Jim Rogers hope-driven wish is that the
politicians were smart enough at some point to say (to the central
bankers), "we've got to stop this, this is going to be bad." He adds, on
the incoming QEeen, "she’s not going to stop it, first of all she
doesn't believe in stopping it, she thinks printing money is good."
However, Rogers warns in this excellent
interview with Birch Gold,
"eventually the markets will just say, "We're not going to play this game anymore", and we'll have a serious collapse." The world is blinded by central bank liquidity, and as Rogers somewhat mockingly notes
"if
everybody says the sky is blue, I urge you to look out the window and
see if it's blue because I have found that most people won't even bother
to look out the window..." Rogers concludes, "everybody should own some precious metals as an insurance policy," because as he ominously warns,
when 'it' collapses, "there will be big change.
Transcript (via
Birch Gold Group)
Rachel Mills, Birch Gold Group (
BGG): This is Rachel Mills for
Birch Gold, and I am very pleased to be joined today by Jim Rogers, legendary investor. Thank you so much Jim for joining me.
Jim Rogers: I am delighted to be here Rachel.
BGG: So today I wanted to talk a little about stock
market highs and Quantitative Easing and inflation and a little bit of
Federal Reserve and when is the taper is going to happen and currency
wars. But there is one question that I don’t have to ask you, which you
get asked a lot, I know, and that is what your secret to being so
prescient in the marketplace?
“…if
everybody says the sky is blue, I at least urge you to go and look out
the window and see if it’s blue because I have found that most people
won’t even bother to look out the window…”
JR: As far as I know, I’m not quite sure. I do know
that I have learned over the years, always, when nearly everybody is
thinking the same way that means somebody’s not thinking that means we
got to start thinking about it and see if there’s not another way,
another approach. Because if everybody says the sky is blue, I at least
urge you to go and look out the window and see if it’s blue because I
have found that most people won’t even bother to look out the window. If
they see on the television or in the newspaper or something that
everybody says the sky is blue, I at least urge them to look out the
window. I find that most people don’t want to do their homework, that’s
the first problem that many people have, is just doing simple homework.
“…no matter what we all know today, it’s not going to be true in 10 or 15 years…”
Second, I have learned that if everybody says the sky is blue and I
go and look out the window and see that it is blue, I have also learned
that, well wait a minute, if everybody knows the sky is blue, is that
going to change? Now that everybody knows something, is it time to start
thinking about “Well maybe tomorrow the sky will not be blue?” And
again, most people say “Well everybody knows the sky is blue and that’s
all we need to know.” No, it’s not all you need to know because another
thing I have learned in my life is that no matter what we all know
today, it’s not going to be true in 10 or 15 years. You pick any year in
history and go back and then look to see what everybody thought was
true in that year, 15 years later the world had changed enormously.
Enormously. And yet in that particular year everybody was convinced that
this is the way the world was. Pick 1900, 1930, 1950, any year you want
to pick, and you will see that 15 years later, the world was totally,
totally different from what everybody thought it was at that time.
So I have learned, for whatever reason, to know that change is
coming, to know to think against the crowd, that the crowd is nearly
always wrong and to try to think for myself. Now, I certainly make
plenty of mistakes and have made plenty of mistakes in my life, but
these are some of the things that I have learned, to try to think around
the corner, try to think to the future if you want to be successful.
BGG: Yeah that’s right. And I read somewhere, tell me if this is true, that you were shorting real estate in 2006?
JR: Yes, yes, 2006, 2007, 2008. Yes, yes. I was
short Fannie Mae, I was short all of the investment banks. I was short
all the banks.
BGG: And I bet, were people rolling their eyes at you, were they laughing at you?
JR: Oh very much so. I went on television quite a
lot in those days saying it’s crazy. And I was on CNBC and I explained
that I was short Fannie Mae and had been short Fannie Mae and Fannie Mae
finally started to collapse. And the lady said to me, “Well it’s your
fault that Fannie Mae is going down, it’s the short sellers that are
causing problems with Fannie Mae.” And I explained to her, “Listen lady,
if you really think that short sellers are making Fannie Mae collapse,
you better get another job, because that’s not the way the world works.”
Short sellers do not make Fannie Mae go from $70 to $0, I assure you,
the only thing that can make that happen is serious fundamental
problems. So yes, everybody knew I was nuts back in those days!
And then, they started blaming it on me and on the short sellers, all
of the problems. Nobody likes to take responsibility for their
mistakes, certainly not politicians, but it was clear that first they
laugh at you, then they ridicule you and say it’s your fault and blame
it on you. Eventually they all say, “Oh, well we knew that. We thought
of it ourselves! We knew that Fannie Mae was a fraud.” But that’s a
difficult and sometimes painful process.
BGG: Sounds like they were attributing more power to you than you actually have!
JR: It’d be wonderful if all I had to do was sell
something short and it would go down. Unfortunately it usually goes up
when I sell it short, my timing is usually pretty wrong.
BGG: I want to talk a little bit about currencies.
It seems that all the major countries in the world are in this race to
the bottom to devalue their currency relative to all the others to
appease their export industry. Meanwhile, workers and savers are getting
killed by the cost of living increases that this is causing. Do you
have any observations or predictions about how this currency war is
going to end, or can it continue somehow indefinitely? And who wins in a
currency race to the bottom?
“Eventually the markets will just say, ‘We’re not going to play this game anymore’, and we’ll have a serious collapse.”
JR: Well, the first thing you need to know is that
nobody ever wins a trade war, a currency war, which is just another kind
of trade war. Everybody loses in the end, some may temporarily come out
ahead but it’s temporary if nothing else. As you have pointed out, the
cost of living of many people is going up, and it certainly is, my gosh,
in Japan you have a currency that’s down 25% in a year. Well I assure
you the Japanese are feeling that because everything that Japan imports
has gone up fairly substantially AND even the things that they don’t
import are up because the Japanese manufacturers and the Japanese
producers can raise prices because they don’t have to worry about
competing with the foreigners any more.
“We’ve got to stop this, this is going to be bad.”
So we’re all losing in currency wars. How long can it go on? Well, it
can go on as long as politicians can continue to print money. The
problem is, of course, eventually the markets will just say, “We’re not
going to play this game anymore” and we’ll have a serious collapse. You
and I can print money all day long, but at some point, you, I and
everybody else is going to say, “Wait a minute, guys, this money is
getting worse and worse and more and more worthless, so why don’t we
stop playing this game?” I wish the politicians were smart enough at
some point to say, “We’ve got to stop this, this is going to be bad.”
But unfortunately they never have, and probably never will. Mr.
Bernanke is certainly not going to stop it, because he doesn’t want to
go down in history as causing the collapse. Mrs. Yellen, when she comes
in, she’s not going to stop it, first of all she doesn’t believe in
stopping it, she thinks printing money is good. And she knows – I hope
she’s smart enough to know – that if she stops, oh my gosh, it’s going
to collapse. So she’s not going to stop. Nobody wants to go down as
causing the collapse of the world. So I’m afraid this is going to go on
until the market eventually says to them, “Okay, enough is enough,” we
have a big collapse and then they’re all thrown out and we can start
over.
“Eventually
they will try to cut [QE], it will finally cause the collapse, at that
point we will have a big change, because they will throw them out,
whether it’s the politicians or the central bankers or whoever.”
BGG: Wow, that’s a painful scenario actually. Do you
think there is any chance that Larry Summers would have stopped
Quantitative Easing at all?
JR: Well, first of all it’s irrelevant because he’s
not going to be Federal Reserve Chairman. Second, even if he started,
you know, if somebody came in and said, “Okay, we’ve got a terrible
problem, we’ve made horrible mistakes, now let’s change things.” And
even if everybody in the world said, “You know, he’s right, we’ve got to
do something” and they started, well, within a few months or a year or
two, the pain would be pretty horrible and then everybody’s going to
say, “Well we didn’t know the pain was going to be this bad, this is not
what we signed up for.” And then the guy would either be thrown out or
assassinated or who knows what!
BGG: Oh yeah, they would blame everything on whoever stopped the party.
JR: Yeah. At first they say “It’s fine, we want to
do it”, but once the pain comes, the pain is going to get pretty
serious. We had Mr. Volcker who came in, was told “stop the madness”
back in the 1970s and he did. Well, Jimmy Carter got thrown out, because
he was who had told him to do that, because the pain was so bad. Reagan
of course thought it was wonderful, that pain was taking place because
that got him elected. And it was help to clean up the problems. That’s
what happens, you cause the pain and they throw you out.
BGG: So, you don’t think there is any way they’re gonna make good on their threats or promises to taper?
JR: They might, no I don’t. They might start, as I
said, somewhere along the line they’re going to start doing it. But when
the pain gets pretty serious, the lady or the person or whoever it is,
is going to have real problems. Let’s say that in 2015, Yellen says,
“We’ve got to stop this” and they start stopping it, well, at that point
it’s going to be pretty serious for the parties in power and they’re
going to get thrown out and the next guys will continue to taper
because, as I’ve said, they got power because of the tapering and the
problems, and they’ll clean up the problems.
But that’s the only way that you’re going to see it stop someday. The
market is just going to say, “We don’t want to play.” That’s what
happened with Jimmy Carter when he was in, everything was collapsing:
bond yields were falling apart, you know, inflation was everywhere.
“Thank you Mr. Carter, we don’t want to play this game anymore. It’s
absurd.”
BGG: What tip-offs are you looking for for where the
top of the market is and when would you start to see the collapse
coming? Are there signs that you’re looking for?
JR: Well, I wish I was that smart or it was that
easy. Back in the late 1970s, Mr. Volcker was told and he came in and
said: “I am going to kill inflation because Mr. Carter has told me to.”
And Mr. Carter was very clear that he had to stop inflation. I doubt if
we’ll have that kind of scenario again but we would think, we would
hope, that the Federal Reserve will announce, you know, that they
publish their numbers so we can all see what’s happening. At the moment
they are buying a trillion dollars a year – that’s a trillion with a “T”
– of assets. Eventually we will see that they stop that if they do or
slow it down.
What will probably happen is that they will slow it down at first to
see what happens, and if things aren’t too bad at first – and they
probably won’t be too bad at first – well what is likely to happen is
they will slow it down, things will drop, and then they will rally and
the Federal Reserve will say “Hey, this is not so bad, we can do it.”
And they’ll cut some more. Things will drop again and then rally,
because it will take a while for people to really believe how bad it can
get, or will get. And so eventually they will try to cut [QE], it will
finally cause the collapse, at that point we will have a big change,
because they will throw them out, whether it’s the politicians or the
central bankers or whoever … will continue because they like it, they
got the job because of the collapse and then we’ll finally start over.
But it may be really painful in the meantime.
“I’ve
owned gold for many years, I’ve never sold any gold and I can’t imagine
I ever will sell gold in my life because it is somewhat of an insurance
policy.”
BGG: Sure. And when we do begin the process of
starting over, whenever that happens, it will be really good to have
something substantial, something real, something other than paper in
your portfolio. And that’s what Birch Gold is trying to help people
figuring out how to do. So, we’ve always said that precious metals are a
type of insurance for the long term. I read in your interview in
Barrons that you are holding gold right now and expecting maybe a buying
opportunity to come up. Do you still feel that way?
JR: Yes, I’ve owned gold for many years, I’ve never
sold any gold and I can’t imagine I ever will sell gold in my life
because it is somewhat of an insurance policy. I hope that my daughters
own my gold someday, I mean I owned gold, I’ve never sold any gold and
if gold comes down and I expect it to go down, doesn’t mean it will,
I’ll buy more. I’m certainly not going to sell.
“Everybody
should own some precious metals as an insurance policy. So if they
don’t have any right now, I would urge them to go buy something.”
BGG: Right. So what advice would you give someone who as of yet has no precious metals in their portfolio right now?
JR: Well, everybody should own some precious metals
as an insurance policy. So if they don’t have any right now, I would
urge them to go buy something, buy themselves a gold coin if nothing
else, and see that it’s not going to hurt. It won’t hurt you to
buy the first gold coin, the first silver coin, and from that you start accumulating as your own situation dictates.
First, do your homework, don’t buy gold because you heard me say it
or even because you hear you say it. But if people don’t own they should
start after they have done their homework. And then they will probably,
if they do their homework, most people will then realize, “Oh my gosh, I
better have insurance, and
gold and silver may get me through serious problems ahead.”
BGG: Yeah. How do you feel about silver? Do you favor silver over gold? How do you feel?
JR: Well, silver is historically down 60% from its
all-time highs, so yes, I would prefer silver at the moment because gold
is down only what, 30 or 40% from its all-time highs.
BGG: Well, thank you so much for talking with me today. I think we will leave it there. Thank you so much, Jim Rogers.
JR: Thank you Rachel, anytime. Let’s do it again.
BGG: I would love to.
JR: Bye bye.
BGG : Bye, thank you!
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