Here’s a very interesting article by Dereck DeCloet on ReportOnBusiness.com. Some very good reasons on why you should be investing in Canada right now.
Heed the advice of The Smartest Man
Crackpot. Crank. Scaremonger. Alarmist.
The Smartest Man We Know has heard the slurs. When you make your living on Wall Street, yet hold the opinion that Wall Street is populated by incompetent fools, you’re not going to win a lot of friends at dinner parties, are you?
According to Jim Rogers, the increasing foreign debt of the United States has created fundamental problems for its economy and the US dollar will lose its position as the world’s reserve currency.
“The US dollar is and has always been the world’s reserve currency; that is in the process of changing.” Rogers said during a presentation at the IFSA annual conference at the Gold Coast on Wednesday.
“America is out of control,” he said. “The US is now the world’s largest creditor, having US $13 trillion in outstanding foreign debt.
But what is even worse is that our foreign debts are increasing at the rate of US $1 trillion every 15 months.”
What a day for financial stocks! Regional banks got slaughtered and even large national banks sank like bricks. Washington Mutual (WM) was down 35% and Wachovia (WB) dropped 15%. I guess the market didn’t care for the Federal Reserve’s bailout of Fannie Mae (FNM) and Freddie Mac (FRE).
So should the Federal Reserve have offered to bailout FNM and FRE in the first place?
I read two very interesting news reports today. One was about the spread of global inflation.
Last week came word that the Gulf States were piling up $1.5 billion net per day in oil revenues. In China, not an oil exporter, the rate of growth of foreign currency reserves has slowed down recently, but the country still nets about $1 billion per day. Overseas central banks accumulate Everests of these dollars, and lend many of them back to the United States – by buying U.S. Treasury bonds. To give you an idea of how fast this mountain of money is growing, foreign central bank holdings of U.S. treasury bonds, held in custody at the Fed, are increasing at a 37% annual rate.
Legendary investor Jim Rogers has been bullish on commodities since 1999. He started out bullish on oil and metals and to a certain extent on soft commodities like orange juice, coffee and grains.
Here’s a great 10 minute video on his current economic views and what he’s investing in right now.
As always, he calls Ben Bernanke a clueless moron and has a great explanation for why lowering the interest rates is bad for the US economy. That’s always entertaining.
He thinks we might fall into the same trap as Japan and see 17 years of stagnant GDP. That’s downright depressing.
According to Bloomberg, Jim Rogers is in the process of getting all his assets out of the dollar.
“I’m in the process of, I hope in the next few months, getting all of my assets out of the dollar. I’m that pessimistic about what’s happening in the U.S.” Rogers said.
“The yuan is the best currency to buy right now, I don’t see how one can really lose on the renminbi in the next decade or so. It’s gotta go. It’s gotta triple. It’s gotta quadruple.”
Yesterday, one of my friends asked me if I thought the US would face a depression. He was pretty certain that a depression would occur, and it would be just like the previous depression where there were no jobs, no money and thus no food.
Some of the commonly stated reasons for the Great Depression are unequal distribution of wealth, lack of savings, high tariffs and war debts, over production in industry and agriculture, and the stock market crash and ensuing panic.
Given these reasons and the fact that we’re currently experiencing all of them, I can understand why one would think that a depression is imminent.
The entire sector of mortgage lending stocks have been slammed across the board. Some of them have gone under as their credit lines have dried up and they have been asked to repurchase loan portfolios with high deliquencies.
Some of the companies may have been unfairly punished. TheStreet.com just published an article, Subprimal Fears Signal a Time to Buy where they mention that one such company is American Home Mortgage (ticker symblol: AHM). At current stock prices, it yields a 16%+ yield! (As of writing the article it was 18%+).
Jim Rogers, successful hedge fund manager, investor and author of incredibly interesting books is so certain that real estate prices are going to drop in certain “bubble” markets that he’s putting his $15 million Manhattan home for sale. Its not that he needs the money, but he’s probably a value investor. And like many value investors, he can’t bear not taking advantage of selling obviously over-inflated assets. Warren Buffett, probably the most famous value investor on earth, also believed that his Laguna Hills house was over-priced and sold it a while ago.
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