Wednesday, February 24, 2016

Jim Rogers speaks with Midas Letter on US Treasury and Gold

Midas Letter: Treasury yields have dropped to record lows, but what’s happening in the G8 almost suggested general abdication of faith in the world’s major currencies. Do you see that manifesting in a flight away from government debt anytime soon?

Jim Rogers:    Well, yes and no. Somebody’s buying all this debt at no return; many people are forced to buy it. Some of the people I talked about before, pension plans, insurance companies, etc, don’t have any choice but to buy it, and then of course, the central banks are buying it themselves in staggering amounts, especially the American central bank. So yes, there’s going to be a time where people simply will not put up with this garbage anymore, they’ll say I don’t care, I don’t want your garbage. First of all, the returns are virtually nothing, especially if they go to negative returns; people are going to find other places to put their money.

Therein lies a huge problem: what will happen is that interest rates will go much, much higher, and that will attract some funds, but people are going to continue to lose faith in governments and government paper money.

Midas Letter:  Right. So that, to some extent, would you say, explains gold’s performance since the end of 2015, which has been nothing short of explosive? In the past, gold has tumbled with major market indices, but this time, it’s acting completely opposite to major stocks. Does that suggest it may be regaining its appeal as a safe haven status for larger institutions?

Jim Rogers:    Well, James, it certainly has this year; I mean, get out your charts. You’ll see in the last six weeks, gold has gone straight up. I cannot think of much else that has gone straight up, maybe silver, but not very much has gone straight up in the last six weeks. Is it the beginning of the resumption of the long term bull market in gold? I have no idea; I have not bought any on this move. I haven’t sold any, I’m just watching. I’m skeptical that it’s the beginning of the big move, but who knows?

Jim Rogers is a smart investor who co-founded the Quantum Fund with George Soros in 1973. By 1983 the fund gained more than 4000 percent.