; Chris, it has never been easy for me. All my friends are always talking about “oh gosh it used to be so easier.” I don’t remember it ever being easy. Maybe their memory makes it easy, but it has always been hard for me making a living in the investment markets. But that is where I am putting my money.

Agriculture, of course—I am optimistic about agriculture. Agriculture has done a knee jerk in the past a little while, but I still love agriculture even though she has been mean to me.

Chris Martenson: I do too for a bunch of long-dated reasons and looking where the world is going and were population is headed and where resources are going and how the weather is getting a little wonky, which is going to make things interesting I suspect going forward.

It is always interesting. You are absolutely right. I don’t think it has ever been easy to put money in, pull it out. What you have just described for me is sort of like bubble dodging and I am intrigued. If the dollar is the final safe haven, but it turns into a roach motel and you’ve got to run out of that where – what is on your list then? You said gold potentially, but where do you go if the U.S. bubble bursts?

Jim Rogers: Well if the U.S. dollar bubble bursts and the U.S. bubble bursts – that is what I don’t know. By then conceivably the Chinese currency will be convertible. But conceivably the market in China would have turned into a bubble and it would burst. If the currency becomes convertible—it looks like it may well in that period of time — I may have to sell my U.S. dollars, buy gold, buy the Renminbi. I don’t know. Paper money everywhere in the world is suspect now. There is not a sound paper money anymore because politicians everywhere have learned to buy votes. Even dictators have learned to buy votes with their currency. It is not easy now, but for me Chris it has never been easy.

Chris Martenson: Well, with that I want to thank you so much for your time. We have been talking with Jim Rogers, legendary investor, telling us that you’ve got to be nimble and watch the whole world and be ready to move around the world with your money and maybe even your feet, as some people have done. Jim, thank you so much for your time. I do appreciate it.

Jim Rogers: Well, Chris I also suggest they listen to you. Maybe that is how they will figure out how to survive the coming crisis.

Chris Martenson: And thrive. Thank you so much, Jim.

Jim Rogers: Thank you. Bye-bye.

Monday, June 29th, 2015 Invest, News, Wealth Comments Off on VIDEO: Jim Rogers on why the U.S. dollar may soon enter a bubble

Bill Bonner: Think money in the bank is safe? Think again…

From Bill Bonner, Chairman, Bonner & Partners:

The Dow ended the week back above 18,000 points, despite all the hand-wringing over a potential Greek default.

Gold fell back below the psychologically important $1,200-an-ounce mark.

It is a wait-and-see period.

We are waiting to see what will happen with Greece, for example.

SEE ALSO: Dr. Ron Paul Describes Exactly What America’s Next Crisis Will Look Like

A Heinous Accusation…

But before we get to the Greeks, we rise to our own defense.

Last week, a reader leveled a heinous accusation – a dirty blow, beneath the belt, outrageous, and hideous.

He implied we were a closet Democrat.

Can you imagine?

Our escutcheon sullied… our dignity impugned… our intelligence and savoir faire challenged in such a defamatory manner!

Wrote Diary reader Bud S., in response to our recent series, “The Good, the Bad, and the Ugly” (To catch up, here’s Part IPart II,  Part III, and Part IV):

Commenting on Bill’s current list of ugly people, it seems like the common denominator is that they’re all Republicans.

Hmmm… How can you have a list of ugly people without a Clinton or an Obama on it?

Hmmm… very interesting, guess you can make of that what you will.

Let us assure readers we are not now, nor have we ever been, a Democrat. Not even with a small “d.”

We confess that in our youth – our lungs filled with the gas of civic virtue and our head with delusions of democracy – we once pulled the lever for Jimmy Carter.

As presidents go, he was not the worst. But we quickly realized our error and swore off voting forevermore – a pledge that we have solemnly honored ever since.

If our barbed words seemed to prick Republicans lately, it is only because – at least as far as the zombie wars are concerned – they are the loudest and dumbest jackasses in the field.

Yes, there are plenty of Democrats in this pasture, too. But you get the impression that their motives are purer. They are just in it for the money. And the Imbecile Vote – which is, of course, decisive.

READ MORE: Why America is NOT Normal – Dr. Ron Paul’s 8 facts prove how bad things really are

Showdown in Europe

Back in Europe it is like a showdown in an old TV Western.

Greece on the one side… Germany on the other.

Each in the street, facing off, waiting for the other to blink an eye or draw his gun.

And waiting… And waiting…

One deadline passes. Another approaches.

If we had money in Greece, we’d definitely want to make sure our passport was up-to-date and our savings were outside of the country.

Apparently, there are a lot Greeks with the same idea. The Wall Street Journal reports that cash outflows from Greek banks doubled in the last four days. The smart money is voting – to leave.

Big banks are private businesses. But they are so closely connected to the government and so heavily regulated that they may as well be public utilities.

Banks are responsible for creating roughly 90% of the money supply. They do this by simply lending money into existence.

Banks are also tools for “public policy” implementation – that is, for clumsy and counterproductive central economic planning. They play an integral role in QE. And overnight lending rates between banks determine where short-term interest rates go.

The feds also bail the banks out when they get in trouble…

You may think you have “money in the bank.” You don’t. Your “deposits” are really loans to the bank.

You lend it your money. It agrees to pay you back – under certain conditions. And it can change those conditions when it has the backing of the feds.

RELATED: Is this China’s plan to destroy the U.S. Dollar?

Our Meeting with the President

As the crisis nears, first the feds will limit withdrawals to a certain amount per day. The amount will seem reasonable; most people will see the need and not be inconvenienced.

But a growing number will see the handwriting on the wall… and begin taking out as much cash as they can. Then the feds will reduce the maximum withdrawal limit. Then they’ll ban withdrawals altogether.

When your bank reopens, your deposits could be subject to a tax (a negative interest rate). Or they could be transformed into a different currency.

That’s what happened in Argentina at the start of the new millennium. And it’s what could happen in Greece too.

We were involved personally, in a minor way, in the Argentine crisis. It was the late 1990s. The government of Carlos Menem had pegged the peso to the dollar. But the Argentine version violated just about all the rules of how a currency peg should work. And the smart money was beginning to bet that he couldn’t hold the peg.

We visited President Menem in the Casa Rosada. (The U.S. has a White House. Argentina has a Pink House.)

“Are you going to keep the peg?” we asked.

“Of course, we’re going to keep it. There is no way we would ever abandon it. It is now the heart of our economy. It is why foreigners such as you are willing to invest in Argentina, because you know the currency is safe. It is the reason we have such a booming economy.”

A few months later, Argentina abandoned the peg. It closed the banks. People had tried to protect themselves from a devaluation of the peso by opening accounts in dollars. But when the banks reopened, they discovered that their dollars had been converted to pesos – with a 66% loss!

The important insight is that government and banks always work together to protect themselves – not you.

Is Your Money Safe?

We saw it happen in Cyprus, too. The government there (working with the big banks) changed the terms of the deal – suddenly and, for depositors, catastrophically.

It gave big depositors – with over $100,000 in the bank – a haircut and a shave equal to nearly half their money. Why?

The Cypriot banks had bought Greek government debt. The fall in value of those bonds (the Greeks couldn’t pay then, either) left the banks on the edge of bankruptcy.

The loss was very real. Who ended up paying for it?

The banks that made the bad investments? The government that regulated the banks and forced them to buy government bonds?

Nope. The depositors! Innocent, but perhaps naïve, the depositors got scalped.

And now, Greek depositors – the smart ones, at least – are taking precautions. They yanked out €3 billion ($3.4 billion) this week – or about one-quarter of all deposits for the year.

In the U.S., the FDIC guarantees individual deposits at member banks up to $250,000.

How good is that guarantee?

In a pinch, all sorts of things that you took for granted suddenly have question marks behind them.

What’s the bank’s collateral really worth? How much does the bank have in reserves? How much does the FDIC have? How long will I have to wait to get my money? What will it be worth then? What will I do in the meantime?

You may want to take precautions too.

Regards,

Bill

Crux note: If you think this kind of thing can’t happen in America, think again. In fact, it came within hours of happening just a few years ago. And it’s starting to happen again. Bill explains it all in his new investor presentation. You can view it here.

Sunday, June 28th, 2015 Invest, News, Wealth Comments Off on Bill Bonner: Think money in the bank is safe? Think again…

CHART: This commodity may be on the verge of soaring

From Chris Kimble at Kimble Charting Solutions:

CLICK ON CHART TO ENLARGE

SEE ALSO: Dr. Ron Paul Describes Exactly What America’s Next Crisis Will Look Like

The chart above looks at corn over the past 30 years and applies a two-year rate of change to it. Over the past two years, Corn is down around 45%… It has been a rough go of it for sure! Could that lead to future opportunities?

Below looks at the best performing assets over the past week, (calculated at 8:30 central Friday morning):

CLICK ON CHART TO ENLARGE

READ MORE: Why America is NOT Normal – Dr. Ron Paul’s 8 facts prove how bad things really are

If you like the idea of buying low and selling higher, you might want to look at the chart below:

CLICK ON CHART TO ENLARGE

One week DOES NOT make a trend.

At this time, corn futures look to be working on a breakout of a two-year falling channel, which is a positive for them. Corn now looks to be testing the top of a pennant pattern at this time. Should it break above this level, it could attract more buyers.

A large unfilled weekly gap remains just above the $6 level. “IF” corn would fill this gap, some big gains would take place!

We cover grains in the Sectors/Commodity Sentiment Extremes Report.

Sunday, June 28th, 2015 Invest, News, Wealth Comments Off on CHART: This commodity may be on the verge of soaring

Jim Rogers on why the U.S. dollar may soon enter a bubble

From Adam Taggart at PeakProsperity:

Two years since his last interview with us, investor Jim Rogers returns and notes that the risks he warned of last time have only gotten worse. In this week’s podcast, Jim shares his rational for predicting:

  • increased wealth confiscation by the central planners
  • a pending major financial market collapse
  • gold’s return as the preferred safe haven investment
  • more oil price weakness, followed by a trend reversal
  • Russia’s rebound
  • a China bubble reckoning
  • agriculture’s long-term value
×





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SEE ALSO: Dr. Ron Paul Describes Exactly What America’s Next Crisis Will Look Like

Here’s the transcript of Chris and Jim’s conversation:

Chris Martenson: Welcome to this Peak Prosperity podcast. I am your host, Chris Martenson. You know, it was three years ago and then it was last year we ended up talking with legendary investor Jim Rogers, and it turns out everything that he told us about back then made sense and it came true. When we were talking with him last time I was a little bit credulous, but he said that he was bullish on Japanese equities precisely because they were debasing their currency. That turned out to be the correct view, of course. So now we are going to get to talk with him again. Jim, welcome to the show.

Jim Rogers: I’m delighted to be here, Chris. Good evening. Good morning.

Chris Martenson: Good evening. Good morning. You are in Singapore. I’m over here in the United States. About a half a world apart.

Jim Rogers: Morning here and evening there. Go ahead.

Chris Martenson: Here is what I wanted to get your views on – the Federal Reserve is at the end of its QE program. It looks like the U.S. markets are topping out. There is a lot of uncertainty in the markets. But let’s start with Japan. You were right to call a bullish call on Japanese equities then; where do you stand now?

Jim Rogers: Well, I’m still long Japan. I would like to buy more if I find the right opportunity and the right thing. I suspect – well, conceivably Japan is going to turn into a bubble again even though it has been 25 years since they had a bubble in Japan. Maybe they are overdue. Mr. Abe, the prime minister and the head of the central bank seem determined to do whatever it takes to drive things higher. They said they will print, their words, “unlimited amounts of money” so I am afraid it could turn into a bubble. In any case, I am still buying.

Chris Martenson: Well now Japan is an interesting case obviously. They are losing population at this point. What remains is rapidly aging. Does it make sense to try to pump things up given the demographics?

Jim Rogers: Well, Chris, Japan is going to be a disaster. Mr. Abe is going to go down in history as the person who ruined Japan. Twenty years from now people are going to look back and say “oh gosh well that was it. That was the end.” The end for everything you just got through saying. Their population is declining. Their debt is going through the roof. Their currency is being destroyed. None of these things are good to build an economy or to build a long-term future. But it is good for stockbrokers and good for investors because it does make stocks go up whether we like it or not. History will say Mr. Abe ruined Japan, but in the meantime he is getting stocks higher and higher.

Chris Martenson: Now how do you feel about United States equities given that same dynamic? Do you think the Federal Reserve is committed to do whatever it takes?

Jim Rogers: What I suspect will happen with the U.S. is the U.S. will have some kind of correction somewhere along the line for whatever reason and then everybody will call up after, I don’t know, the market comes down 9% or 13%, you make up the number. Everybody will call up Washington and say “oh my gosh, you’ve got to save us. Civilization is at risk. You are going to ruin your reputation and our lives and our world.” Those people in Washington are bureaucrats and politicians; they’re not terribly smart. So they will panic. They will give up and they will come to the rescue. I don’t know what they will do. They will do something to calm everybody down. Then I suspect the market will turn around and have another big rally. It may go on to new highs. It may even turn into a bubble depending on how panicked the people in Washington get. Then that will be the end. The market will make its final top. That could take weeks or months, but then the market will make its final top and that will be the end. And we will start to have serious stock market problems worldwide.

READ MORE: Why America is NOT Normal – Dr. Ron Paul’s 8 facts prove how bad things really are

Chris Martenson: And when you say – what is your timeframe for those serious stock market problems worldwide? Is this something that will take a year or two to resolve or is this something that might last the rest of my life? What are you talking about here?

Jim Rogers: Well the rest of your life, that would be wonderful. You are a young man. That would be terrific. Even the rest of my life would be terrific. No, no. I suspect in the next year or two we will see some kind of major, major problems – longer term problems in the world financial markets. I would suspect when we have this correction it is going to cause central banks to panic. That would happen in the next few weeks or month, and then we have the galloping to the rescue to save us all. That turns into a rally, a big rally that could last a few weeks or months. By 2016 I am sure we are all going to be moaning and groaning because there is going to come a time when there is not much the central banks can do when they have lost all credibility. When governments have lost all credibility. They will print and spend and borrow, but there comes a time when people are just going to say “we don’t want to play this game anymore.” And at that point, that is when the world has a serious, serious problem because there is nothing to rescue us.

Chris Martenson: Do you ever speculate about what those next things might be? I have heard lots of speculation. Potentially a debt jubilee. Maybe a tax rebate. Giving money to Main Street instead of Wall Street. If you could war-game that out and knew what they were going to do, would that change your investment strategies?

Jim Rogers: Well of course if I knew what they were going to do I would invest accordingly. One of the things they will probably do if it comes to it is they will take money away from bank deposits. They have already passed the regulations which said we can take money away from depositors now. They couldn’t do that before last time around. They did it in Cypress and did it in a few places, but in America it was not legal in the UK but it is now legal that they can take your money out of your bank account if they want to. If they decide to. Who knows what they will do. They may buy stocks. Some countries the central banks have been buying stocks. They could do all sorts of things. Mr. Bernanke once said that he would have the power to do anything he wanted. He could buy gold mines if he wanted to. He can do whatever he wanted. Who knows what they will do. They’ll get more and more desperate, but the more desperate that they get the more the world—other than rallies—the world is going to realize oh my gosh the game is up.

By the way, Chris, we may conceivably survive one more big financial problem. Big problem. Serious problem. Collapse if you will. If we do, if they come up with something to save us the next time around, the time after that, boy, there is nothing they can do then. I suspect the next economic collapse, financial collapse, will be the one they cannot deal with. If somehow they are miracle workers, be very, very careful. I would be worried about 2022 – 2023 because then the game will definitely be up if it is not up this time around.

Chris Martenson: Why do you hold that view? Is it because of all the debt outstanding or do you have resources in that view as well? What is really underpinning that view that we have got one, maybe two cycles left, but then we are in trouble?

Jim Rogers: As you know, we had a problem in 2008, which was the worst we have had in a long time. Much worse than the earlier financial crisis and that was because the debt was so, so much higher. Well, Chris, look out the window. The debt is everywhere now. It is staggering. There is no country in the world that has lower debt today than it had in 2008. The Federal Reserve’s balance sheet alone has quintupled, more than quintupled just in those few years. No. Things are getting much, much worse. All the countries that talk about austerity – they all have higher debt now than they did last year. They will all have higher debt next year than they had last year or this year. This is all a shell game. It’s a sham. The debt keeps going higher and higher and higher.

Chris Martenson: You mentioned the bank deposits now being seizable in the chain of dissolution and bail-ins and all of that. I have been a little surprised that gold hasn’t been slightly more popular, given that. I think people have turned to long-dated government bonds as a means of hopefully protecting their wealth. How do you see gold playing out in this particular story?

Jim Rogers: Well, I own gold. I own some gold and I never sold any gold. I’ve had gold for many years. But I have not bought gold in quite some time. Gold has been an anomaly. Gold went up 12 years in a row, as you well know, without a down year. Now that is very strange. That does not happen in markets. So the correction of gold is now going through and also is an anomaly if you ask me because we have to correct that huge move up of 12 years in a row. I don’t know how long it is going to last. I am not buying gold at this stage. I even hedged some of my gold. Not much, but some because I expect another chance to buy gold sometime in the next year or two if it happens. If it happens I hope I am smart enough to step in and buy a lot of gold.

Chris Martenson: And what are you seeing over there in Singapore around gold buying? I know I’ve read lots of stories—haven’t been there myself—about China and the Shanghai Gold Exchange over there in Asia. Obviously a love affair going on with gold. I have been surprised seeing how much gold has been going from west to east, that the price has been doing what it has been doing, but those are the markets. Have you noticed any increased attention to gold in Singapore or about the same?

Jim Rogers: There is more interest in gold. In China it was almost impossible to buy gold 15 years ago, even 10 years ago. Now there are gold shops everywhere in China. It is easy to buy and they have been buying. That is pretty much true of other places in Asia as well. When gold first collapsed there was a big move, a lot of people rushed to buy, but that has cooled off. I was just in China, in fact I saw a gold shop so I stopped to go in and see what was happening. There was not a soul in the shop except five staff members. They were very excited to see anybody. I even bought a few coins just to keep them happy. I bought three silver coins, I think, and one gold. It seemed to be the highlight of their day. It has certainly calmed down in Asia, the gold buying.

As I said, I suspect there is going to be another chance for all of us to buy gold. I don’t know why, Chris, gold has not had a 50% correction in many, many years. That is unusual because most things have 50% corrections every three or four or five years. It’s just the way the markets work. But gold has not. So back to my point: The anomaly is how gold has been acting for the last several years. There are still too many holy people who think that gold is mystical, that gold can never go down. We have got to wait for some of them to give up. We’ve got to wait for some of them to just throw gold out the window and say “she was dishonest. She lied to me. I’ll never touch gold again in my life.” Then we can have a bottom, and then maybe it will be time to buy a lot.

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Chris Martenson: Let’s turn to one of my other favorite commodities that was dishonest and lied, which was oil. Coming down from a high of in the 110 zone and getting halved on the world market, what are you making of the oil markets here?

Jim Rogers: Well, you are right it was dishonest. What happened as you know, America was negotiating with Iran last summer and then the deadline came of July 31 and they both agreed to extend the deadline for a year. You can look at the charts and you will see that is when oil started going down because told America Saudi Arabia to dump oil to get the Iranians under control and the Russians. Saudi Arabia was very happy to do that because they need to do something about fracking. They cannot stop fracking, but they can bring a rationale, a sense to the fracking market. So they started dumping. You see the charts as well as I do. It looks to me that oil will probably be making a bottom sometime this year no matter what Saudi Arabia does at this point. I would not sell oil. As you know, Chris, the way markets work – usually – when something has a big collapse there is a dead-cat bounce, there’s a big bounce for whatever reason, and then a few weeks or months later the market tests the lows. I suspect there will be a test of the lows sometime in the next few weeks or months but that the lows will hold and then oil will go its merry way again.

The fundamentals of oil are such that the world has continued to use more oil than it has discovered. I mean yes, we are not discovering as much as we are using anywhere in the world except for fracking. And therefore world reserves, except for fracking, continue to decline. So the world oil problem is not pretty if you go out a year or two or a few years.

Chris Martenson: Yea, that was something that caught my attention even February of 2014, a full year and three months ago, when all the international oil majors were cutting their capital expenditures because they couldn’t both profitably search for oil and pay dividends. So they cut CAPEX in that story. That was with oil at 110. My concern is a couple two, three years out I think that shortage of CAPEX will translate into shortage of production. And oil is right now below its marginal cost of production. That seems like a pretty good place to think about getting in for any commodity, doesn’t it?

Jim Rogers: Well, normally, but I have been around a long time and I have seen plenty of commodities stay below the cost of production for longer than anybody would think is sensible or rational. Everything you said is correct and it will cause problems eventually whether the problems are this year or whatever. I do know it will be this decade, if not this year, because everybody has cut back and that is it. Even before the cutback the world was using more oil than it was finding every year and so world reserves continue to go into decline, except for fracking.

And fracking, of course, we now know the wells are very short-lived wells; these wells will dry up pretty quickly, so fracking is not as wonderful as we thought. Most of the frackers had negative cash flow. They only survived by rushing around drilling, drilling, drilling more wells, which is why production is still going up. That is going to change very soon.

Chris Martenson: I agree. I agree. The negative cash flows—it was like they were making it down on volume. It was a strange, strange situation.

So Jim, as we turn our attention to Europe, obviously—I am almost tired of analyzing what Greece may or may not do. It is a rumor a day. But do you have a point of view on where Greece is headed and how this might turn out?

Jim Rogers: Well, first I’ll tell you what should happen, what would be best for Greece and the world. What would be best would be if Greece went ahead and went bankrupt and defaulted on its loans, because they can never pay them off no matter how much phony bookkeeping or sleight of hand you want to use. So it is impossible. They should just go ahead and go bankrupt. I would not leave the Euro if I were Greece. That would make it even worse for Greece. They should go bankrupt, stay in the Euro, and default on their loans. They may get thrown out if they default on their loans. But Chris, you know many American states have gone bankrupt in our history. They didn’t get thrown out of the U.S. Many counties, many cities; it’s not the end of the world. You don’t have to leave just because you go bankrupt. That would be the best solution. Will that happen? Probably not. I’m sure something is going to come along to make everybody say things are okay.

One situation is Greece—the center of the Orthodox Church is in Greece. The Russians are also Orthodox. Who knows? Putin is doing all sorts of things with the church these days. Putin is going to ride to the rescue of the Greeks. It will make him look good. It will poke the Americans and the Europeans in the eye. Who knows what may come out. I suspect something will come up which will make everybody say things are okay even though they’re not.

Chris Martenson: If Greece does default, as far as I understand nearly all the debt has been sequestered in the ECB so it is just an explosion on a central bank balance sheet, which is not really a market moving event is it?

Jim Rogers: Yes. It will move to market, I assure you. At least for an hour, if not for a week. It will have some effect because many people will panic. Somebody is going to lose no matter what happens. Greece is a very, very small economy in the world context. Very small in Europe. Very small even in the Euro context. Tiny. But it will make headlines and it will cause some dislocations in the market for a while.

Chris Martenson: Now, you brought up Russia and I have been intrigued by watching Russia going under sanctions and things going quiet a little bit. Do you have a sense—is Russia going to be brought back into the fold or do you think this coldness is going to persist for a while?

Jim Rogers: I’m buying Russia. I’m bullish on Russia at this point. Will it be brought back into the fold? Not at the moment. There are some bureaucrats in Washington. They caught the lady on the telephone plotting for the illegal coup in Russia or in the Ukraine. So she and her friends obviously have an axe to grind to make sure that Russia is still a bad guy. I don’t think you are going to see anything solved any time soon with the U.S and the West.

It is bad for the U.S; it is bad for the West. Many Western companies, European companies, are already suffering because of the sanctions. Certainly suffering as much as the Russians if not more. Worse still, Chris, is we are now driving the Russians and the Asians together and the Iranians and everybody else. Yes, it is a temporary blow to Russia but unfortunately in the long term it is going to make Russia stronger because they are going to be even tighter with the Chinese, the Iranians and any other Asian countries. That cannot be good for the U.S.

Chris Martenson: I agree. It was an amazing pivot that Russia did after being annexed and pushed away by the U.S trying to isolate it, seeing the gas deals that Russia struck with China—extraordinary. $400 billion, 38 billion cubic meters, just an astonishing set of figures on that. Then they struck a second deal. And now we have China looking to lay claim to what they hope are hydrocarbon resources in the South China Sea with the Spratley Island deal. United States there poking at China on this. China is seeming to be pretty firm about this. Do you think China is going to stick to its guns and lay claim to those islands or is there room for negotiation here?

Jim Rogers: Well lay claim— Chris if you go back and look at an old map — Rand McNally is the quintessential American company. Rand McNally maps from like 1947 show the Spratley Islands as part of China. We’re doing a little revision of history here all of a sudden in the U.S. Get out some old maps. Old American maps. Not old Chinese maps. Old American maps and you will see that the Spratleys were always considered part of China. Why America is doing all of this? I have no clue other than maybe we think that we should control the world and everybody should jump up. We have a lot of bureaucrats in Washington who need something to do, need to make themselves important.

I know China is not going to give in. They have been around a few thousand years. They are firmly convinced—partly because of American maps—that the Spratleys are theirs. I would hate to see us all go to war and do something foolish over a few rocks in the middle of the ocean, whether it’s with the Koreans and the Japanese or the Chinese. They are all fighting over some rocks in the water. It is a shame somebody can’t sit down and sort of divide it up and say, God, there’s no sense spending billions of dollars on tanks and planes and killing thousands of millions of people. Let’s sort this out. You may remember that 500 years ago, when there was a big dispute in the western hemisphere about whether the Spanish or the Portuguese should own it. They were about to go to war. They went to the Pope and the Pope divided it up. I wish we could find somebody who is as well thought of as the Pope in 2016 or 17 who could sort this out. I know the Chinese are not going to give up. I know the Americans keep trying to throw their weight around. And I don’t know what business it is of the U.S, but someone in Washington thinks it is.

Chris Martenson: I totally agree with you on that. Jim, as a final question here then – I have a lot of people (myself included) pretty confused on how to invest in this environment. Frankly, from my point of view, it seems more like a speculator’s environment rather than an investor’s environment. People throwing TA out the window wondering when fundamentals will matter again. How do you go about investing in an environment like this?

Jim Rogers: Well fortunately or unfortunately this seems to be a market where momentum is what everybody is playing. I have seen a little bit of it in the past. Not as extensive as it is now, but you are right. About the only thing that seems to matter now is momentum for people.

But you are starting to see that go the other way. Germany has already rolled over. America is not doing very well. I don’t know how people should – what I am doing is I continue to buy China. China looks like an incipient bubble, which would be a shame because if it turns into a bubble I will have to sell my Chinese shares.

I continue to invest in Russia, although not at the moment because oil is, I suspect, going to be testing its bottom. Japan I am still involved in. What else am I doing? I own U.S. dollars. My U.S. dollar is my largest position. Not because I have any confidence in the U.S. dollar. It is a terribly, terribly flawed currency. We are the largest debtor nation in the world’s history. And the debt is going higher and higher and higher. But there is going to be more turmoil coming, Chris. And during periods of turmoil people flee to a safe haven. The U.S. dollar is not a safe haven, but many people think it is and they don’t know what else to do. So they will go to the U.S. dollar. They are not going to the Yen. They are not going to the Euro. We may even turn into a bubble in the U.S. I can conceivably see – and this is the scenario that might work out: The U.S. dollar, for a variety of reasons, turns into a bubble. That of course is not good for gold. Gold drops a lot, at which point I would have to sell my U.S. dollars and hopefully be smart enough to buy gold. If it works that way.

In the meantime, the Chinese market could be turning into a bubble. It looks like it might; I would have to sell my Chinese shares. I don’t know what I would do with the money at that point. If that happens, the Japanese market will be a lot higher. I don’t want to buy it that much higher. I have to sell it somewhere along the line.

We are always coming into interesting times. You say it is very difficult at this point; Chris, it has never been easy for me. All my friends are always talking about “oh gosh it used to be so easier.” I don’t remember it ever being easy. Maybe their memory makes it easy, but it has always been hard for me making a living in the investment markets. But that is where I am putting my money.

Agriculture, of course—I am optimistic about agriculture. Agriculture has done a knee jerk in the past a little while, but I still love agriculture even though she has been mean to me.

Chris Martenson: I do too for a bunch of long-dated reasons and looking where the world is going and were population is headed and where resources are going and how the weather is getting a little wonky, which is going to make things interesting I suspect going forward.

It is always interesting. You are absolutely right. I don’t think it has ever been easy to put money in, pull it out. What you have just described for me is sort of like bubble dodging and I am intrigued. If the dollar is the final safe haven, but it turns into a roach motel and you’ve got to run out of that where – what is on your list then? You said gold potentially, but where do you go if the U.S. bubble bursts?

Jim Rogers: Well if the U.S. dollar bubble bursts and the U.S. bubble bursts – that is what I don’t know. By then conceivably the Chinese currency will be convertible. But conceivably the market in China would have turned into a bubble and it would burst. If the currency becomes convertible—it looks like it may well in that period of time — I may have to sell my U.S. dollars, buy gold, buy the Renminbi. I don’t know. Paper money everywhere in the world is suspect now. There is not a sound paper money anymore because politicians everywhere have learned to buy votes. Even dictators have learned to buy votes with their currency. It is not easy now, but for me Chris it has never been easy.

Chris Martenson: Well, with that I want to thank you so much for your time. We have been talking with Jim Rogers, legendary investor, telling us that you’ve got to be nimble and watch the whole world and be ready to move around the world with your money and maybe even your feet, as some people have done. Jim, thank you so much for your time. I do appreciate it.

Jim Rogers: Well, Chris I also suggest they listen to you. Maybe that is how they will figure out how to survive the coming crisis.

Chris Martenson: And thrive. Thank you so much, Jim.

Jim Rogers: Thank you. Bye-bye.

Sunday, June 28th, 2015 Invest, News, Wealth Comments Off on Jim Rogers on why the U.S. dollar may soon enter a bubble

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