Wednesday, March 12, 2008

Jim Rodgers: Abolish the Fed!!

There was a great interview on CNBC. Jim Rodgers is one of the best advisors out there and called the great bull market commodities run about 10 years ago. I love Jim Rodgers because he is worth a billion dollars and is an independent investor. Why is that important? Because he answers to no one and these are the guys I would rather listen to versus some guest anyalyst on CNBC talking his firms book.

When Jim gets on air he lets it FLY!! Some excerpts:

Rodger's take on The Fed and the 200 billion dollar intervention:

The Federal Reserve announced on Wednesday a rescue package that it would
put around $200 billion into banks and investment houses and allow them to put
up risky home-loan packages as collateral.
Wall Street responded to the news
with the biggest rally of the year, but Rogers reminisced of the 1970s, when the
Fed printed money to avert a recession, boosting inflation and then forcing
interest rates to more than 20 percent to keep a lid on price rises.
"No country in the world has ever succeeded by debasing
its currency," he said. "That's what this man is trying to do. He's trying to
debase the currency as a way to revive America. It has never worked in the long
term or the medium term."

My take:

Did anyone see the dollar today? All time low. The yen/carry trade is now down to $101.20 as we speak and oil hit $110.00. Wiith a recession looming and prices rising oil should be moving DOWN as demand decreases. The problem is with all of the liquidity from the Fed they are killing the dollar and this has become more of a currency trade based on Euro strength when it is priced in US dollar.

Rodger's take: Fannie is in trouble and expect some Investment banks to fail:

"What is Bernanke going to do? Get in his helicopter and fly around the world and collect rents? That's absurd," Rogers said.

A recession may be a good way to clean up the economy, while trying to prevent one may cost more and actually worsen the recession, Rogers said. Also, investment banks should be allowed to fail.
"Listen, investment banks have been going bankrupt since the beginning of time. If people make mistakes -- if you bail out every investment bank that gets in trouble, that's not capitalism, that's socialism for the rich," he said.
The weakest financial institution is Fannie Mae, in Rogers' opinion, "but all of them have problems."

He said he had a short position on all investment banks and is buying agricultural commodities such as cotton, wheat, coffee and sugar and was also buying the Chinese yuan and the Japanese yen.
"Buy agriculture. Agriculture is one of the few places where you're going to make a fortune in the next years," Rogers said.

My take:

How can you doubt this thinking? He has been dead right and talking about this for a couple years now. The Fed has about $800 billion dollars in cash to inject liquidity into the credit markets. So they have taken 25% of their allocated resources and put together this collateral/MBS deal. It took the bond market one day to figure this plan wasn't going to work. The DOW started up 140 points and then rolled over neagative as the dollar keepd free falling. The dollar CRASHED to all time lows forcing commodities higher.

Remember if you listen to Doug Kass, this is a 6 trillion dollar problem that the FED is trying to fix with 800 billion dollars. the Fed WILL NOT destroy itself in order to save the banks. Expect some failures and more pain in the financial sector is the oncoming weeks.

What Ben needs to do is let capitalism do its job of cleaning out the dirty laundry. Let some banks fail and then we can move on. The MORE we fight this problem with liquidity the worse inflation will get and we will need a Paul Volker like Fed to raise rates to 20% from 6% to clean up this mess.

What do you think 10-20% interest rates will do for housing as people try to qualify for loans. A six figure income will qualify for $100,000-$150,000 dollar house. A time bomb like KABOOM. Housing hasn't even gotten half way towards the bottom and this continuing intervention is giving us more pain and prolonging the problem.

We are heading towards a housing disaster worse then 1990 and possibly the worst since The Great Depression. Cash will be king when Fed rates rise to control inflation. The smart people will invest in fixed income and dividend yield stocks or CD's and be able to possibly even pay cash for a house if you have 80-100,000 grand in many markets when this is all said and done.. The data keeps getting worse folks. Be afraid.

Link below:

1 comment:

Anonymous said...

The Federal Reserve Has Created the Risk of a Global Depression!

Please sign, publish or forward our Abolish the Federal Reserve Petition at to all your pro-freedom friends and associates.

The collapsing dollar, exploding oil and food prices, falling housing market, the subprime mortgage and growing credit crisis and stock market weakness are all a result of earlier Federal Reserve actions designed to maximize Wall Street and banking profits at the expense of productive, working people around the world.

Ron Holland, The Swiss Confederation Institute, Wolf Laurel, NC
PS Check out the July Las Vegas FreedomFest Conference