In a 2009 article, the Huffington Post went into considerable detail about the number of people with PhD degrees in economics employed by the Board of Governors of the Federal Reserve System. This is the government’s branch of the Federal Reserve. It is not one of the 12 regional Federal Reserve banks, all of which […]
The U.S. dollar is the dominant global reserve currency. All markets, including stocks, bonds, commodities, and foreign exchange are affected by the value of the dollar.The value of the dollar, in effect, its “price” is determined by interest rates. When the Federal Reserve manipulates interest rates, it is manipulating, and therefore distorting, every market in […]
The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance or the get-rich-quick adventurer. They will die poor.– Jesse Livermore, How to Trade in StocksThe trouble with capitalism’s guardians is that they have no […]
Let’s head back in time…In 2004, a mere decade ago, the US national debt rang the register at $7.4 trillion. That represents “debt per citizen” of over $25,000. You, me, your neighbor, your 4-yr old grandson, you name it and they’re portion of the U.S. debt is $25k.But flash forward to today and you’ll see […]
Alexander Hamilton was America’s first Secretary of Treasury under President George Washington. When he first entered office in 1789, America was an agricultural nation of just 4 million still broke from its financially costly victory over the British Empire in the Revolutionary War.The states had accumulated relatively massive debts to finance that war, which mostly […]
Remember that correction we’ve been quietly talking about over the past couple of months?Well, it might be right around the corner. Stocks waited until the last day of the month to nose-dive. The S&P 500 posted its first 2% down day since April — and the Dow wasn’t far behind. Early this morning, futures continue […]
A great technology solves a problem that we didn’t know we had. It makes us aware of deprivations we didn’t know existed until we discover the new thing. Once discovered, we can’t go back.People in the 1950s, for example, never missed the smart phone. They were pleased to have a phone at all. But today, […]
Fifty years after the 1929 crash, a group of money managers and investment thinkers put together a collection of essays looking back at that experience. The result was a distillation of some pretty fine investment wisdom. Timely, I think, to review now.One of the contributors was Arthur Zeikel, then with Merrill Lynch. The title of […]
In early July 1944, delegates from 44 countries gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire. A three-week summit took place, at which a new system was agreed to regulate the international monetary and financial order after the Second World War.The U.S. was already the world’s commercial powerhouse, having eclipsed the British […]
When you type a website address into a browser, you might have noticed that the letters “http” appear at the front. “HTTP” stands for Hypertext Transfer Protocol. In typing a Web address, you are actually sending an HTTP command to transmit that website to you. Hypertext Transfer Protocol is the means by which information is […]
Some people are saying it is just what the doctor ordered. Others are saying that the cure is worse than the disease.The Affordable Care Act? Reengagement in Iraq? Tea Party bullying in the GOP?Not this time. Just as protracted in the corridors of Congress and the White House is the debate over the proposed reform […]
In 2012, money mandarins running the European Union chose stagnation over restructuring. Here’s a consequence of that choice: expectations for a self-sustaining economic recovery keep getting crushed.Two years ago, European Central Bank (ECB) chief Mario Draghi promised to do “whatever it takes” to hold the eurozone together. He bluffed nervous investors into believing in a […]
Picture the scene. It’s 2020. You’re at the checkout in a convenience store with a carton of milk. But you’ve got no cash and you’ve left your cards at home. No problem. You scan your right index finger; the green light flashes. Purchase approved and you leave. Easy.Is this a realistic vision of the future, […]
People jacked up about income inequality can find a new hobby. The 1% are victims of a doomsday machine, and the countdown is ticking. Machine, thy name is “family.”This came to mind as I was reading a preview of Columbia Professor Andrew Ang’s forthcoming, must-read book on Asset Management. Ang is that oxymoron, an exciting […]
Here’s a fun fact: Although we all hate the U.S. dollar, as it continues to hemorrhage wealth, its foothold as the world’s reserve currency isn’t going to disappear overnight.A Russian gas deal with China won’t change that — as we’ll highlight below.But before we get to the nitty-gritty, let’s dive into a story that’s right […]
Franklin Delano Roosevelt famously used the term “forgotten man” in a 1932 speech to describe those at the bottom of the economic pyramid who, he felt, government should aid.But the originator of the phrase “forgotten man” had a whole different meaning in mind. He aimed to expose the seeming good intentions of government to reveal […]
“As the nation’s central bank, the Federal Reserve derives its authority from the Congress of the United States. It is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding […]
The Keynesian disaster recovery plan has been to lower rates, force people to take more risk in search of yield, and entice others to borrow and spend and, magically, more jobs will be created. If people won’t buy stocks, central banks will.Back in 2011, Ben Bernanke, when asked if QE2 was driving up stock prices, […]
According to the Bureau of Labor Statistics, consumer prices are rising at a 2.1% annual rate. This suggests to us that the current stock market boom will die with a bang, rather than a whimper.Fed economists say they don’t think inflation rates are rising. They think the most recent reading is a fluke. But why […]
Entrepreneurs are high-tailing it out of the United States, and it’s the politicians’ faultThe U.S. government is driving some of its most productive citizens abroad. The only beneficiaries are countries such as Singapore and Switzerland, which offer sanctuary to Americans fleeing avaricious Uncle Sam.Three years ago Eduardo Saverin, one of Facebook’s founders, joined 1,780 other […]
Politicians love raising the minimum wage because they don’t have to ask voters to pay more in taxes. They just dump the costs onto shop owners. But they don’t act like politicians and go into debt to pretend like they have all the money in the world. They face real world situations. And sometimes that means replacing workers with more affordable options...
As the world gets more digital, people forget about the benefits of transacting in cash. And government officials know that.
The experts will tell you the recession is over, but they’re only torturing the data to hide the truth. The economy never recovered from the downturn it experienced. But the downturn happened in 2000, not 2008. The country’s been in the middle of a 14 year recession and hardly anyone knows the truth.
Every time Bitcoin crashes, it winds up at a price greater than it’s previous high. Yet the experts still call it a currency fad that will fade away. But a little over a year since it really took up, the digital currency is still going strong, and is once again seeing its price rise. But is there another reason why people are buying Bitcoins.
All paper currency has a shelf life. It could be 5 years or 500 years, but at some point, the value of any paper currency eventually reaches zero. That's why, for centuries, people have turned to one shiny metal to safeguard their personal store of wealth. And, as Jim Rickards explains, you still have that option. Read on...
Harold Hamm isn’t your typical entrepreneur. His life’s story shows you success in America doesn’t always depend on a fat checkbook
It’s a destructive cycle that comes around everytime your politicians ask you to take to the polls. The government’s meddling creates unexpected problems that eventually overshadow the planners’ original intentions. But that only leads the way for even more interventions.
What is the best single thing you can do for your children? Send them to Asia for school so they can get a good education and learn Mandarin.
Or so says a thinker and investor Jim Rogers.
Some investors achieve the status of being legends, their opinions on all matters of economics and politics sought by everyone. Rogers is an example of that in our time, and for good reason.
His life began in rural Alabama. Then he became an intellectual and professor. Enticed by Wall Street, he tried his hand at the markets and won. He then became a world traveler who set world records, and then became a best selling author.
It was my pleasure to be invited to moderate a private forum in Atlanta, Georgia, at which Rogers was the guest of honor. I got to ask the questions in front of an audience of financial professionals I’ve always want to ask him. We had lots of fun.
Rogers’s big picture forecast is that the U.S. and the dollar are in the process of relinquishing their dominant position in world affairs to Asia. All throughout Asia, people are saving money, working long hours and asking for more work not less. In the United States, we are racking up more debt, saving less, working less, complaining more, and asking only for more goods and services from government.
I was struck by how his analysis is so influenced by cultural observations. He pointed out that the Fed has contributed mightily to the wrecking of entrepreneurship in the U.S. Its low-interest rate policies are actively punishing savings. Its tax policies are punishing profitability and income earning. Its fiscal policies are encouraging dependence. Its educational practices are socializing another generation into laziness and dependence.
What a picture! As a result, he is urging young people to consider getting out. Get your passport, seek your education online, and find a position in Asia. Our great great grandparents uprooted themselves to seek a better life, and our children should consider doing the same. Travel is the first step. It opens up the world and helps us see new opportunities.
As for learning Mandarin, that’s what he is doing with his two daughters. He lives in Singapore in order to make sure this happens.
It’s radical stuff but he is walking the walk.
On the dollar, he is bearish. The Fed has been busying for five years trying to destroy the future of the dollar. Its policies have benefited only insiders but made a mess out of the rest of the economic infrastructure. He thinks that 2008 was a mere warmup for what is coming down the line. What will replace the dollar? He is mildly optimistic about the Euro, temporarily bullish on the Russian ruble, and he is also feeling very good about precious metals like gold and silver.
On commodities, he is sticking by his known love for real stuff over fancy financial products. To his mind, the world food supply is not as plentiful as people believe. Farmers are in a more secure economic position than Wall Street stockjobbers. As for the legions of MBAs that the U.S. is producing, he finds them mostly worthless. A better credential to have is evidence that you can drive a tractor and get stuff to grow.
On bonds, he sees the end of the long bull market coming to an end. The yield curve only looks like it does due to massive intervention by the Fed. This artificiality cannot last. It won’t take much beyond a slight change in the pricing of long-term debt instruments to set off a chain of events that will blow up the Feds balance sheet and utterly wreck whatever stability that exists in the debt outlook for the U.S government. The debt cannot be paid now, but when the world decides that holding the debt is too risky and expensive, the bond bubble will explode, destroying many portfolios in the process. The new crisis will cause new policy panics and bring about a series of catastrophic decisions that will make 2008-2013 look like a mere prelude to the real action.
As for oil, he is bullish but not concerning the U.S. productive capacities. He is not very impressed by the predictions that shale and fracking change much at all, and sees many other regions of the world friendly to the whole industry.
As for technology, he sees the action leaving the U.S. and the world center of innovation emanating from Asia. In fact, he is not very impressed at all but much of the technological production of the U.S. over the last ten years.
A pretty dark picture? It would seem so, unless you speak Mandarin.
The moment of the evening that stands out to me the most really amounted to a brief musing on the whole subject of forecasting. Before offering his forecasts, he eloquently defended the whole enterprise of making predictions.
Predictions can never before scientific, he said. The future is always uncertain and subject to an infinite number of changing variables. Those who presume to have found the magic key to knowing the future — whether they are using high-powered mathematical models or the old-fashioned crystal ball — will be humbled. Human affairs are just that way, and there is no technology that can fix that.
Rogers said that he has been plenty wrong many times in his life.
At the same time, he continued, forecasts are unavoidable. It is not just stock pickers and economists who make forecasts. We all do. We must. We have to act now with the presumption that we have some inkling of what is around the corner.
Riffing on what he said, we go to school hoping to use our education later. We save money hoping to find things later on which we will spend it. We choose our personal associations based on the presumption that people won’t suddenly become different next week.
We all make choices anticipating the future, knowing full well that we could be wrong. We can’t be disabled by the knowledge that the future is essentially unknowable. If we fear that we are wrong to the point of inaction, we doom ourselves as acting persons. In this sense we are all investors, whether we are betting on stock symbols or not. We seek to make judgments that pay off down the line.
How do we make the future slightly less uncertain? How can we work toward making the best predictions? We seek out information. We try to make sure it is the highest quality information. We find many sources for our information. We evaluate it in light of our own education, experience, and intuition. Sometimes this information makes all the difference. Even so, there is no perfect foresight. We can be spectacularly right ten times, and calamitously wrong one time. Or it can be the reverse.
Having said that, he moved on to make the predictions above.
Somehow his small talk gave me a bit of boldness of my own. Having been heavily schooled in the Misesian tradition against statistical prediction making, I love headlines that make fun of economists and how often they are wrong.
It’s just thrilling and fabulous to see big shots laid low by the relentless surprises of real life. Nothing gives me a kick more than to see a model blow up. To see arrogant know-it-alls — especially bureaucrats and politicians — explode in the face of reality that refuses to conform to their outlook restores my faith in prospects of human liberty.
But we can go too far with this line of thinking. We can’t just decline to forecast.
Education and learning improve our ability to forecast, certainly qualitatively but even quantitatively.
As just one example — one that Rogers returned to several times — was the belief on the part of the Fed and the Treasure through two presidential administrations that their stimulus would bring higher economic growth and low unemployment. It hasn’t happened. Rogers hasn’t been surprised by this, and I haven’t either. Anyone who has read deeply in the classical and Austrian traditions of economics could have seen this coming.
Our predictions have been better than theirs.
The beauty of having access to a great investor with a proven record is that you can know that his skills are likely to be more finely honed than the average person on the street. No one is infallible but some predictions — we can predict — are likely to be true more often than other predictions.
I said earlier that his soliloquy on forecasting inspired me. So let me forge ahead with some of my own. I don’t see any of the food problems that he sees. With massive federal subsidies and vast technological improvements in farming, we have far too many, not too few, farmers. Many dismiss the technological innovations over the last years as superficial, but I disagree. I think of Facebook, Twitter, Google, and smartphones as some of the greatest productive capital ever created.
As for the the coming Asian century, that could be right. But unlike the 19th and 20th centuries, the age of the superpower is over. One region’s prosperity doesn’t come at anyone else’s expense. Everyone can win in a world without borders and wars, and that is the world I believe is being born today. As for the dollar and the fiscal disaster, I’m a Rogerian in most every way.
The beauty of investor-intellectuals is that their ideas are tested in the real world. That’s what makes them different from the tenured professors running the universities. A man like Jim Rogers might not be right on all things; no one can be. But in the balance, I would take his forecasts over a thousand econometricians with nothing at stake in the outcome.