Salient to Investors:

Jim Rogers said:

  • When investing, don’t follow the crowd
  • Most government numbers are made up. China has problems with housing and inflation as the US did in the 19th century when it was growing rapidly. Every country that grows rapidly has problems. The US had recessions and 13 depressions in the 19th century but still became  the greatest nation in the 20th century.
  • China is trying to slow, which is the right thing to do as their goal is long-term sustainable growth.  Any big risks will only come from water problems, which I expect them to solve. Buy companies that work to fix water problems.
  • The Chinese stock market is close to a Buy.
  • China’s housing bubble is worse due to their blocked currency, which creates imbalances, like in housing, as people need to invest somewhere.  China will continue to open up their currency.
  • We are in a global bond bubble, which can go on and on. Bernanke believes you can expand the Fed balance sheet infinitely and suffer no ill effects. Since reducing demand for a commodity reduces its price, so bond prices will drop, and interest rates rise.  France tried money printing in the 1950’s and the Italians in the 1960s.
  • At some point markets won’t take central bank policies anymore, and interest rates will rise regardless of how much bond buying they do. Short junk bonds as the marginal stuff goes first.
  • Gold has risen for 12 years in a row – what asset goes up 12 years in a row? – so technically it may need to fall further, but fundamentally it will be a Buy. Holds gold and will add more if it keeps dropping.
  • The US shale revolution is over-hyped. The fundamentals of natural gas are not as good as the hype: the number of ground rigs has fallen 75% over the last 2 years, the wells are very short-lived, and it takes enormous money to maintain them. Companies have lowered estimates of their reserves. Investors will be disappointed with the idea that supply is so big that oil will collapse.
  • Interested in buying natural gas because any commodity that has that big a collapse should be considered.
  • Agriculture is a great long-term story. We have been consuming more than we have been producing over the last 10 years, so inventories are close to historic lows. Agriculture has been a terrible business for many years and we are running out of farmers – average age is 58 in the US, 66 in Japan. Young people are not entering agriculture and everything cannot be automated. Most of Asia is not productive: Mao ruined China’s agriculture and India have absurd regulations and restrict the size of farms. The suicide rate of Indian farmers has risen dramatically over the last few years.
  • Cotton is doing well because farmers planted less last year.
  • Abe will ruin Japan and says he will ruin the currency. Japan has huge debt levels, horrible demographics, barriers to foreigners, a declining population,
  • The Euro will look very different within a number of years as devaluing is a temporary solution – Europe has been trying it for decades without success. Only real structural change will improve their economies.
  • The ECB can only buy sovereign debt for a while because eventually the currency collapses and the markets won’t take it anymore – they have more money than the central banks.
  • China is in better shape than the other countries. It is the largest creditor nation, people save a lot, and is building its internal economy. They should have already started reducing their exposure to Treasuries.
  • The US is the largest debtor nation in the history of the world, yet only half of the population pay taxes.  All the debt is in the West while all the credit is in the East.
  • Singapore is doing well and will be the fastest growing money center in the next 10 years. Income taxes are low, incentives to save are high, savings rates are high, and they work hard to attract capital and labor. The current backlash from immigration has happened to all countries at some point in history. Singapore is becoming the new Switzerland, helped by problems with offshore havens like Switzerland and Cyprus.

Stanley Druckenmiller is warning about a rise in US rates, due to uncontrollable entitlements.

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