I had a conversation recently with some insiders in the financial industry, of a rather bearish persuasion. So bearish that they’re interested in leaving the United States.
Which is how I’ve felt for about five-six years.
The conversation yielded interesting tidbits. Some of them confirm my own thinking; others contradict it. The contradictory parts interested me the most, of course. I tend to pay more attention to people who think differently from me than to people who agree, perhaps because of some diffidence about my own judgment….Unfortunately, my own instincts have turned out to be more accurate than I’ve been able to believe.
Anyway, here’s what I came away with from what I consider honest and reliable professional money managers:
1. China is overvalued greatly. By around 50%-60% or more (not the first time I’ve heard this, of course).
2. Jim Rogers knows commodities, but doesn’t know gold as well (this was new to me).
3. Marc Faber has one of the best reputations as an investor among insiders (well-known to me). His newsletter is worth the money.
(Full disclosure: I don’t subscribe to Mr. Faber’s newsletter, work for him or receive any kind of compensation for this statement. I’m passing it along as well-founded opinion that might help readers struggling to find reliable guidance in the welter of news….)
4. Gold bars sold by some firms have tungsten underneath, so be careful from whom you buy. James Turk is a reliable person to buy gold from. (Full disclosure: I don’t use Mr. Turk’s services nor have I been paid by anyone to make this assertion).
6. A lotof Several money-managers think there may be no gold at Fort Knox – or very little – not just confirmed “conspiracists” – among whom I am proud to number myself. (Correction, Nov. 13: “No gold” doesn’t have to mean the absence of physical gold. Gold could be present physically, but it could owed to other entities, like a house that is technically in your name, but is really owned by all your creditors).
7. Rogers was more the driving force behind Quantum’s success than Soros.
8. There will be no secession. Americans aren’t up to it. The cognitive dissonance between perceived reality and “real” reality is too great for most people to grasp the extent of the corruption in the system. Any hope of rebellion rests with “red-necks” (apologies for using a racist term – I use it ironically here), not with yuppies.
9. The Indian market is riddled with fraud and hype. Jim Rogers thinks the Indian market is a scam. (I wouldn’t use that harsh a word, but I worry about hype and corruption in it too).
10. Brazil’s Fortaleza area, which has been attracting a lot of investor interest, has great beaches and weather…as well as slums, crime, and deadbeats of all kinds. Recommended for investing, not for living.
11. Argentine property laws are not as safe as US property laws (despite Kelo) – at least, at the level where it concerns the ordinary joe. Aggressive, organized squatting is a problem in rural areas.
12. The ongoing investigation of insider trading (eg., Galleon) is not just a one-day wonder, but might bite harder than expected.
I agree for the most part. I wanted to comment on 8 and 9.
Regarding secession, I don’t believe it’s because we’re not up to it but rather because there comes a point in one’s development where he or she realizes that most states who have the gumption to do it would end up with a system that basically mirrors the federal system. It wouldn’t be an improvement. If it happens, it would have to happen in a state like Vermont or Alaska where there isn’t a lot of demographic divergence. It can’t happen in Texas. There are too many special interests here who have a vested interest in maintaining the status quo. Any independent Texas would look an awful lot like the USA with all the same problems. There would be no benefit except for “bragging rights.”
Regarding India, I will defer to others because I don’t know as much about India as I should, but I like the confluence of demographic trends long term from an investment perspective. 1.2 billion people, a relatively high birth rate, rapidly developing infrastructure, etc. To me, India will be the story of the next 50 years, not China. There’s more upside in India, more opportunity and more children to fuel future growth. Fraud and corruption are common in rapidly growing economies. I say that not to excuse it, but merely to recognize that it isn’t all that unique.
BTW, I don’t know if you’re aware or not, but Texas voters passed an anti-Kelo referendum issue on Tuesday that prohibits the state from taking land where it would benefit another private owner. I guess it will have to be tested before we can determine if it’s worth the paper it’s printed on. It has been a hot issue here due to the push for a new network of privately operated toll roads called Trans Texas Corridor.
Thank you for such a thought provoking column.