122830103 - 1_45tze3fq - PID 1851201 >> Jim, welcome back to Real Vision. It's always a pleasure and an honor to chat to you. >> Well, it is my pleasure. It is my honor. I am a fan. >> Thank you. Listen, Jim, you are one of the people I love to reach out to when the world is getting pretty confusing. We are all trying to think through what's going on. We've got this crazy markets, and everyone is scratching their heads trying to think, how does this play out from here? How are you conceptualizing this right now? What are you thinking about markets? >> Raoul, if you don't know what you do, you should watch your Real Vision. They can tell you. They can tell you what's happening? >> I'm too busy. >> Are you too busy? Well, that I get somebody to watch it for you. How's it all going to play out? Well, it seems to me that what's happening is because of the gigantic amounts of money being printed. It takes awhile to build a factory, but it takes ten seconds to go online and invest. A lot of money is going into investment markets all over the world. I don't see any reason for this to end. I see bubbles forming, but I don't see full-fledged bubbles in stock markets yet. Some stocks never go down. Tencent never goes down. Samsung never goes down. Apple never goes down, but there's still a lot of stocks that aren't up, so it's not a full-fledged bubble. It is a full-fledged bubble in bonds. Bonds have never been this expensive in the history of the world, at least the recorded history of the world. So bonds are definitely in a bubble. Property in some cities; Seoul is a gigantic bubble. Look around our cities were property as a bubble. Commodities are only thing I know that are on it, that are still cheap compared to other assets around the world and some stock markets. I'm investing in China, I'm investing in Japan because the US is at an all time high, but some markets are still down from their all time high. >> I want to unpack some of these things. You said something interesting about companies like Tencent and Samsung. Do you think we've got a secular trend change in how people value these high-growth, high-margin companies? Is there a change going on that we're having to get our heads around because the bond market, basically it's not a market anymore? >> This is not my first Rodeo, Raoul. I have seen this movie before. It have been many times, people get very excited. I can't remember the late 60s if it had computer in the name. The stock went through the roof. Even if it was a laundry, didn't matter. Didn't matter what it was. We've all seen this before. We've seeing it in Japan, we've seen in America. In the late 90s. This has happened before and it's happening again. Whatever the hot technology is of the day, those stocks for whatever reason get very, very hot. 150 years ago it was Railroads. There was a gigantic bubbles in Railroads , and you know, Raoul, Railroads are still around, but you never made money in the stocks if you bought them in the bubble. You remember 1929? In 1929, Radio Corporation of America, RCA, became unbelievably expensive. Well, we still have radio. Radio merged with CVS, et cetera. It's still there, but you never made money if you bought it in the bubble. So be careful. You ask, how it's going to play out? We've had bubbles before, we're going to have them again, and they always end badly. If you buy the bubble stocks, you probably never going to make money. >> Something that I've noticed is this time around. I mean, I'm noticing this bubble behavior build up and we've seen retail speculative activity, the option activity. It's probably less so in Asia, but it's very predominant in the US. We're seeing mutual funds with record low cash holdings and we're seeing record margin, that all of the big market stocks. They're not great at timing, but they start to stack up. It feels that somewhere maybe in the next 12 months or even shorter, we run the risk of a sort of 1987 event. By that I mean a non-economic event, but a market-based event, because everybody's over their ski tips. Well, any thoughts on that? I was speaking to Felix, we laugh about this as well last week, and Felix had the same view on this, that it feels like it's heading that way. >> Well, it certainly does. You see a lot of new investors piling in, talking about how easy it is to make money, how much fun it is to make money. I said I wish you were easy. You see Specs coming in. Specs often come in at the end of big long bull markets. Remember the Mississippi land company, sorry the South Sea Land Company, that was 300 years ago. Same thing. They have been Specs long ago. All of this has happened before and it is happening again now. Your question and mine and everybody, when is it going to end? I don't see an ending yet, but something may well happen. One thing that always happens, is they just get so expensive that it ends, or a central bank or two starts cutting back. A war breaks out or something happens, and various thing, but I don't see any of those things happen yet. If everybody was buying socks. Now, when you go to the dentist Raoul, if the receptionist wants to talk to you about stocks, that's a bad sign. That's a very bad sign. Those sorts of things are beginning to happen. I went to my chiropractor the other day and the massage lady wanted to talk about stocks. Wasn't the reception is yet, but it's starting to happen. >> You've got a lot of great stories and I'd love you to tell the story of 1987, how it affected you, your observations of the time, and how you dealt with that, because I just think experience is really important to people. Whether that event happens again at all, isn't relevant, but I think it's really great to people to share some of the experience that you learned. >> Well, I'm delighted to talk about that. A little wonder that out ahead of a few winters in my life that happened to be one. I don't know if you know, but I was short the US market, and it all happened on my birthday. The best birthday I had. October 19th was my birthday. I couldn't believe it. I still can't believe it. >> I would never forget that now Jim because I know that date was my birthday.. >> Yes. I won't either. I don't forget my birthday, it would be I don't forget October 19th, 1987. I'd been babbling on and on and on about how this is all crazy and out of control, and that Greenspan didn't know what he was doing, and then it started happening, it started about six weeks before. How did I know if that thing started coming apart six weeks before October 19, but then it did. You had all the thing people buying on margin speculating it was very easy. Stocks went straight up for nine months or something. Now Raoul, you've been around, these things have happened before. >> What tips it that time? Because that was a weird one, because the Central bank didn't raise rates. In bond yields were going up and the dollar was bouncing off the falling shock, those kind of things. Any idea what tips it or was it just the crowd that just changed? >> Well, it was portfolio insurance in those days, there are all sorts of new wonderful inventions to make sure stocks never went down or that nobody ever lost money again. I don't remember a specific trigger. I do remember that it started on August 25th I was having dinner with a friend of mine. He's the head of the Wall Street Journal at the time, and we were talking about it. I was telling him blah, blah, blah. Lo and behold, that was the day. He still remembers. I still remember. But I don't remember anything specific happening that caused it. It just got too overheated. You don't have to have a specific ringing of the bell or shooting of the pistol, but it can happen that way. >> So let's flip a bit to the bond market where you said there is a huge bubble has been built. How does that end? Why does it end? Because the Central banks won't let it end, essentially.. We see it in Japan, they can buy unlimited amounts of bonds. I mean, how does this stop? >> They are buying. The head of the Central Bank says, his word is, "We will print unlimited," that's his word, "unlimited amounts of money and put it in the investment market," and he's doing it. Raoul, he buys ETFs every day. Well, I own Japanese ETFs, he's got more money than I do, if he's going to buy ETFs, I am too. The Japanese market is still down 35 percent from its all-time high. US market is making all-time highs. There's a chance, I mean, I don't know, you watch Real Vision, they'll tell you, but there's a chance that the Japanese market may go back to its all-time high of over 30 years ago because of all the crisis that's going on in Japan and in the world. I do not know what the trigger will be. I can feel what's happening. I see all the signs. We've talked about some of the signs, but it's not as though there's total madness yet. I said there are a lot of stocks that are still down or still aren't participating. Now in the bond market, everything is participating, junk bonds, foreign bonds everything. So unless you have a special situation bond, I would not own bonds anywhere in the world. I do own, full disclosure, I do own some Russian government bonds in rubles, but they're short-term. I mean, they're a year or two. >> When you're allocating risk now, what are you looking for? You talked about Japan, and I understand A, you've got the central bank on your side, and B, it's a discounted market, and it's not wildly expensive. Well, what else is interesting to you right now, where you're more comfortable taking risks? >> Well, I will be buying agriculture. In fact, I have orders in at the moment to buy more agriculture because the agriculture is still there as is it. Commodity is the only thing that I know that is still cheap. Sliver's down 45 percent from its all-time high. Sugar is down 75 or 80 percent from its all-time high. Some of this stuff is still very cheap. Fundamentals are improving. But Russia, everybody hates Russia, I'm buying Russian stock as we speak but I don't want to buy Apple. Now, if you know what you're doing, then gosh you're going to make a fortune in Apple this year, not me. Not on the long side, maybe the short side later this year. But no, that's not the kind of thing that I'm any good at investing in. >> When you're trading the agriculture commodities, are you trading futures contracts, or are you trading equities that have exposures in them, or do them both? >> Mainly I'm buying the ETFs because ETFs are a miracle for lazy people like me, they're great. But Raoul, I'm sure you've seen all the studies, the study show that if you invest in the index, you're going to outperform most investors, professional, and otherwise. For me, I'm buying agricultural index, ETF to be exact. >> What about gold and silver? You mentioned silver, they've had a slightly ugly year, gold has been chopping lower for six months or so,and can't really get extraction. What do you think gets that market going again? The miners as well, which are very cheap have been struggling. >> Well, I have not been buying and probably will not buy. I'm waiting for the correction to work its way out. Listen, my market timing is horrible. I'm the worst market timer in the world, Raoul, so don't listen to me for short-term trading. But somewhere along the run, I hope that I was smart enough to buy more silver and more gold. Probably more silver than gold, because silver is down 45 percent, gold is only down 10 percent from its highs. Before this is over Raoul, both of them are going to go through the roof because I mean, history shows that whenever people lose confidence in governments and money, all of us peasants buy gold and silver. Listen, the politicians and the academics will say, "Forget gold is a barbarous relic," whatever they term it. But Raoul, peasants like me like to have some gold in the Clouds, we like to have some silver under the bed because we also peasants know, "Okay. Maybe it's not any good but we want some." But I'm not buying it now, I mean, I own a lot but I'm not buying now. >> Have you ever caught the Bitcoin bug, have you've got an interest in that yet? I mean, a lot of people have started to get [inaudible 00:13:48] , I've been very involved with it for a long time that. What's your thoughts on that? >> Well, let's say wish I had bought Bitcoin. I will point out that many cryptocurrencies have already disappeared and gone to zero. We all hear about Bitcoin, we don't hear about the dozens that don't exist anymore. There is no question that money is going to be on the computer. You cannot take a taxi in China with money. You cannot buy ice-cream in China with money. You've got to put it on your phone. Some countries, every country is working on it, including the US, Chinese are ahead. But Raoul, my view is it's going to be their money. If, let's use Bitcoin if Bitcoin ever becomes a viable currency, not a trading vehicle, but a viable currency, they're going to outlaw it. Governments don't want to lose control. They like their monopoly, and once they all have their own government money, you think they're going to say, "Okay, here are US dollars and they're all in the computer, but if you want to use something else, you can." That's not my experience with governments any time in history, well, most times in history and I can't imagine US government is going to let people do that. >> No. I mean, a lot of people now try not to think of Bitcoin as like a replacement to currencies, but more as a store of value like gold plates but in the digital world. So in which case the authorities, yes, occasionally they ban gold here and there. But generally speaking, they allow it to exist alongside. If you want to store a value, that's okay, just don't let it become money. >> Well, as I said if it's just a trading vehicle, I don't see any reason that they would outlaw it unless it's money laundering or something like that. No, if people aren't trying to use it to compete with government money, why not? I know I'm not a very good trader, so I can't imagine that I would ever try to buy and sell it. But you have plenty of guys who are very good at it, who are doing it. But as a store of value, yeah, conceivably, but I don't know what the value is. Listen, if we have a store of value of silver, I know that silver, well, it can be used in solar panels and electric cars, etc. I don't know what Bitcoin can be used as except for trading them. >> One of the things that I'm looking at is the underperformance of emerging markets versus developed markets, particularly versus the US. its all-time under-performance. When we talk about cheap, some of these markets are really cheap in comparison, they're not super cheap in price terms, but generally very cheap in comparison. How are you thinking about emerging markets? It's going to be on your radar screen, I mean, you're a big emerging markets fan and you, obviously, allocated some cash to Russia, but what are you looking at in that? Do you think there's a big opportunity setting up? >> Well, I know the huge opportunity, as I mentioned, Russia, which most people consider an emerging rob China. I'm buying Chinese shares and Japan's lot of emerging market, it will be again someday but not now. Those are a couple that I have on my list. I'd like to be by Myanmar but cannot do it now, you have to go there, which I'm not interested in going to Myanmar at the moment. I'm looking, but I don't have anything other than maybe Russia and China that I'm buying at the moment. >> Last time we talked, we chatted a bit about India, and you were like, "No, everyone gets burnt in India because it's full of promises and nuances." How are you thinking that one through because I mean, just still keeps going up? regardless of all of the governments and the bureaucracy and all the other terrible things that go on? >> It's at an all-time high, yes. Again, back to my earlier statements, I'm not particularly interested in rushing out. You want me to tell you things about 20 years ago, Raoul, I don't want to waste your time, and you don't want to hear it. But you want to hear what I'm buying tomorrow, you want to know what I'm buying next week. India is not on the list at the moment, but if you drive it down 50 percent, it'll be on the list again. >> Now, you are in a unique situation being in Singapore. The world is very Western New Centric right now. What do you feel the mood is on the ground in Asia? How are people in Asia thinking through because they generally had a very good COVID, they managed it well, economic growth is returning faster than elsewhere, there's a lot going on in the region. What's the sense on the ground there in what people are thinking? >> Well, one of the main things that I sense is happening is, Donald Trump pulled out of Asia, he pulled out of the Trans-Pacific Partnership and China said, "Oh wait a minute, that leaves Asia for us." Then a month or two ago there was another 15 nation trading partnership without the US, including a lot of our allies like Japan, Australia, places like them. They're moving on here, America, I hope somebody in Washington is now saying, "Wait a minute, we better do something, they're moving on without us." But the sense I have here is that that's exactly what's happening. Asia is saying, "Okay, see you, we're going to move on, we want to trade, we know there's a lot of money here, a lot of trade here, a lot of energy here." They're moving on. The US, I don't want to overstate this but many people are realizing, not that the US is irrelevant, but that we can get along without the US if we have to, and they're doing it, they're moving on. I even sense in Korea right now, they would like to do something about North Korea. They haven't been able to because of the US, but I get a strong sense these guys are now saying, "Well, maybe we should do something on our own." >> It feels that the world is splitting, that Asian block is falling as you're saying and everyone seems quite comfortable with it. One of the issues for everybody is inter-Asian trade was always in US dollars, which is crazy. >> They say that too. >> The Chinese digital currencies are stats of a big change, I think. >> I noticed in the last few weeks or days that Angela Merkel is seriously [inaudible 00:20:32] herself more and more. We got to be nice to the Chinese. Mr. Trump smashed the Chinese, but wait a minute, we should be doing business with China. Even the Prime Minister in England today said, "I love China, I'm very, very keen on China." Because he's starting to get the pushback among companies in England. What are you doing? It's the second-largest economy in the world, a huge creditor in Asia, and etc. I'm beginning to sense that other people are starting to say, "Mr. Trump can bash them all he wants, the Democrats can bash them all they want but we know where our bread could be buttered." >> Yeah. I get interested when the narrative is all one way, the narrative, particularly US, is extremely China negative from both sides of the political spectrum. That often feels to me like an opportunity. When the narrative is going too far one way, you see the continued growth in China, the continued rise in what's going on, the technology, the amount of money pouring in from the government, and even from foreign capital. It feels that people are going to get politics confused with markets. >> Well, throughout history, when a country has problems the politicians blame foreigners, and that's what Trump was doing. He was saying, "Those evil yellow people with black eyes and black hair and they speak a funny language and funny food and funny clothes." That's what the politicians always do, Raoul. Go back and read history. Not just America, everybody, all politicians throughout history blame foreigners when they have a problem and they try, it's easier to blame foreigners for many reasons. That's what Trump was doing and he certainly raised the rhetoric and the Democrats joined him. I sense that the Democrats at the moment in there were saying, "Wait a minute, guys, let's start over, or let's think about this so well." But certainly other countries in the world, I get a strong sense are starting to say, "Well, maybe we can figure out a way to do something about this." One reason I'm interested in buying Chinese shares, they are below most other stock markets, and certainly on a historic basis, and they certainly seem to have handled the virus much better than most countries did. I don't believe any government, but I see you on the Internet, I'll see what's happening in the streets and in the restaurants and the people. I see they're going to dance halls and gym classes and everything else. The Asians seem to have done a less bad job especially China. This crazy rhetoric has happened throughout history and sometimes it has led to war, shooting war not just trade war. Let's hope it doesn't happen again. But I am investing in China. >> Yeah. You're actually a huge influence on me when I read Investment Biker for the first time and I just started out in investment banking in the early '90s, it made me realize, and I think you really got people to think about this, is that what you hear is not necessarily the truth. What you see when you go there, speak to people, there is no truth in financial markets or economies, but it's closer to the truth. That was a huge lesson I learned from you. >> Well, it's a huge lesson, I taught myself, I learned from it to by going. First time I went to China in 1984, I just assumed I was going to get shot. American propaganda all my life has said they're evil, vicious, bloodthirsty, dangerous, poor, disgusting people. Didn't take me long to see from the ground up, "Wait a minute, there's another story here." But I have learned that many times, Raoul in my life. You better see it for yourself and certainly don't believe propaganda, don't believe Chinese propaganda, American, don't believe anybody's propaganda, check for yourself. >> That's why Russia periodically become so cheap because Westerners shun it. It's once every 10 years Russia becomes just a phenomenal trade. I guess you sense that with commodities starting to go up in price, Russia pretty much shunned by foreign investors. I don't speak to anybody or anything in Russia right now and there's other times when everybody is investing in Russia, nobody's got anything right now. Is that your sense as well? >> I have Russia and I'll buy more. They've got agriculture, they've got oil. both of which have been disastrous for a while. As you know, everybody hated Russia or still do, still hates Russia. I hated Russia for many decades, but in the last four or five years, I think I've seen her change in the Kremlin for whatever reason. They understand investing, they understand capital, they understand entrepreneurship now. I mean, this is not Switzerland, this is not the Netherlands, but it seems to be a change, and my goodness it's cheap. Raoul, nobody would lend money to the Russians and so they don't have gigantic debts like the US or Japan, or the UK, or other people. >> What about in currency world? Anything interesting? Or are you just thinking, well, the dollar probably slowly falls. I mean, anything particularly interesting? Personally, I don't find a lot interesting in currency world, but I don't know if you are seeing anything. >> My view is that there's going to be turmoil sometime in the next year or two, big turmoil for reasons we discussed earlier. Whenever that happens, people look for a safe haven, and for historic reasons, many people still think the US dollar is a safe haven. It's not. America's the largest debtor nation in the history of the world, Raoul, but people don't think that way. I certainly see problems in the UK and Europe, etc. Not going to buy the Russian ruble, and Chinese, remember they cannot buy because it's not convertible yet. I own a lot of US dollars on the assumption that in the next turmoil it's going to get very overpriced. It could turn into a bubble as well, but at that point I'm going to have to sell it. Well, for economic reasons, it's the largest debtor nation in world history, but also for political reasons. If Washington gets angry at you, they cut you off. Well, people are starting to say, well, wait a minute, wait a minute, that's not what an international currency's supposed to be, it's supposed to be neutral. It's supposed to be usable anywhere. Now they're looking for a competitor. They're working on competitors. India, China, Brazil, Russia, various countries are working on competing currencies to compete with the US dollar, and I suspect it will happen. >> The one place that nobody talks about, bizarrely, is Europe. Everyone's just given up entirely. Have you given up entirely as well? I mean, again, I have. I don't really even bother to follow it. It's interesting to get into additional currency and stuff, but Europe, I don't know. What do you think? >> Well, no. As you said those words, I said right, "She's right." Many of those markets are up, of course, because they follow the US market. The Euro, as a currency, to me, is not wildly exciting for the reason we all understand. I suspect they're going to be more separatist movements, since the British pulled it off, some point. But there are politicians in other countries now saying, "You know, I could make my name by being in favor of separatism," and they're starting to do it. So I would expect to see more turmoil of that sort in Europe. But as you said those words, I own a few shares in Europe, but no, I'm not buying anything. I guess because I'm not looking. >> No, nobody is. I mean, we've just ignored a third of the world's economy. >> I have noticed that Mrs. Merkel is starting to be nicer about the Chinese. I noticed that the Prime Minister Boris Johnson is starting to be nicer about the Chinese. These things I notice because I'm in Asia. Those are only recently that it's starting to happen. But that again, it's Chinese-centric or Russian-centric. That's what attracted my attention because they're starting to talk about changing their views towards the East. >> One of the things that obviously endlessly comes up and you'll have heard it a thousand times before is, Taiwan and the risk of something, a conflict there. Do you see that risk as rising, just same as it ever was, just the rhetoric keeps going up and down? How do you get to grips with that? >> I see the rhetoric rising, especially when Trump was there and they were doing everything they could to bash China. That rhetoric, I have the sense, is calming down now. But again, all these passions and views have been inflamed in the last two or three years. >> I just want to go back to commodity markets. You've been very actively involved in commodities over the various cycles. Do you think, is this a reflation idea, it's two to three years, we can make some good returns out of it, or are we seeing something bigger? I mean, obviously, I remember when you wrote the book about commodities, that was China coming in. There was a huge demand shift to the world and you would dead right in that. It doesn't feel like we've got a demand shock here, so it feels like it's more a cyclical commodity play. What are your thoughts? >> I'm starting to see a lot of people talking about a new super cycle in commodities. I wish they weren't saying that, because when we a lot of people bullish, it worries me. I don't like them. I wish they would still say oh, that's crazy. I do know that on the supply side there are many problems, partly because of the virus. I do know there are some demand issues. We're all going to have electric cars, apparently. Well, electric cars use five times as much copper as regular cars. Some of the stuff like zinc and lead, they need it. Silver, made for solar panels, for electric energy, you need a lot of these things, so there are demand shifts taking place. Nothing like coming out of China 20 years ago, but there are things happening and the supply side is down because of the virus and the problems it has caused. I'm bullish. I'm long on commodities. I hope I'm buying some more yesterday. I don't know. I'll have to see what's happening. But yeah, no, I'm certainly not selling. >> There is also the upside chance that these fiscal stimulus that are still to come, not the ones to get rid of cashflow problems over the virus, but the infrastructure projects that both the EU and the US have talked about, and they're generally going to be green infrastructure projects, I'm guessing, that could be a demand shift that nobody's really factoring in yet. Particularly in some of these commodities that it's not iron ore this time around as you said, it's silver and copper and other stuff, lithium. >> Yeah, it's the things that people use for electricity. I mean, electricity been around awhile. We're not reinventing the wheel here. We're using it in more and more demand-intensive ways or so it seems. Yeah, no, I see it, but I also see oil is down gigantic amount for various and sundry good reasons. But that too, I mean, if you ask me, oil is making a complicated bottom. The frackers came in, huge bubble, but now that bubble popped. It used to be, well, if you could spell fracking, people would give you money. They would give all the money you wanted. But now they realize, oh my God, you got to make money, you got to pay your bills. So the fracking bubble burst. They're still fracking, going to be, but it's not such a huge new source of supply as we had before, and in the meantime, known reserves of oil continue to decline. I mean, this is simple, straightforward facts. I'm not talking some miracle here. Oil is cheap, hydrocarbons are cheap, it seems, so anyway, commodities are certainly the cheapest asset class I see right now. >> Final question, silver, which you've mentioned a couple of times. I know a lot of people are interested in silver. We talked about ETFs, just getting exposures to the metal itself or owning physical metal yourself. Do you look at silver miners as well? Is that something that interests you or do you just keep it simple? >> I'm lazier than I used to be. I've always been very lazy, but if you have a silver miner, send me an email, I'll look at the name, and gold miners. But again, Mark Twain, who was a great American writer as you know, once said, "A definition of a gold mine is a hole in the ground with a liar standing at the top." There are hundreds of silver and gold miners in the world. There's only one of these, so it's simple. >> Keep it simple, stupid. >> Yes. It's easier to buy this, the ETF or the stuff, the real stuff. But if you know, Raoul, if you know a silver miner that's going to find a big deposit in Berlin, you should buy all you want and send me an email because I want to buy it too. You'll make a fortune. But unfortunately, there are hundreds of those out there. >> You don't know who's telling the truth? >> Yes. I'm keen, certainly on silver and gold. Better silver, but I don't have any silver mines at the moment in my portfolio. >> Jim look, as ever, real pleasure to speak to you, to pick your mind, to get your perspective what's going on. I really appreciate your time and brilliant to catch up. >> Well, I am still a big fan of what you guys are doing. I hope you keep it up, it's remarkable. It's remarkable what you have done and are doing and I hope you continue. >> Thank you so much, Jim. >> Hey there. Since you got to the end, I'm guessing you liked the video. That's probably because we don't just turn on a camera and film. We work really hard on getting the narrative flow just right, and that's why many finance companies are actually now hiring Real Vision to make videos for them. 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