Jim Rogers: Before All This Is Over, Gold Is Going Through The Roof

[Theb]

But before we even come to that are there any real signs that a bear market is coming? or are there any real signs that a recession might even begin? Because what I am seeing is good, unemployment is not that big to make a crash and those who are unemployed have now found ways to make money online from blogging in Youtube to trading crypto which we can consider that they are earning something even if they are unemployed. Big companies as well as government projects are providing jobs to their locals. Looking at how money flow inside the pocket's people makes you think if there will be a bear market soon.

I'm not a graduate of any economic-related course, but I do know that day by day, inflation is doing its part at a rapid pace and the overall debt of the US alone is growing, with figures reaching a staggering $21-T currently. Sure the US can print more and more money as long as they wish, but the question is until when can it hold? Also, not all people are lucky enough to be a Youtube star or Instagram influencer or a crypto trader; do remember that there are hundreds of thousands of homeless people relying on meal stubs and the government to continue living. All in all, I think the world is already in a pretty bad shape, economic-wise. A steep correction in the stock markets might come sooner, but expect it to be a harsh one.

Printing more money is never a solution to any debt crisis or it can even be the cause of inflation in the first place. The basic understanding is the more you supply your citizens with money the more it devalues the price of your own currency. So printing more money cannot be a solution to anything it has even caused hyperinflation to Zimbabwe where there money has no value at all they are forced to print higher numbered money, that is the reason why they have 100 trillion Zimbabwean dollar as banknotes in the first place.

Yes there are still a lot of homeless people living but how many of them actually owns a stock? or do they even have assets to affect or influence the stock market? I guess not, the harsh truth about it is the only ones who can potentially crash the market are the rich people and I don't think that they want to move in the bear market as well not unless they want to the next Warren Buffet or something.

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[Sithara007]

The American stock indices have gone up by more than 50% during the last three years. Some of the smaller nations have seen even larger increases with their stock indices. So I would say that there are chances of a major correction occurring sometime soon. But IMO, it should be in the 20% to 25% range.

[HiRollStaff]

Jim Rodgers has been bearish on the stock market since the 1980s and how well has that prediction worked out? The stock market has been a tremendous engine for wealth accumulation over that time. People who constantly predict economic collapse are tiresome, and it's very much a case of the boy who cried wolf. Jim Rodgers isn't the worst of them, but because there are so many of them, his predictions can mostly be lumped in with them. The bearish sentiment on the stock market has to be viewed as a black mark, even though his own fund handily outperformed. Outperforming something doesn't make the other thing a bad investment. The stock market has been an excellent investment since the 1980s.

This is an interesting point. About constantly predicting economic crash. Not many of those investors are on the top ten list. What I have found is that the top ten list is full of people who are either A) Critical yet optimistic, and B) sometimes very quiet about their successes. Not often you hear someone like Warren Buffett bad mouthing a bunch of companies or stocks.

[magneto]

I would be interested to know whether the userbase of gold and precious metals is growing or shrinking. Whenever I see someone with gold fever predicting the price of gold will rise, its typically someone who represents older age brackets. Gold and precious metals don't appear to have much support among younger generations. If all of this is true, it could suggest the price of gold will decline. Particularly if turkey and other nations experiencing economic turmoil decide to dump gold they repatriated from the united states.

The price of gold could also be vulnerable to strong manipulation similar to aluminum and steel. Years ago coca cola claimed that aluminum prices which factored into the price of their canning process were being manipulated by goldman sachs and other financial insitutions. There is a split of opinions on this topic and it is controversial. But it might be said that manipulation of aluminum prices aren't so different from what happens in gold markets given the tendency some have to take quantities of gold off the market or in turn adding quantities to move the price in one direction or another.

Gold lacking utility it can't be utilized for much. Goods and services often can't be bought with gold which limits its utility and in turn its price.

Recently however countries like china have proposed allowing free exchanges of gold for their native currency the yuan. Others like Erdogan have proposed a move back to a gold standard. Perhaps support for gold is in our future. Although it is also possible that turkey, china and other nations are only hyping gold to raise its price before they dump their gold holdings on the market.

You're right. The situation of gold is very complex, because I believe that we're seeing its major function as a store of value diminish over time. Especially with more convenient alternatives such as bitcoin itself, which has a lot more support in younger generations.

And we all know that things with support in younger generations, will usually be the future.

I'm still not doubting the fact that precious metals are undervalued at the moment historically, inflation adjusted they are nowhere near the 1980s precious metal peak. Economic breakdown or not, I see real potential for gold and silver to make a huge run in the positive direction soon, although its long term utility is in question at the moment.

[jaysabi]

Jim Rodgers has been bearish on the stock market since the 1980s and how well has that prediction worked out? The stock market has been a tremendous engine for wealth accumulation over that time. People who constantly predict economic collapse are tiresome, and it's very much a case of the boy who cried wolf. Jim Rodgers isn't the worst of them, but because there are so many of them, his predictions can mostly be lumped in with them. The bearish sentiment on the stock market has to be viewed as a black mark, even though his own fund handily outperformed. Outperforming something doesn't make the other thing a bad investment. The stock market has been an excellent investment since the 1980s.

This is an interesting point. About constantly predicting economic crash. Not many of those investors are on the top ten list. What I have found is that the top ten list is full of people who are either A) Critical yet optimistic, and B) sometimes very quiet about their successes. Not often you hear someone like Warren Buffett bad mouthing a bunch of companies or stocks.

That's because the stock market has been the largest driver of wealth creation in the modern American economy. You don't win betting against the stock market or the American economy for long periods of time. Rodgers seems to be a permabear, and while he has made a lot of money correctly betting against certain things at different points in time, he's been constantly bearish on the economy for the last 40 years, and if you were out of the market for that period of time because you were bearish on it, you would have missed an extraordinary wealth gain. $1000 invested in the S&P index in 1980 would be worth $24,000 today ($66,000 if you were reinvesting dividends the whole time). 24x (or 66x) your investment over a time period where someone has constantly been saying a crash is around the corner makes my point. Crashes happen, and sometimes Rodgers gets it right, but if you ignore that and stay invested for long periods of time, you get wealthier by investing in the American economy.

[victorski]

It is nice to have and see such great wise guys as this. Thanks for sharring, I need to buy some glod now, huh. Indeed.

[First77]

Chinese central banks have purchased 1000 tonnes of Gold since 2010. Looks like there will be a BIG BUY in gold and silver.

[Dimid]

There are striking similarities, graphs of historical prices for gold and bitcoin. Not only are the basic oscillations identical, but several deep dips are repeated in the same place. And here you involuntarily think about it, or the universe really is one big fractal, or someone is using the gold price chart as a guide to managing the prices of crypto currency.

[pinkflower]

Gold bugs are usually people who are into the "world financial collapse is here" conspiracy theories. They are like the people who are into the "Jesus is here, repent now" scams who want to make people scared to manipulate them.

Having that said, gold is a good investment but it will not go through the roof. That job is only for cryptocurrencies lol.

[The_Dark_Knight]

Gold and precious metals don't appear to have much support among younger generations.

You're probably right, but I haven't seen any data on that.  The thing is, older folks probably remember the time when the US was on the gold standard and still harbor some nostalgic but irrational feelings toward precious metals. 

It interesting to see how Gold is viewed in the west versus how it is viewed in eastern countries like India. Here it's more of a necessity than just an interest. During marriages, considerable amount of gold is spent for jewellery for the bride as well as groom. It's similar to the diamond engagement ring trend in west on which you guys too spend a bomb.

Keeping this in mind, the demand for gold is always going to be there in eastern cultures. It's psychological and social requirement is so ingrained that even the poorest of the poor try to give away some form of gold during marriages. It is a study topic in itself that how much of this fetish for gold has kept generation of Indian poor trapped in a cycle of poverty as they spend their life's savings for pleasing the society. Even then, there are cases where brides get harassed, abused and at times killed because of the demand for more.

The views of gold are not the only a cultural thing, in the West there is disdain for gold because paper currency is one of the preferred method by the government to steal from their citizens, so is obvious that they have done everything they can to try to stop the use of gold as a currency, and yet gold is to consider a premium currency and it easy to see why because it has almost all the characteristics that you will like in a currency.

[First77]

Gold bugs are usually people who are into the "world financial collapse is here" conspiracy theories. They are like the people who are into the "Jesus is here, repent now" scams who want to make people scared to manipulate them. Having that said, gold is a good investment but it will not go through the roof. That job is only for cryptocurrencies lol.

Fake news/email alert from Bullionbypost

[markj113]

Fake news/email alert from Bullionbypost

That is a well known and trusted bullion dealer.

Why is it fake news, not hard to verify the claim by just looking a gold price chart?

[BobK71]

Regardless of Jim Rogers' history, my rationale for not getting into the US stock market at this point is that the prices are sky high and not justified by fundamentals, because:

- the market was hanging on to the hope of the Trump tax-cut coming true, after the hope of all other potential good news had been dashed.

- the market is largely supported by by companies borrowing money cheap and buying back their own stock, in an environment where the Fed is almost forced to keep raising rates.

To the credit of the elites, there are signs they are trying to deflate the bubble preemptively.  (This is all very similar to 1928-29 BTW!)  Though this is good policy, it's not a good sign for investors.  The elites certainly know a lot more than we do.  Either they succeed, in which case the prices should go down before they stabilize, or they fail, which means there will be a worse, market-driven crash down the road (and BTW the latter scenario must be why they try to deflate the bubble in the first place.)

Just about the only scenario that is short-to-medium term bullish for US stocks at these prices is that the elites succeed, in engineering a preemptive reset-by-inflation of the entire system (assuming they are pursuing this for this time frame, which is by no means certain.)  In that scenario, it's best just to hold cryptos anyway.

I don't see the data backing you up on this. Price to earnings ratio of the S&P 500 as of May 2018 is 24.17 on a trailing twelve month basis (graph below), which is pretty inline with the average for where we are in the business cycle. It is above the long term historical average, but a tad below the average since 1990 which stands at 24.43 (21.15 back to 1980), so prices are not "sky high" relative to the current era of earnings and especially considering that companies have only gotten more profitable since the tax cuts. The new tax savings will support continued capital returns to shareholders through buybacks and dividends in a rising interest rate environment, so debt will be less crucial for that and will mute the impact of rising interest rates.

My subjective conclusion that prices are 'sky high' is supported by my arguments lower down, which I hope you will address specifically, if possible.  I didn't bring up P/E ratios for the following reason:

I understand the value of quantitative analyses in a supporting role, but the overall judgment of any asset value in this world must be subjective.  Central banks are at the center of all asset values, and thus any bet on prices must, in the final analysis, be a judgment of whether a poker bluff will be successful.

Just like P/E ratios, you can bring up any number of arguments to say the prices will go up, or will go down.  What I try to bring up are major fundamental factors concerning what the top elites are doing.  If demand is fragile across the economy (due to a systemic debt overhang, for example,) the pricing power of firms becomes soft, and any comparison with past P/E values becomes suspect.

That is why, in situations like this, I prefer fundamental, qualitative analysis.

[First77]

Gold has been sleeping for a long time, and I feel like a lot of people have already forgotten the fact that it's still one of the safe havens that people will turn to in an economic downturn. There is also silver, which I feel like is definitely underappreciated as well at the moment.After the gold rallies earlier on in this decade, gold prices have essentially stabilized and found a bottom, and is now moving sideways instead of having a particular direction in which it's moving at. That is a pretty good sign that it's preparing for a bull market. Demand for gold as a store of value will come naturally, as more people realize how unreliable fiat is.

China will make a BIG MOVE in Gold. Look like China Central banks will buy 500 tonnes Gold after all the trade wars started by Donald Trump.