Jim Rogers Blog : Global Economic Slowdown or Meltdown?

Jim Rogers : Global Economic Slowdown In The Next Year or Two

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Well if Jimmy thinks we are headed for a slowdown; he is dead wrong. It is going to be more akin to a meltdown. Why?

First, interest rates at some point are bound to rebound. That is a simple mathematical calculation when completed has the potential to drive stock and bond markets down by fifty per cent or more. Include real estate properties in the market definition.

But the real big - big reason is that we are past peak everything, and that spells trouble as things move to the other side of the slope. If anyone thinks that have fewer things and more consumers is a good thing - they are need of prompt medical attention. In other words, smaller pies and more eaters will never be a good thing.

When will it occur? No one can predict for sure, but it should be within five years - and then continue much longer  All this should lead to more social, political and military disturbances. Making matters worse.

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First Financial Insights
September 8th, 2013  

Expect Another Meltdown...

Jim Rogers Blog - Banks Stop Printing Artificial Money

The Problem will appear when the Central Banks stop Printing Money Artificially

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There is one big problem with Jim's statement - Central Banks have alway and will always print money artificially. Why? First: How is money created? Where is it born? Who creates it? The answers to  these questions are actually quite simple. Money is created by virtue of a journal entry by a Central Banker in their books of account. There is little "physical" rhyme or reason for its creation, as the basis for authorizing the entry is a decision made by policy-makers based on the circumstances of the time. So the amount of entry is not determined by a set tried and true formula tied to GDP or any similar economic measure. It is largely arbitrary. 

So the paper you hold in your hands, bank accounts or use to ascribe other assets value is existentially nothing more than the fiat offspring of a Central Banker's accounting entry. It is not tied to national resources or future resource output potential in anyway - that would put  too much science into this mystical journal entry and money printing process. By the way, the more we print the more global stock markets go up as shown:

Global Stock Market Growth Flat J -Curve (Exponential Upwards)

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Therein lies the real issue, because as national resources behind the money supply are exponentially depleted by expanding populations, so is the de facto value of each money unit that had ever or will ever be printed.Thus, creating the basis for another exponential J-curve, as there is an inverse relationship between printed money and exponential resource output depletion. (see charts below) More and more printed money is simply needed to preserve the statu quo perceptions and defer social unrest.

Global Money Supply Flat J-Curve (Exponential Upwards) 

Global Resource Depletion Flat J-curve (Exponential Upwards)

Global Population Growth Flat J-Curve (Exponential Upwards)

Debasement in a sense actually started when the very first dollar was printed. The above hockey-stick charts show a fairly clear relationship between the expanding expanding money supply, resource depletion and population growth, leading to two logical questions: What's left? How long will it last?  The chart below uses oil as a surrogate for resources - and as expected the J-curve is inverted to the money, depletion and population J-curves above.



Global OIL Production (Extraction) Declines - Flat J Curve (Trending to Exponential Downwards)

Not only do these charts paint an obviously  bleak picture - the most important observation is that they are all going the wrong way - Exponentially!  And so is the climate right along with it as population growth spurs a J-curve in climate change as well as can be seen in the undernoted chart.



Global Climate Change - Flat J Curve (Exponential Upwards)

Bottom line is that the printing of money actually correlates with the respective J-curves population growth, resource depletion and climate change. While they correlate the printing of money appears to affect everything in the wrong way. But regardless of causation or correlation all these charts are forming J-curves going the wrong way.  But most importantly, they are doing in EXPONENTIALLY!   

Now try explain these simple J-curves to Central Bankers in Greece, Cyprus, Spain, Portugal, Nauru, Japan, Italy, Ireland, and the rest. Money is de jure or legal evidence from the issuing state that it is obliged to pay its holder the stated value of resource outputs through its various agencies. All is fine until there are no further resource outputs because inputs no longer exist for conversion by the nation's economic processes . As we can see in individual real nations noted, as these J-Curves continue to accelerate, the economic effects and value of money diminishes by country, and should ultimately do so in an exponential manner globally.   

What next? Just keep reading the international headlines.

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First Financial Insights
September 2, 2013

"Stop Printing Artificial Money"

     

The Jim Rogers Blog - Commodity Prices Going to Moon

The Jim Rogers Blog 

 War in Syria Commodity Prices go to Moon? 

Does this mean we should land on the moon again for bargains? Folks could be waiting there right now looking for our business. Who we wonder?

Commodity prices are ready to shoot upwards whether there is a war in Syria or any big event somewhere else on the planet. Syria is somewhat irrelevant in this regard as markets are poised more on fundamentals to lift skyward.

The world is more fragile today than it was twenty years ago for obvious reasons. More people, fewer resources and wider geo-political tensions and instability. For more worries you may add in climate change, wildfires, water supplies and worst - fewer and fewer pollinating bugs. And that's the war we are really losing sleep over.

Bottom Line: Anyday, anything, or anytime - LIFT OFF ALICE!

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First Financial Insights

August 24, 2013

To the Moon...

The Jim Rogers Blog : Financial Calamity US Dollar Collapse?

The Jim Rogers Blog

Financial Calamity - US Dollar Collapse? 
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Just cannot see eye to eye with Jim on the collapse of the US dollar, albeit the financial calamity is more or less a hangover from the 2008 Meltdown and remains plausible. Indeed we had  forecasted such a collapse two years back, by 2020. Bonds yes; but a currency short is fraught with too many pitfalls.

There are many reasons behind the likely stability embedded in the US dollar in such times. Two are big ones. One,  it will simply win by default because other currencies that are competitive, in any significant way, should be that much worse off in the turbulent economic times ahead. Remember, the US is a Hegemony with about 60 -70% of the world's resources and economies within its influences and/or control. There is little else in terms of a viable surrogate exchange media that could handle the global financial volume and liquidity needs as well. Former communist countries have huge credibility issues to overcome to garner any trust for this role.

But most importantly - they have bigger GUNS! In the end, that may be all that matters. 

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First Financial Insights

August 22, 2013 

Pentagon 2020 Outlook:
 Continues to See Strong US Dollar

The Jim Rogers Blog: Shale Oil not enough to solve Americas Debt Problems

The Jim Rogers Blog: Shale Oil not enough to solve Americas Debt Problems

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Shale's Big Shoes to Fill

No kidding? In fact, we have done this analysis once before using Bill Gross's (PIMCO) numbers that puts US total debt closer to $100 trillion once all contingencies, guarantees  and other unfunded future liabilities are thrown into the pot. And that's present valuing related assets using today's long-term treasury rates. What happens when they double?

So what would it take to pay off the US debt - you would  think that one trillion barrels in  world -wide oil reserves would do it?  Under strict assumptions it does, but then how do you run the future economy? To be fair, this assumes too, that all US debt is owed to foreigners. It isn't. The vast majority is owed to other citizens that Keynesian economists believe we should  not fret about under the theory  - it is just money you owe  to yourself. That could be a hard one to explain to pensioners if one day that debt is cancelled for whatever reasons.

Still. we are on-side with Mr Rogers, as it is going to take a lot more than shale oil to pay the debt and keep the "physical economy" running for a few more decades. Think about it!

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August 6,2013 

Another set of NUMBERS

The Jim Rogers Blog : WE ARE IN BIG TROUBLE! - There is a huge artificial Boom (video)

The Jim Rogers Blog : WE ARE IN BIG TROUBLE! - There is a huge artificial Boom (video) 

We are right behind Jim on this issue and recommend reminding yourself often and keeping an eye the ball, not getting caught when the trap collapses.

  INVESTORS' INSIGHTS

This is beginning to sound like a chorus line with a song that sings about the coming collapse of almost every kind of asset value. We recently commented in The New York Times that values could collapse by as much as 50% should long rates rise by 2% or more. Readers got mad at us, but it's not our fault, because we did not invent financial mathematics -someone else did! Nor we do believe that these rules are open to negotiation, legislation or persuasion of any kind. They are absolute.

So how did we ever get backed into this corner? Well. you can blame the usual suspects who lost sight of common sense and were "influenced by the political immediacy of their times." Now there is no where to run or hide.

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First Financial Insights
August 1, 2013

Remember these guys - Unusual Suspects?

The Eric Sprott Blog: HA! HA! -There is a Serious Shortage of Gold

The Eric Sprott Blog: HA! HA! - There is a Serious Shortage of Gold - (Read More)

 "I think it’s just been one big scheme to try to get people dissuaded from owning gold and to cause supply to come out. As you mentione...

So do want to buy our new book - with over 1 million pre-sold copies? The title is "The Secret to How to Make a Lot of Money Real Quick"; - write a book like this.

Sarcasm notwithstanding, Eric is basically a promoter and should disclose his personal, corporate and managed positions, so it is clear where he is coming from and fair to everyone who listens to his pitch. As well, to make this relevant for serious investors - sources, numbers and opposing views should be brought forward for objective analysis. We strongly believe, moreover, that if this was such a great investment, folks like Buffet, Bogle, Gates, Goldman and many others, would all be quietly chasing this huge home run. There is little evidence suggesting they are swinging at the plate.

In the meantime, we will continue to support the belief that gold is a psychotic placebo, that has lost substantial real purchasing power over the past 33 years, as well as being the one of the worst asset classes over that time. Making it just a speculative relic used by barbarian traders that holds none of the attributes true investors desire - like expected or defined returns.

Bottom line, we are not putting much faith in the rhetoric of gold promoters like Faber, Sprott and Rogers. For as Charlie Monger would say, "if its too good to be true, it usually is "

INVESTORS' INSIGHTS 

First Financial Insights

July 31, 2013

Our Message..

These wise guys are not "Gold bugs" for a reason -

The Jim Rogers Blog : I would rather be a Creditor than Debtor

The Jim Rogers Blog : I would rather be a Creditor than Debtor (read more)

Lets see if we can make sense of this. Now let's say China holds 1trillion in 10 year bonds and decides to cash or redeem their whole position. What could possibly happen? The Fed wires a one trillion freshly printed electronic dollars to China and takes back the bonds. So instead of holding an IOU due in ten years it now holds an IUO that is due on demand - albeit it is less less than 10% of  US's GDP or in other words all the goods and services output of the US economy for one month.Not much by some measures.

Anyway, now if China decides to convert these dollars immediately to other currencies it actually shoots itself in the foot because by depressing the US dollar they make their exports substantially more expensive to American consumers. Demand for Chinese goods would collapse in the US, that could shut down China's domestic manufacturing causing massive unemployment, and in turn social unrest followed by political change. Somehow it is hard to find a winner in such drama and both sides are thus inter-dependent - strange bedfellows indeed! .

There is a lesson - the best credit terms maybe negotiated by the creditor's biggest debtor - so borrow a lot! But somehow, Ben Franklin and Shakespeare's  wisdom also seems to ring true: neither a borrower nor lender be...

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First Financial Insights

Or, just tell them to go fly a kite

Bloomberg BusinessWeek - The Social Media Bubble Deflating

Bloomberg BusinessWeek - The Social Media Bubble is Quietly Deflating

Just a few months back, you may recall, along with Jim Rogers, we raised concerns about Facebook and generally the whole social media industry, referring to it as a generational fad and having difficulty seeing how a sustainable business model could be developed. Moreover, whether such tools or derivatives could find useful and profitable transitions into business markets. Guess what? Looks like the markets are tuning into Mr Rogers and ourselves as VC (Venture Capital) funding has plummeted to 2% this past quarter.

As one insider notes; what a business - "thinking about how to make people click ads"  And that pretty well sums up the industry's "Critical Success Factor" and how you build any sort of Sustainable Competitive Advantage around it, remains a puzzle.

Anyway we still believe that the big ticket, high margin objects just simply requires good ole face to face contact -  a little of that human touch!

INVESTORS INSIGHTS - February 18, 2013  
JIM ROGERS - Facebook is not an Investment, it's a Waste of TIME  

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First Financial Insights
July 20, 2013

Not a Happy Camper

THE JIM ROGERS BLOG - Rogers: More Money has been lost in GOLD Mining Shares

THE JIM ROGERS BLOG - Rogers: More Money has been lost in GOLD Mining Shares than any other industry in America 

We agree for the most part, except JIM you forgot one important aspect of mining, that is many mines are polymetallic, so they extract many other minerals including gold in their process. Should gold gravitate to zero, these mines will treat it as a by-product, and thus only assign the incremental costs associated with the ore or even  possibly leave it unprocessed for a period of time. If gold is a by-product then the full weight of production costs will not be attributed.So even at $50 an ounce, some miners may still be able to produce it on a break-even cash basis  because the cost assignments are arbitrary.

Anyway we are happy you enoyed our article - "Gold is a Psychotic Placebo - NOT AN INVESTMENT." And by the way, we confirm that old story about gold mines - 99% of all stock mining ventures end up being worthless. And yes, it will be very hard for these sociopaths to attract capital in the future. That's one good thing for the greater cause - our future generations!

INVESTORS' INSIGHTS

First Financial Insights

July 10, 2013

Somewhere Under A Rainbow