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Jim Rogers To Realistbear: The Bond Market Is A Bubble!

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http://www.cnbc.com/id/38031568

Jim Rogers Sees Bond Market Bubble Developing

Published: Thursday, 1 Jul 2010 | 4:44 AM ET

By: Antonia Oprita

Bond markets are a bubble waiting to burst because the world economy is facing even worse problems after central banks flooded markets with cash to try to get out of the crisis, famous investor Jim Rogers told CNBC Thursday.

On Wednesday, banks borrowed less money than markets expected from the European Central Bank, in what investors saw as a reassuring sign that Europe's banking system is not as weak as previously feared.

"I don't quite see that myself," Rogers said, adding that the problems are worse now than at the beginning of the crisis. "Markets are looking ahead to more difficulties."

And he said he does not see why investors look at bonds as safe havens.

"I'm watching the bond market, I have no longs and no shorts," Rogers said. "It is a bubble which is developing; it's one of the few bubbles in the world which is developing."

"I think it's going to be a disaster and I plan to be selling them short sometime in the foreseeable future," he added.

Some economists have been calling for more stimulus money to be poured into the economy, but Rogers said this would be bad as it would help only certain categories and will have to be paid for by others.

"The people who receive the money think things are better, and they are better for them, but the rest of us have to pay the price," he warned.

'We Have Inflation Now'

In the US, officials and pundits recently said the bailout of Fannie Mae and Freddie Mac may end up costing taxpayers $1 trillion.

Prices are creeping up all over the world but some governments "lie" about inflation, according to Rogers.

"We have inflation now. Everybody who shops knows there is inflation… prices are going up," he said.

The US and the UK are among governments who "lie" about inflation, while Australia, China and Norway – countries that tightened monetary policy – are facing up to it, he added.

"My investment outlook is I am long commodities and short stocks. I don't own stocks in any place at all," Rogers said.

Geographically, he said he prefers assets in the countries that have the cash, rather than in the ones that have the debt.

"The creditor nations are all in Asia now … I'd rather be invested with the creditors than the debtors," Rogers said.

Food Prices Rising

Printing money has been good for hard assets and food prices "are going through the roof," he added.

"You should all become farmers. Agriculture's been a disaster for 30 years. We have a shortage of farmers now," Rogers said.

He said he is long the US dollar, despite the fact that there are huge negative feelings in the markets about the greenback and currencies are "suspect" everywhere.

"We now know that Greece is bankrupt. We know now that many companies and states in the US have been lying about their finances," Rogers said.

"Governments have poured huge amounts of money in the system… that money has to come from somewhere. This is not over yet. The debts have gone higher," he added.

The recent data on China showed signs of economic cooling as the central bank tightened policy.

"The Chinese government realizes they have problems in real estate and they're trying to solve these problems," he said.

But even though China's economy is in better shape than the euro zone and the US economies, the country can not pull the world out of recession, he added.

It's deflation Jim, but not as we know it.

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http://www.cnbc.com/id/38031568

Jim Rogers Sees Bond Market Bubble Developing

Published: Thursday, 1 Jul 2010 | 4:44 AM ET

By: Antonia Oprita

It's deflation Jim, but not as we know it.

Rogers-another self serving hack. Anybody with half a brain can work out this stuff. Who exactly is this aimed for when he spouts this drivel? Not the man on the street who doesn't know the "bond market" from the hole in this riggot.

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"But even though China's economy is in better shape than the euro zone and the US economies, the country can not pull the world out of recession, he added."

maybe not china alone but china, her satellites and the remaining asian economies besides japan certainly can do, if they appreciate their currencies abandon mercantilist policies and focus on domestic demand.

If they do that they can certainly be the demand of the world.

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What is it about humans - they always have the premise that there is greener grass over yonder?

hunter gatherer.

not gatherer hunter.

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"We have inflation now. Everybody who shops knows there is inflation… prices are going up," he said.

Prices rise when demand rises.

The big question is whether the global economy can support more bubbles that result because prices rise. I think not. Bill "Big William" Gross was calling deflation last year and his bond fund has kept on returning huge profits relative to stocks.

Can prices gain traction when jobs are being lost in large numbers?

http://finance.yahoo.com/news/New-jobless-claims-rise-in-apf-2896779054.html?x=0&sec=topStories&pos=1&asset=&ccode=

New jobless claims rise in sign of weak job market
Christopher S. Rugaber, AP Economics Writer, On Thursday July 1, 2010, 8:50 am
WASHINGTON (AP) -- Initial claims for unemployment benefits rose for the second time in three weeks last week, signaling that layoffs are rising.

Are the view of Alfonso Posen to be weighed in relation to his view that deflation now looms due to job losses, falling deman and export losses:

Bank of England interest-rate setter Adam Posen yesterday said that the economy could be at a tipping point.
Mr Posen commented in a speech that he had "laid awake for a number of nights" worrying about the state of the economy.
He said: "The UK economy is potentially switching between two states a recovery, which we are now in, albeit perhaps an initially weak one ... and the renewal of a
severe recession if not outright deflation.
"

And where does Bill Gross stand? A sure-fore deflationist throughout most of 2009 (his total Bond Fund did extremely well in 2009 and is already headed for double digit gains this year with almost 6% YTD):

http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/Bill+Gross+June+2010+Investment+Outlook.htm

Fiscal tightening, while conservative in intent, leads to lower and lower growth in the short run. Tougher sovereign budgets produce government worker layoffs, pay cuts, reduced pension benefits and a drag on consumption and the ability of the private sector to accept an attempted hand-off from fiscal authorities. Recession becomes the fait accompli, and the deficit/GDP ratio moves ever higher because of skyrocketing risk premiums and a plunging GDP denominator. In many cases therefore, it may not be possible for a country to escape a debt crisis by reducing deficits!
So the developing predicament is becoming more obvious to Shakespeare’s “lenders and borrowers be.” Fiscal tightening and budget conservatism may have come too late for Greece and its global lookalikes. Continued deficit spending may be an exorbitant privilege extended to only a few. Caught in the middle are many developed countries that likely face New Normal growth rates and a continued bumpy journey toward that destination.
Investors must respect this rather tortuous journey in the months and years ahead for what it is: A deleveraging process based upon too much debt and too little growth to service it. No longer will “two get you three” in the investment world. Not 1,000%, but 4-6% annualized returns for a diversified portfolio of stocks and bonds is the likely outcome. And be careful – sometimes “three gets you two.”
William H. Gross
Managing Director

What? No inflation Bill?

Bottom line for me is the minimal impact all of the world's QE is having on rates of inflation. Trillions pumped in and yet rates have remained the same more or less--usually less as the US has been experiencing for many months now.

Edited by Realistbear

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View PostRealistbear, on 04 June 2010 - 06:03 PM, said:

The reality is that everyone is "debasing" their currencies.

"Japan does not have deflation"

The reality is that everyone is debasing their currencies. Co-ordinated or short term cyclical debasing never works which is the point you miss every time you quote the fact that everyone is trying to debase their currency as a cheap way out of their obligations.

The problem is that many Western nations are trying to do the same thing leaving the relative values the same. And this is why the in tandem attempt to deflate their value will not give rise to increasing prices.

For example, the US had been trying to devalue the $ up to 2009 when the Euro became so overvalued that the imbalances broke out sending the Euro down against the $. Now that the Euro is being "devalued" relative to the $ and the Pound it is causing problems in those countries who export to the EZ.

As someone once said:

"There are some who suggest that deflation is nothing more than a theory and that it cannot happen in the real world as nations will always resort to inflation to solve their debt problems. My own view is, and always has been, that the economy runs in cycles. You do not get a continuous stream of inflation neither do you get a continuous stream of deflation. Its cyclical with periods of growth and retrenchment. Currencies are in a state of constant flux and we have seen recently (2009) that attempts by a number of nations to debase their currency has not worked because everyone is doing the same thing causing the currencies markets to remain more or less static over the medium to long term."

The reality is that everyone is "debasing" their currencies to no avail.

Deflation can exist and it happens when there is a period of sustained price falls.

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Rogers-another self serving hack. Anybody with half a brain can work out this stuff. Who exactly is this aimed for when he spouts this drivel? Not the man on the street who doesn't know the "bond market" from the hole in this riggot.

Give over! It's not drivel. If you only needed 'half a brain' to work out 'this stuff' then a great many of the worlds most respected economists must indeed be brainless, since the advice given to govts over the years has lead to a magnificent sovereign debt/banking crisis. The fact is the world is now awash with govt issued bonds and most people understand that it is so much we are drowning in them. The market is indeed a bubble and it can and will probably burst as Jim Rogers suggests, but no one else has been saying it in that way. He is very often right and not often wrong about much. It will affect us all as this crisis develops further into the 2nd leg.

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Give over! It's not drivel. If you only needed 'half a brain' to work out 'this stuff' then a great many of the worlds most respected economists must indeed be brainless, since the advice given to govts over the years has lead to a magnificent sovereign debt/banking crisis. The fact is the world is now awash with govt issued bonds and most people understand that it is so much we are drowning in them. The market is indeed a bubble and it can and will probably burst as Jim Rogers suggests, but no one else has been saying it in that way. He is very often right and not often wrong about much. It will affect us all as this crisis develops further into the 2nd leg.

Warren Buffett said a couple of years ago that he expected to see ALL of the bubbles burst including the commodity bubble. He basically said that everything that had risen by large amounts during the bubble forming years (prob. 2001-2008) would see a bust.

What asset class does best when everything that has gone up in value crashes? If all the bubble assets burst the safest place to be is cash and bonds issued by the nation that is regarded by the rest of the world as a relative (key concept "relative) safe haven.

Jim has made some horrible calls over the last few years including the demise of the US $ in 2008 and constant inflation warnings when the world is deflating rapidly.

If China's bubble pops demand for commodities will collapse in the way Buffet envisaged. When global demand suddenly drops down a gear or two the prospects for inflation will be poor. The market will be more awash with sell orders that buy orders--except that is for those scrambling to get back in cash and safe haven bonds.

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"Japan does not have deflation"

I know.

The reality is that everyone is debasing their currencies. Co-ordinated or short term cyclical debasing never works which is the point you miss every time you quote the fact that everyone is trying to debase their currency as a cheap way out of their obligations.

The problem is that many Western nations are trying to do the same thing leaving the relative values the same. And this is why the in tandem attempt to deflate their value will not give rise to increasing prices.

What you are saying is that if we have two makers of similar goods and they both decide to increase the amount of those goods exponentially at the same time at the same rate, then relative to each other they will not change in value.

True enough.

However, the value of something is determined by how much it is compared to material reality, so all you are outlining is a worldwide inflationary apocolypse.

For example, the US had been trying to devalue the $ up to 2009 when the Euro became so overvalued that the imbalances broke out sending the Euro down against the $. Now that the Euro is being "devalued" relative to the $ and the Pound it is causing problems in those countries who export to the EZ.

As someone once said:

"There are some who suggest that deflation is nothing more than a theory and that it cannot happen in the real world as nations will always resort to inflation to solve their debt problems. My own view is, and always has been, that the economy runs in cycles. You do not get a continuous stream of inflation neither do you get a continuous stream of deflation. Its cyclical with periods of growth and retrenchment. Currencies are in a state of constant flux and we have seen recently (2009) that attempts by a number of nations to debase their currency has not worked because everyone is doing the same thing causing the currencies markets to remain more or less static over the medium to long term."

The reality is that everyone is "debasing" their currencies to no avail.

Deflation can exist and it happens when there is a period of sustained price falls.

Deflation never has happened under a fiat money, it's not happening now.

Values are relative to each other in the context of material reality.

if you really think that oh, say the euro could start printing trillion euro notes and the dollar do the same but nothing would change in the economy as long as relative to each other they remained roughly the same you are smoking crack. Please put the pipe down. Your logic is bad, your arguments poor and there is no evidence for anything you say.

If we had two bakers one making white bread, one making brown who decided to make exponentially more loaves every day but at the same rate, do you eally think that those loaves would retain their value?

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I know.

What you are saying is that if we have two makers of similar goods and they both decide to increase the amount of those goods exponentially at the same time at the same rate, then relative to each other they will not change in value.

True enough.

However, the value of something is determined by how much it is compared to material reality, so all you are outlining is a worldwide inflationary apocolypse.

Deflation never has happened under a fiat money, it's not happening now.

Values are relative to each other in the context of material reality.

if you really think that oh, say the euro could start printing trillion euro notes and the dollar do the same but nothing would change in the economy as long as relative to each other they remained roughly the same you are smoking crack. Please put the pipe down. Your logic is bad, your arguments poor and there is no evidence for anything you say.

If we had two bakers one making white bread, one making brown who decided to make exponentially more loaves every day but at the same rate, do you eally think that those loaves would retain their value?

1. We have only ever had fiat money--or at least since the Babylonian Empire.

2. If everyone attempts to deflate the value of their currency in tandem stasis is maintained. You can only have movement, either inflation or deflation, as measured against something else.

3. Deflation is real in Japan--everyone is saying so. Even the Japanese.

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Warren Buffett said a couple of years ago that he expected to see ALL of the bubbles burst including the commodity bubble. He basically said that everything that had risen by large amounts during the financial bubble forming years ( 19802001 - 2008) would see a bust.

What asset class does best when everything that has gone up in value crashes? If all the bubble assets burst the safest place to be is cash and bonds issued by the nation that is regarded by the rest of the world as a relative (key concept "relative) safe haven.

Jim has made some horrible calls over the last few years including the demise of the US $ in 2008 and constant inflation warnings when the world is deflating rapidly.

If China's bubble pops demand for commodities will collapse in the way Buffet envisaged. When global demand suddenly drops down a gear or two the prospects for inflation will be poor. The market will be more awash with sell orders that buy orders--except that is for those scrambling to get back in cash and safe haven bonds.

Fixed

Edited by Tamara De Lempicka

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http://www.cnbc.com/id/38031568

Jim Rogers Sees Bond Market Bubble Developing

Published: Thursday, 1 Jul 2010 | 4:44 AM ET

By: Antonia Oprita

It's deflation Jim, but not as we know it.

hmm....it's not just the US and UK is it?

the CPI measure(or calculation thereof) is broadly similar throughout both the states AND the eurozone.

he's basically saying that the way the CPI book is cooked is fraudulent.....and I'd agree...

...but it's rather unfair to wag the finger of blame at one particular country.

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1. We have only ever had fiat money--or at least since the Babylonian Empire.

Not so. There have been numerous examples of market based money.

Even if it were so, it wouldn't change the point that no fiat money anywhere has ever deflated and this one isn't either.

2. If everyone attempts to deflate the value of their currency in tandem stasis is maintained. You can only have movement, either inflation or deflation, as measured against something else.

And that something else is material reality.

3. Deflation is real in Japan--everyone is saying so. Even the Japanese.

Only it isn't - as you already know.

Carry trade and hyperinflationary amounts of yen flooding the world @ 0.25% interest. Embrace it.

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Warren Buffett said a couple of years ago that he expected to see ALL of the bubbles burst including the commodity bubble. He basically said that everything that had risen by large amounts during the bubble forming years (prob. 2001-2008) would see a bust.

What asset class does best when everything that has gone up in value crashes? If all the bubble assets burst the safest place to be is cash and bonds issued by the nation that is regarded by the rest of the world as a relative (key concept "relative) safe haven.

Bought and paid for

and wrong re paper money - sorry replace wrong with liar - as he knew the answer from an early age given his Father

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Construction steel going up 30%

Construction timber going up 20%

Deflation my ****. We haven't fully seen the effect of currency depreciation nor the effect of reduced volume at higher prices caused by keeping the bubble going and everything nice and unaffordable - prices need to go higher to make up for the absurd fixed costs.

Gong to be brutal, DrBubb wil be back shortly with his homebuilder charts, they really up shit street now - overpriced houses on overpriced land and going to be smacked in the face witht he blockback from the inflation that they love so much.

Edited by OnlyMe

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On Wednesday, banks borrowed less money than markets expected from the European Central Bank, in what investors saw as a reassuring sign that Europe's banking system is not as weak as previously feared.

Not consistent with Realistbear's Euorpean armagedon scenario.

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Jim Rogers has bet the farm and his family (apparantly his little kid is learning Mandarin) on all this guff about a commodity/China supercycle. I'm one of the few people who thinks that China is a great bubble that has actually been deflating for some months now and will unleash deflationary forces upon the entire world - Japan+++.

Bill Gross has consistanly called it right, as has RB. Reduced Western demand = lower prices. SIMPLES :P

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Give over! It's not drivel. If you only needed 'half a brain' to work out 'this stuff' then a great many of the worlds most respected economists must indeed be brainless, since the advice given to govts over the years has lead to a magnificent sovereign debt/banking crisis. The fact is the world is now awash with govt issued bonds and most people understand that it is so much we are drowning in them. The market is indeed a bubble and it can and will probably burst as Jim Rogers suggests, but no one else has been saying it in that way. He is very often right and not often wrong about much. It will affect us all as this crisis develops further into the 2nd leg.

You are saying they are not? So you think our old friend Krugman is not a hack, or Danny Blanchflower over in Dartmouth? I will give you Roubini-that's it mate.

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Jim Rogers has bet the farm and his family (apparantly his little kid is learning Mandarin) on all this guff about a commodity/China supercycle. I'm one of the few people who thinks that China is a great bubble that has actually been deflating for some months now and will unleash deflationary forces upon the entire world - Japan+++.

Bill Gross has consistanly called it right, as has RB. Reduced Western demand = lower prices. SIMPLES :P

I agree on Bill Gross but he basically runs the Fed if you think about it. I honestly think he sets Treasury yields himself sometimes. nobody can tell me he isn't in bed with Bernanke. As for Buffet I used to have great respect for him until two things happened.

1 I read his book (he was a thief as a young man) and people don't change. Once a thief etc.

2 His buy-in at Goldmans was insider trading that would have meant jail time for anybody else. He was on the inside team (with Obama) when it happened. Just analyise that deal from start to finish. Stank to high heaven.

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I agree on Bill Gross but he basically runs the Fed if you think about it. I honestly think he sets Treasury yields himself sometimes. nobody can tell me he isn't in bed with Bernanke. As for Buffet I used to have great respect for him until two things happened.

1 I read his book (he was a thief as a young man) and people don't change. Once a thief etc.

2 His buy-in at Goldmans was insider trading that would have meant jail time for anybody else. He was on the inside team (with Obama) when it happened. Just analyise that deal from start to finish. Stank to high heaven.

check out his silver dealings also

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Jim Rogers has bet the farm and his family (apparantly his little kid is learning Mandarin) on all this guff about a commodity/China supercycle. I'm one of the few people who thinks that China is a great bubble that has actually been deflating for some months now and will unleash deflationary forces upon the entire world - Japan+++.

Bill Gross has consistanly called it right, as has RB. Reduced Western demand = lower prices. SIMPLES :P

in paper money yeah right

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