When we will look back at the lockdown, do you think it will be called as the biggest mistake of modern history by global politicians who used a hard hand to control the coronavirus?
Well, the biggest mistake of modern history is quite a statement. I know we are going to look back and say it was a very bad mistake and it was a mistake of history. The biggest in modern history? It is already the biggest mistake of 2020 and certainly a very-very big mistake. Not everybody closed down. Sweden did not close. They had problems but they did not close. They say that in the end they will come out ahead because others will have reoccurrence. Eight American states never closed. So not everybody closed.
But as far as I can see, yes, it was a mistake and we should not have done it. Let me just add one thing. We have had viruses and epidemics before. We have had this before throughout history. Never before did the whole world close down when we had epidemics. We have had several in this century and certainly in the last century. This is the first time that the whole world has closed down the economies and it is not a good decision.
If I look at the world right now, debt could be large in the government’s balance sheet but private debt and the household debt is not that high. Could that be the differentiating factor this time?
The household debt may not be as high as it would have been because nobody can get a loan. But unfortunately people are not having income and they are somehow borrowing money on their credit cards. So yes, maybe household debt has not skyrocketed like government debt but the US was the largest debtor nation in the world three months ago. Since then they have added trillions of debt; both the central bank, all the states and cities, and this has happened throughout the world. Japan has added huge amounts of debt. So even if Japanese citizens or American citizens are not adding huge amounts of debt, do not worry; the governments are.
What do you make of the current size and the scale and the market cap of the US tech giants. Some of these companies are now commanding marketcaps which run into trillions of dollars. Their marketcaps are bigger than a lot of countries put together.
These things often end in blow offs and that part of the market is already beginning to have its own blow off. They go up nearly every day. The valuation is incomprehensible to those of us who are a little more conservative. So yes, this is part of the same thing I was talking about. This often winds up in a mania or a bubble and that looks to me what is forming in the US and maybe in some other places as well. Some Chinese stocks are the same way. Alibaba and Tencent are some of the stocks that just never go down.
What should an investor do in this kind of an environment?
Only invest in what you yourself know a lot about. Do not listen to me or anybody else. Maybe you can listen to ET Now but stay with what you know. As I look around the world, I will tell you what I am doing. Bonds are clearly a bubble. Bonds have never in world history been this expensive. We just talked about how some stocks are clearly too high. Commodities are the cheapest asset class series right now. We could say that a few weeks ago too but as I look around, the world commodities and some of the beaten down areas like airlines, transportation, hotels are very cheap on a historical basis. So these are places I like to find things that are ignored and cheap but some people are very good at buying Amazon and buying stocks that go up all the time. I am not any good at that.
Have you added more gold in your pockets and have you bought more silver?
I have bought a little more gold. I am not buying a lot right now but surely in Asia, many people are having to sell their gold and silver to eat. These are hard times in some places; so I am waiting. I suspect maybe later this summer I will buy more gold and silver because before this is over, gold and silver are certainly going to turn into a bubble. When people get terrified of their governments and of paper money, they always go to gold and silver. They always have and they will again. I am like all the other peasants in the world. All of us peasants know we better have some gold.
You are the only one who came on ET Now in the morning when crude fell to zero and you said oil cannot remain at zero forever. From zero, it has become $40 again. What is the real level for oil? Where do you think the fundamentals for oil are moving?
I make plenty of mistakes. Oil is in the process of making a complicated bottom; a serious bottom. The known reserves of oil continue to decline. We know you have to make money and fracking is going to continue but it is going to have to be much less oil from fracking and it will have to be at much higher prices. So oil is making a complicated bottom. It takes a while for a stock or commodity or anything in the market to make a real bottom and that is what is happening with the oil right now.
China for the last 20 years has been one of the demand and consumption drivers for the world. How do you see that changing, now that there seems to be a challenge at least on the global trade front?
China has not escaped and will not escape what is going on. They are opening up. They have certainly opened up more than most other countries so far and they seem to have done a less bad job. I do not know if we can trust any government in what they say about the virus. If you listen to them they have done a less bad job. They are opening up. I can certainly see every day on the internet many Chinese cities and restaurants and places are open. They are coming back but they are coming back slowly.
Remember, if you are an airport and you have no flights and then next week if you have six flights, it looks better than what it was before. So everybody is going to look better for a while just because we are opening up many parts of the world economy and things will look better than they were when everything was closed. Will it be better a year from now? I suspect not but watch ET Now and they will tell you.
If Jim Roger has to go on a long ride, a boat ride or a road trip in 2020 where he is not going to check on the prices for the next five years; but he is allowed to invest in three assets or commodities or investments for the next five years, what would you do?
Silver, gold and agriculture.
Silver and gold I understand. Agriculture is very interesting. Let us walk through it. What are your thoughts there?
Agriculture has been a disaster for 30 or 40 years. The average age of farmers in America is 58. In Japan it is 66. More people commit suicide in the UK in agriculture than any other sector. More kids study public relations in America than study agriculture. Agriculture has been a nightmare. It is turning. It has got to turn or we are not going to have any food or not going to have any clothes.
But some would also argue that modern science has developed and because of fertiliser, better pesticide, better medicines, the agriculture produced globally has increased; so the pricing power for some of the agri crops may not be there?
Absolutely. I mean India is a good example of that but not just India, it is nearly everywhere. No technologies are always making advances in any sector of the economy and including agriculture but still somebody has got to make the food, somebody has got to tell the computer what to do. Maybe we are going to have depression in agriculture for another 30 years? I suspect not. I bought some agriculture recently. I told you my market timing is always bad. I have bought some agriculture, some Chinese wine stocks recently, Russian Shipping companies, Japanese ETFs. I have been buying a few things that are depressed but if you ask me, for the next five years, it is gold, silver and agriculture.
Do you think in the next couple of years, the dollar could lose its charm of being the reverse currency? One day the world will realise that US debt is getting unmanageably high even though right now money has moved into dollars because of chaos in the world. Do you think it is a matter of time a bright boy will get up from the right side of the bed and say America has got debt issues and the dollar should not strengthen?
Very good insight. I happen to own a lot of US dollars despite what you just said and despite that, America is the largest detonation in the history of the world. I own them because as turmoil develops, people look for a safe haven. They think the dollar is a safe haven for historic reasons. It is not but everybody thinks it is. So I own the US dollar. It is going to get overpriced; it might even turn into a bubble. I hope when that happens, I am smart enough to sell my US dollars because every word you said is right and it has worsened; that debt gets higher and higher every week.
Now the US dollar is probably in its last legs as it can go on for a while. It has gone on for a while but many countries like China, India, Russia are finding ways to compete with the US dollar and looking for something to compete with the IMF and the World Bank and currency settlement. Zo the world is already trying to figure out the way to do something and compete with the US dollar. So you are exactly right. I am not the only person who knows the US dollar has serious problems.
if(geolocation&&geolocation!=5&&(typeof skip=='undefined'||typeof skip.fbevents=='undefined')) !function(f,b,e,v,n,t,s) if(f.fbq)return;n=f.fbq=function()n.callMethod?n.callMethod.apply(n,arguments):n.queue.push(arguments);if(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version='2.0';n.queue=;t=b.createElement(e);t.async=!0;t.src=v;s=b.getElementsByTagName(e);s.parentNode.insertBefore(t,s)(window,document,'script','https://connect.facebook.net/en_US/fbevents.js');fbq('init','338698809636220');fbq('track','PageView');