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A Quick Read for Busy People
A 3 minute synopsis of the interview with Jim Rogers, chairman of Rogers Holdings and author of Street Smarts: Adventures on the Road and in the Markets, by Stefan Molyneux from Freedomain Radio.
Problem and Solution
Understanding the Market
Advice for His Children
The FED and Janet Yellen
Interview with Jim Rogers
March 14, 2014
Jim lives in Singapore.
He moved there because he wants his children to grow up speaking Mandarin and knowing Asia. In Jim’s view, the best preparation he can give his children for the 21st century, is to know Asia and speak fluent Mandarin.
The US is certainly in decline. China is 1/10th the size of the US and European economy. It’s not big enough to save us no matter how good or bad a job they do.
The US is the largest debtor nation in the history of the world, and the debts are getting bigger and bigger every day.
China in the meantime is the largest creditor nation in the world, and that’s getting bigger and bigger every day.
Jim is an American citizen, American voter and American taxpayer, and he doesn’t like saying the things he says about America, but one has to deal with reality or one will not survive.
Ron Paul was one of the few people in Washington who understood what was happening. He understood the economy and he understood the world.
There’s a possible political solution, but no country in history has gotten itself into this kind of condition and just woken up and said, “Oh gosh, why don’t we change things? We’ve made terrible mistakes for fifty or sixty years – let’s bite the bullet and start over.”
They only do that after a crisis or a semi-crisis.
The crisis can be a war. There are many ways countries get slapped in the face and then start to change things.
PROBLEM and SOLUTION
We’ve all had a fabulous forty or fifty years but it’s all been built on debt, and eventually someone has to pay the piper.
U.S. debt has skyrocketed. In the last ten years the economy has grown some, but the debt has gone up something like ten times as much as the economy has grown.
Jim says to give him a trillion dollars and he’ll show you a fabulous time — that’s easy if you’re playing with other people’s money.
But eventually that runs out.
Jim suspects it will run out in the U.S. in this decade if not before.
Most people learn from failure. Unfortunately, it’s the way a lot of us learn things. Jim says he’d rather not have to, but some of the most instructive things are when you fail and have to deal with the failure.
The way the economic system is supposed to work, and the way it’s worked for most of world history, is that people fail and then competent people come in and take over the assets, reorganize it and start over.
What we’re doing in America, and some other countries, is we’re taking the assets from the competent people and giving them to the incompetent people. Then we’re saying, “Now you compete with the competent people with their assets and money.”
It’s bad morality and bad economics.
It’s not that easy getting a job in finance these days, and in Jim’s view it’s not going to be easy going forward.
We’ve had long periods in history when the professional financial types were in charge, and long periods when the producers of real goods were in charge, and then followed again by the financial types.
In the 50s, 60s and 70s, Wall Street and the City of London were backwaters. Then we had a great bull market in the 80s and on.
In 1958 in America, 5,000 people got an MBA. Last year 200,000 people in America got an MBA.
So now you’ve got a huge glut of competition at a time when the financial world is hugely leveraged.
In the 60s and 70s there was virtually no leverage.
Now there’s staggering leverage at a time when governments, every time you turn around, put a new regulation or control or tax on the financial types.
So you’ve gone from no competition, no leverage and being loved by politicians, to being despised by politicians, huge leverage and massive competition.
That’s not the prescription for good times.
Some people will do well, but not like when the wind was at your back.
Compare that with farming, for instance, when more people today are in public relations than in agriculture. The average age of a farmer is 58. Farmers are dying and retiring.
It’s likely that agricultural prices will go up, then farming will become an exciting place to work, and we’ll see the farmers driving Lamborghinis.
We’ll have another shift. There’s nothing unusual about it. People just forget.
In 2008, when the economic dam started breaking, Washington ignored the calls from the plumbers and took the calls from the banks. The banks said Washington had to save them or it would be the end of Western civilization. That’s one of the reasons the debt has gone through the roof.
Today, the new head of the banking regulation in Europe, to Jim’s astonishment, said they had to let people fail.
For Jim, who has been watching for a few years, this is mind boggling.
Let them fail. It won’t be the end of the world.
It will be good for the world.
But in America we won’t let them fail. If it’s a friend we have to bail them out.
Jim owns stocks, bonds and currencies — the whole works.
He very optimistic about agriculture. We all know what agriculture is. We all know what sugar and wheat and copper and gasoline is.
None of us have a clue about Motorola or IBM. The chairman of IBM cannot fully understand IBM — tens of thousands of employees, products, competitors and governments to deal with.
Cotton is pretty simple — there’s either too much cotton or too little cotton.
It doesn’t mean it’s easy to figure that out, but it’s a lot easier than it is to figure out what’s going to happen to IBM, or major companies in the world, or even bonds.
Agriculture prices have been going down for thirty years on a relative basis, so either we’re not going to have any food or the price of agriculture is going to go up.
Jim believes they will go up so he owns agriculture products.
There are many ways you can play. You can buy agriculture in different countries, seed companies, tractor companies. For Jim the best way to play is to own the stock itself.
Jim always had a huge interest in the world and what was going on in the world. That was his main passion.
All he knew at that time was that there was a Wall Street and something bad happened in 1929. He didn’t know the difference between a stock and a bond back in those days.
Then he got a job and realized he could be paid, and paid a lot of money, to understand the world and what was going on.
So it was instant love. This was what he was looking for.
He didn’t know there was a job that would pay him and reward his passion, but he found one and has been there ever since.
UNDERSTANDING THE MARKET
If nothing else, we all go to the grocery store and we all buy fuel.
The more you know about it the better off you’re going to be, and the better you’re going to be able to navigate the situation.
It doesn’t mean you have to become a professional financial type, it’s just better if you know what’s going on than if you don’t know what’s going on.
You’ll just get blindsided month after month if you don’t know what’s going on.
LESSONS FOR HIS CHILDREN
Jim says he is trying to teach his children to think for themselves and to be independent.
He doesn’t want them to believe things they are fed either by the school or the media or wherever.
Be aware and be skeptical.
Beware of the boys.
Be curious about the world.
He wants to help them to find their passions and follow their passions.
Jim believes that if he can teach them those things then they’ll be set.
THE FED AND JANET YELLEN
It’s the same stuff.
He’s sure Janet Yellen is a wonderful person but she’s been part of this whole madness that’s been going on.
She’s not coming in and looking at the situation with a new eye.
Nothing is going to change.
Eventually markets are going to get scared and go down a lot. Then Yellen is going to panic and say, “Gosh, I’m sorry.” Then they’ll stop and reverse.
Or a least stop if nothing else.
Then the markets will breathe a sigh of relief and rally.
All these people are academics and bureaucrats. They’ve never had a real job and that’s why they work for the government.
So it’s going to end in a disaster.
Yellen doesn’t understand any more than Greenspan or Bernanke did. She was part of it.
The situation is getting worse.
You should be worried and be careful and be prepared.
It’s not going to be fun when it ends.
Another Week on Wall Street
words and music Elaine Diane Taylor
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from the album Coins and Crowns available on iTunes
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