Publisher’s note: For the first time ever, American Consequences feature contributor and Stansberry Research editor Steve Sjuggerud is going public with the asset responsible for most of his wealth… and we suspect that it will surprise you.
June 12, 2020
You see, the majority of Steve’s personal investable net worth is actually OUTSIDE the stock market.
And he says the timing is perfect for you to do the same…
That’s why Steve is going public with ALL of his real estate secrets on June 24.
He’ll show you the real estate process that he used to make himself and his family millions. He’ll walk you through his own real estate investments – including homes he and his wife bought and flipped… tax certificates that paid him an 18% yield… and even raw timberland.
Most important, during this event Steve will show you a type of investment opportunity that has been off-limits to ordinary investors until recently. Steve believes it’s the No. 1 best way to get started in real estate right now. RSVP to his special broadcast and learn all the details by clicking right here.
And now, here’s Chaos Chronicles editor Kim Iskyan and a special interview with a legendary investor…
Here Comes the Blow-Off
Jim Rogers is an investing legend – cofounding the Quantum Fund, one of the world’s most successful hedge funds. After generating returns of 4,200% over 10 years, he quit full-time investing in 1980 to do whatever he wanted.
Since then, he’s become a best-selling author and holds several Guinness World Records – including “most countries visited in a continuous journey by car.” He’s traveled around the world by car and motorcycle – trips that were the basis for two of his books, Investment Biker and Adventure Capitalist.
Jim has fantastic insight on investing – as well as on how to find and follow your passion.
He’s also a fellow resident of Singapore. I’ve met with Jim a number of times here, and earlier this week I chatted with him over video. Click here to check out the video interview, and below are some of the highlights, lightly edited for clarity…
On not meeting in person in Singapore
Jim: Kim, here we are in Singapore, and we can’t visit each other. We have to use modern technology to do our discussion.
Kim: We’re practically neighbors by Western standards because we live all of 15 minutes away from each other. But unless we’re family, we can’t actually meet!
Jim: I know. Go to jail if we touch each other.
Kim: That’s no joke, either.
On debt, why markets have rallied, and owning Japanese shares
Jim: So the world was ready for a bear market… I didn’t know about the virus, but I certainly knew the conditions were fraught. The debt was unbelievable.
As soon as it hit, central banks led by the U.S. went to work every morning, turned on the printing presses, and cranked up as fast as they could.
For example, the head of the Bank of Japan goes to work early, starts the printing presses, prints, prints, prints, prints, buys bonds, buys exchange-traded funds (ETFs), now he can buy stocks. I own Japanese shares, who am I to compete with the Bank of Japan? He has more money than I do. If he’s going to go there every morning, print money, and buy stocks – a simple guy like me, I’m going to buy Japanese stocks, too…
You ask why the markets went through the roof, well, that’s why.
On the evolving market blow-off
Kim: What do you think is coming next for markets?
Jim: I would suspect markets will continue to be fairly strong. The U.S. [is close to its] all-time high because there’s so much money being printed and there’s so much money being spent. It has to go somewhere.
I don’t see them stopping printing money, unless something strange happens. At some point, the market is just going to say, “OK, we’ve seen this movie before. We’re not going to play this game anymore.” But that doesn’t preclude a bubble, that doesn’t preclude a blow-off. [Editor’s note: That’s what follows a “melt up”… when markets rise sharply and fast, before declining steeply later.]
Markets frequently have blow-offs after a long period of rising… I’m not any good at market timing or short-term trading or setting trends like that. But I have seen throughout history, after markets go up for a while, they all frequently have a bubble. And all ingredients are in place right now for a bubble, and bubbles always end finally when somebody says… “Wait a minute, we got to stop this.”
That’s the way most bubbles end… But it may go on for a while.
On how it could get worse… and MMT
Jim: The debt problem could be even worse. You know about MMT? It’s “more money today,” “more money tonight,” whatever it’s called. [Editor’s note: Modern Monetary Theory (“MMT”) argues that governments can pay for huge spending by simply issuing more currency without needing to worry about deficits.]
Everybody wants a free lunch. You know, this is a wonderful new theory, wonderful free lunch. And when there are problems, quite often wonderful new theories come along and people say, “We need it. We need it. We need a free lunch.”
Karl Marx, remember Mr. Marx? What a ludicrous theory he had, but many people for a few decades said, “Karl Marx is a genius. Karl Marx knows what he’s doing. He can save the world.” But nobody would pay a dime for Karl Marx anymore. But it didn’t mean that for a long time, people didn’t listen and played the game.
And so in hard times, this could go on for a while. You know, I don’t like it. I see it’s going to end horribly…
On the cure being worse than the disease, and McDonald’s closing
Jim: What was really unexpected [about the coronavirus] was the politicians’ and the media response. You know, we’ve had many epidemics in the past, and never before have they closed McDonald’s for an epidemic. Never before did they close the airlines for an epidemic. I’m not quite sure why it happened this time. I look back, and it would seem that somehow or another, people got hysterical about China, but China wasn’t hysterical like the Western press.
Now, sometimes the cure is worse than the disease… It seems to me that the reaction has been worse than the disease. The cure has been worse than the problem in this particular case.
In 2009, we had the H1N1 virus in America. You might not have even known about it. You go over to McDonald’s, nobody was sitting around in McDonald’s talking about, “Oh my God, you heard about the H1N1 virus?” You know, for some reason, the world didn’t go berserk in previous times like this. So that seems to be the problem.
On the unexpected… and learning (or not) from history
Kim: How should investors prepare themselves for the unexpected? Next time, it won’t be a pandemic, but it’ll be something else. How can we think about that?
Jim: Something’s always unexpected, but something always comes along and happens. It always has.
If you are not aware that [unexpected] things like this will happen, you should not be investing. You should always have a plan A and a plan B, and you should have the expectation: Oh my gosh, what if something happens? What if people blow up the World Trade Center? What if a pandemic comes? What if people go broke because they’re overextended?
I mean, if you don’t understand that about investing, please don’t invest. Do not invest because you’re probably going to get wiped out… So please, if you’re not prepared for this sort of thing, if you don’t have hedges or know what hedging is, do not invest.
Something always goes wrong. Remember history? I repeat to you, the lesson of history, nobody learns a lesson of history. But please, if you’re going to invest, remember, ask yourself every morning, “OK, what can go wrong? Will it go wrong? When is it going to go wrong?” You probably will not figure out what is going to go wrong, but something is going to go wrong, and you better be prepared, and you better be hedged… You should learn about hedging or don’t invest.
On where there is – and isn’t – “money lying in the corner”
Kim: You’ve described your approach to investing as “waiting until there is money lying in the corner, then all you have to do is go over and pick it up.” Do you see any place in the world right now where there’s money lying in the corner?
Jim: Stocks in the U.S. are making all-time highs… Japan stocks are down 60%, 40%, or 50% from their all-time highs. It doesn’t make them cheap, but it’s cheaper than being at an all-time high. China stocks are down 40% or 50%. I told you I bought Japanese ETFs, actually, because that’s what the old man running the bank likes to buy…
There are still things that may be cheap going forward. I bought Russian government bonds in rubles recently. Nobody likes Russia. Nobody likes rubles. But bonds, short-term bonds especially, are very high-yielding right now with the ruble collapse. So there are things that might present opportunities… I bought a Russian shipping company recently.
As you know, anything to do with travel has been smashed… everything – airlines, restaurants, hotels – they’re empty. You and I live in Singapore. The Singapore airport is closed, essentially. So all these things, nobody’s paying any attention.
But Kim, I do know we are all going to continue to fly someday. We’re not all going to take the bus around Europe, around America. We’re not going to all take the boat to London in the future. I do know that airplanes will come back. I do know that things having to do with travel and the world will come back someday.
On buying Russian shipping shares… and that time Jim shorted Mexico…
Jim: If you can’t even find Russia on a map, please do not go buy Russian shipping stocks. If you don’t know how to buy Russian shipping, don’t buy Russian shipping because some guy you saw on the Internet said he’s buying Russian shipping.
And I want to make a point… Once upon a time, I was on a TV show. It was a call-in investment show. And I was talking, rambling on about how I’m shorting Mexico. And the way I’m shorting Mexico is the Mexico Fund, which is a closed-end fund on the New York Stock Exchange. [Selling a stock short is a way of making money from the decline in price of the security.]
Lo and behold, two weeks later, Mexico collapsed – catastrophe, disaster. So I’m sitting here looking like I’m smart, you know. And we’re talking about it on the TV show. And one of the callers called in and says, “You son of a bitch, what are you doing talking about Mexico. I lost my shirt. I went and bought the Mexico Fund because I saw you talking about it on your show, and it has collapsed.”
We were shocked because we had been talking about that – I was selling it short because I expected it to collapse. I expected disaster. This guy, all he heard was “Mexico Fund,” and he went and bought it [rather than selling it short]. And then he was furious at me because he bought it and it collapsed. And I had been telling him, telling everybody, “Sell it, sell it, sell it.”
Now here are some of the stories we’re reading…
Second U.S. Virus Wave Emerges as Cases Top 2 Million
Though the outbreaks come weeks into state reopenings, it’s not clear that they’re linked to increased economic activity. And health experts say it’s still too soon to tell whether the massive protests against police brutality that have erupted in the past two weeks have led to more infections.
Johnson & Johnson says coronavirus vaccine’s human trials moved up to July
The company signed deals with the U.S. government last March to increase its manufacturing capacity in order to produce more than 1 billion doses of its vaccine through 2021, according to Reuters. Such developments occurred before evidence has been shown the vaccine works.
A Scramble for Gold Is Redrawing the Map of the Market
The scramble to get gold to New York stemmed in part from the demand among U.S. investors for the precious metal, seen as a safe store of wealth by many. Gold prices have climbed almost 15% this year, and rose 1.3% Thursday to $1,745.30 a troy ounce.
And let us know what you’re reading at [email protected].
May you find your way through the chaos,
Chaos Chronicles Editor, American Consequences
With P.J. O’Rourke and the Editorial Staff
June 12, 2020