February 28, 1946 |
|Alma mater||University of Zurich|
I believe that the market is slowly waking up to the fact that the Federal Reserve is a clueless organization. They have no idea what they're doing. And so the confidence level of investors is diminishing, in my view.
Nobody at CNBC owns gold. Nobody at Bloomberg owns gold. Gold is being constantly talked down by the media, and Fed officials, and economists, who also don't own any gold. They're all stocked up in equities.
I'd rather buy something that is relatively depressed than something that is relatively high.
Market forces will one day crush the Federal Reserve. One day, the market forces will reverse.
In the economy of the cuckoo people that populate central banks, everything is possible. What you have is gigantic bubbles, the NASDAQ in 2000, then the housing bubble and then commodities in 2008 when oil went from $78 to $147 before plunging to $32 within six months.
When it comes to money, the best investments were probably the ones I did not make.
If we have an economic crisis in the Western world it's because the government makes up 50 percent or more of the economy. This is a cancer that is taking away people's freedom.
If you really believe that every three years the market will double, then go and buy shares. I don't believe that.
As an observer of markets – whenever everyone focuses on one thing – like Greece and Europe – maybe they miss issues that are far more important – such as a meaningful slowdown in India and China.
Credit expansion and money printing hasn't filtered much to ordinary people. It's boosted asset markets, real estate and stocks. So well-to-do-people have done very well.
When you have a perfect free market, it's difficult to predict the future. But when you have a market that is disturbed by government manipulations and money-printing, it's impossible to make any predictions.
The reason I am so negative about the Federal Reserve's policies is that they only target core inflation and argue that they can't identify bubbles, but when each bubble bursts, they flood the system with liquidity that brings about unintended consequences.
The fallacy of monetary policy in the U.S. is to believe this money will go to the man on the street. It won't. It goes to the Mayfair economy of the well-to-do people and boosts asset prices of Warhols… Very happy. Very good for the Fed. Congratulations, Mr. Bernanke.
Now, McDonald's is a very good indicator of the global economy. If McDonald's doesn't increase its sales, it tells you that the monetary policies have largely failed in the sense that prices are going up more than disposable income, and so people have less purchasing power.
I don't think Canada is very inexpensive anymore. I travel there all the time; it's rather on the expensive side. I think there's significant risk to the Canadian economy.
The problem with Mr. Obama is that you get more regulation and it's a disincentive for businessmen to hire people. You probably also get higher taxes, so in terms of the economy, he is very negative in my view.
If the U.S. Government was a company, the deficit would be $5 trillion because they would have to account by general accepted accounting principles. But actually they encourage government spending, reckless government spending, because the government can issue Treasury bills at extremely low interest rates.
The Federal Reserve – all of them – could be sitting on a barrel of dynamite, and then pouring gasoline on top of it, and then light a cigar with matches, throw the match into the gasoline, and then not notice that there is any danger.
In the 40 years I've been working as an economist and investor, I have never seen such a disconnect between the asset market and the economic reality… Asset markets are in the sky, and the economy of the ordinary people is in the dumps, where their real incomes adjusted for inflation are going down and asset markets are going up.
I don't particularly like equities, but I think equities are a better space to be in than bonds.
There's no such thing as a favorite investment. But I think I tend to invest in Asia in promising countries, in equities, in real estate, and I own precious metals, obviously.
What I object to the current government intervention in so-called 'solving the crisis', they haven't solved anything. They've just postponed it.
The politicians are all useless individuals. Nobody is reducing the problems in the U.S. or Europe, just putting on a Band-Aid and postponing the problems endlessly.
When people talk about people who are optimistic about gold, they call them 'gold bugs.' A bug is an insect. I don't call equity bugs 'cockroaches.' Do you understand? There is already a negative connotation with the expression of 'gold bug.'
The entire political elite has mismanaged the Indian economy for the last 50 years. You cannot solve a crisis that is borne as a symptom of mismanagement in just five minutes or in a week. It will involve significant sacrifices and pain, and I doubt that in India there is the political will to face the music.
My view is that the U.S. market will eventually join the emerging markets on the downside because if you take a bearish view about emerging economies, you cannot be too optimistic about the U.S. because for many U.S. corporations, 50 percent or more of their profits come from emerging economies.
The media has brainwashed the electorate to expect the government to do something. The best economic policy of any government is to do nothing but reduce the size of the government, reduce the size of the laws, and reduce the size of regulations.
I am pretty sure central banks will continue to print money, and the standards of living for people in the western world, not just in America, will continue to decline because the cost of living increases will exceed income. The cost of living will also go up because all kinds of taxes will increase.
This is the choice in life. You choose what is less bad. I don't particularly like Mr. Obama, but I think he is less bad for the world than Mr. Romney. It is a tragedy of life that both candidates did not lose the election. They would have deserved both to lose.
It was easy for the Democrats to attack the wealthy fat cats of Wall Street, the elite, and the privileged people – to portray them as a profiteer of the system, which to some extent, they are. Not because they wanted to, but because Mr. Bernanke enabled them to be profiteers.
If you're in any field, you should own a farm because one day you will be grateful that you are able to grow your own agricultural produce.
Over my career, somewhere, somehow I must've made some right calls. Otherwise, I wouldn't be in business.
I think Mr. Obama is a disaster for business and a disaster for the United States. Not that Mr. Romney would be much better, but the Republicans understand the problem of excessive debt better than Mr. Obama, who basically doesn't care about piling up debt.
If the Chinese bubble bursts one day, which inevitably will happen – maybe not tomorrow, maybe in three months, maybe in three years – when it happens, it will have devastating consequences for the global economy.
The positive aspect of my negative view is essentially that you shouldn't own cash and government bonds, but you should be in assets like real estate or equities or precious metals or in commodities.
Buy a $100 U.S. bond and frame it to teach your children about inflation by watching the U.S. bond value diminish to almost nothing over the next 20 years.
The best way to deal with any economic problem is to let the market work it through.
It's pointless to talk to Fed members about economics because they are academics who believe in money-printing. Some of them believe they didn't print enough, and so with these kinds of people, it is like running to the pope. What do you want to tell them?
My worst investment decision so far is to lend money to friends. So far, it has all come to zero.
I do know some of the world's richest people. In monetary terms, they all performed very well. In terms of a fulfilling life, I am less sure.
If you print money like in Zimbabwe… the purchasing power of money goes down, and the standards of living go down, and eventually, you have a civil war.
Each money-printing exercise brings about unintended consequences. These unintended consequences are higher inflation rates than had no money been printed.
When you print money, the money does not flow evenly into the economic system. It stays essentially in the financial service industry and among people that have access to these funds, mostly well-to-do people. It does not go to the worker.
Every central banker in the world pays attention to credit growth, but not in the U.S.
I am surprised with the reelection of Mr. Obama. The S&P is only down, like, 30 points. I would have thought that the market on his reelection should be down at least 50%.