““Financial Repression can mean many things but basically in a nutshell it is a lack of free market finance and human activity, where the government thinks it is smarter than we are!” 

Special Guest: Jim Rogers is the author of the bestseller, Investment Biker: Around the World with Jim Rogers. His other books include Adventure Capitalist: The Ultimate Road Trip, A Gift to My Children: A Father’s Lessons for Life and Investing, Hot Commodities: How Anyone Can Invest Profitably in the World’s Best Market, and A Bull in China: Investing Profitably in the World’s Greatest Market. Jim grew up in Demopolis, Alabama, and got started in business at the age of five, selling peanuts. Winning a scholarship to Yale, Rogers was coxswain on the crew. Upon graduation, he attended Balliol College at Oxford. After a stint in the army, he began work on Wall Street. He cofounded the Quantum Fund, a global-investment partnership. During the next ten years, the portfolio gained more than 4,000 percent, while the S&P rose less than 50 percent. Rogers then decided to retire–at age thirty-seven–but he did not remain idle.Continuing to manage his own portfolio, Rogers served as a professor of finance at the Columbia University Graduate School of Business and as moderator of The Dreyfus Roundtable on WCBS and The Profit Motive on FNN. At the same time, he laid the groundwork for his lifelong dream, an around-the-world motorcycle trip: more than 100,000 miles across six continents. He has contributed to Fox News, Worth, CNBC and others.

23 Minutes

Financial Repression

“Financial Repression can mean many things but basically in a nutshell it is a lack of free market finance and human activity, where the government thinks it is smarter than we are!”

“History has shown many times that we are smarter than governments, politicians and the bureaucrats – but they don’t like to give up power. When they make mistakes they blame it on us and try and make us pay for it! When they see a problem arise their first instinct is to try and suppress the public and markets. They try and do things they think will make things better, but of course it doesn’t, and only makes things worse!”

Government Controls & Regulations

“When problems arise they put on exchange controls which is a time honored tradition of politicians and bureaucrats to correct mistakes

they have made. We will have exchange controls in the US again – no question. We already have exchange controls to some extent such as FATCA and other things to make it more and more difficult for Americans to do anything as far as finances are concerned. They will put on trade controls, tariffs quotas – they will come up with all sorts of things.”

Politicians don’t know what they are doing. History proves many times that politicians make things worse instead of better because what they do since they don’t know anything themselves, they ask the bureaucrats how they can save themselves. The bureaucrats rush in and say “this is the way you save yourself”. “It isn’t your fault, it is the markets fault and those evil speculators and the people! They then come up with regulations and controls. They don’t know what they are doing!”

Regarding ZIRP, Operation Twist and three rounds of Quantitative Easing, Jim Rogers predicts:

“We are going to have to pay a horrible price for yet another mistake made by the bureaucrats”

What Should Investors be Thinking About?

1. “The first thing investors should do is only do things they know a lot about! Don’t listen to me or anyone else who you don’t know what they are talking about. Do not so something that you yourself don’t understand perfectly.”
2. “Everyone should know about having assets outside their own country. We all have fire insurance which we hope we will never use. Look upon international diversification as a kind of insurance. … diversify internationally.
3. “If you don’t know about other asset classes then please, for goodness sake, learn about them because there are going to be many strange things happen in the next decade.

“The Certainty of Economic Slowdown”

“History shows in the US we have had economic slowdowns every four to seven years since the beginning of the republic. We are going to have them again no matter what people tell you. If someone tells you we will never have another economic slowdown – please put your money in your pocket and head as far away as you can!”

“It is going to be much, much worse than 2008. There is higher debt everywhere than previously!”

“We have never had history all the central banks printing such vast amounts of money at the same time! There is a hugh ocean of liquidity floating around out there!”

… and much more 

• Coming Exchange, Trade and Quota controls,
• The dangers the coming Cashless Society,
• The $5T Nominal Negative Interest Rate Sovereign Bonds,
• The destruction of the US savings and working class,
• The slowing Chinese Economy,
• Why recessions are healthy. Why the avoidance of recessions leads to serious malfeasance.
• The importance of investing in productive assets.

About Gordon Long

Mr. Long is a former senior group executive with IBM & Motorola, a principle in a high tech public start-up and founder of a private venture capital fund. He is presently involved in private equity placements internationally along with proprietary trading involving the development & application of Chaos Theory and Mandelbrot Generator algorithms.

Today I’m sending you a complimentary report from one of the most original and deep-thinking analysts I’ve come across in years—Mr. Jawad Mian.

Jawad is the editor of Stray Reflections, a unique, actionable—and I would add, brilliant—global macro advisory letter. I’m proud to say Jawad is also the newest member of the Mauldin Economics team.

I’m giving you complimentary access to 2 months of his work because I want you to judge Jawad’s research for yourself and if time allows, send us a note with your impressions.

You can read April’s Stray Reflections in PDF by clicking here. I’ll also send you the May issue later this week. In fairness to Jawad’s paying subscribers, we’ve removed the 50+ position long/short portfolio from this preview.

To celebrate Jawad bringing Stray Reflections to Mauldin Economics, he and I have coauthored a Thoughts from the Frontline. If you haven’t read it yet, you can do so here. I study the global markets through the lens of a long-term trend seeker, while Jawad, a trade maker, must search for actionable ideas for investors. While our roles are different, our viewpoints are complementary. As expected, it was a lively and insightful exchange.

As you’ll see in Stray Reflections, Jawad’s thinking is equally informed by market action, history, philosophy, psychology, and demographics. Most of us have a hard enough time being an expert in one discipline. Jawad is a true polymath.

Please take a few moments to read the attached report from Jawad with my compliments, and be on the lookout for another later this week. Again, you can click here to read the April issue of Stray Reflections.

John Mauldin
Chairman

These two charts by Equity Clock visually underscore what’s likely ahead for Canadian Stock Market Investors:

While the Stock Markets may not be set to rise higher, a long forgotten commodity is. Take a look at Sugar and Jon Vialoux’s comment highlights the gains that normally occur in the coming months in this sold out commodity. Currently trading at 12.36 down from its high of 35.92 in Feb 2011:

“A turning point may be evident for the price of Sugar as it enters its period of seasonal strength.  The price of sugar is attempting to chart a double bottom around $0.12; momentum indicators are showing signs of curling higher from oversold levels.   Sugar seasonally gains between the beginning of June and the beginning of August, gaining over 11% during the period.   Both June and July have seen positive returns for the price of the commodity 75% of the time over the past 20 years.   Upside potential for the price of sugar points to the 200-day moving average, currently around $0.145, or over 18% above Monday’s closing price.” – Jon Vialoux’s charts on sugar below.

Jon’s whole report for June 2nd HERE

More Mergers on the Horizon? –

Strengths

• GDP shrank at a 0.7 percent annualized rate in the first quarter, lower than the previous 0.2 percent growth estimate. With the expansion stalled, the Federal Reserve may be inclined to hold interest rates at record lows longer to ensure sustained growth.

• Shanghai Gold Exchange withdrawal volume continues to be strong, coming in at 45.5 metric tonnes for the week ending May 15. According to Credit Suisse, the gold monetization plan in India may boost imports if banks pay investors interest on bullion deposits. The Austrian central bank announced it has adopted a new storage strategy whereby it will store 50 percent of its total gold reserves in Austria by 2020; they currently only have 17 percent within country. 

• UBS has slapped a buy recommendation on its entire gold coverage list with the exception of Newcrest and Independence Group. Balmoral announced it intersected 216 g/t of gold over 0.76 meters in a new discovery zone at its Fenelon and Jeremie Properties in Quebec. Roxgold announced it has received approval of its Mining Convention for the Yaramoko Gold Project from Burkina Faso’s Council of Ministers. 

Weaknesses

• Gold faced a second weekly drop and investors cut holdings in bullion-backed funds to a four-month low amid speculation that U.S. interest rates will rise this year. 

• Australia, an engine room of the decade-long global commodity boom, is forecasting a staggering 90 percent plunge in spending on projects, according to Mineweb. The fall in spending may portend more mergers in the future.

• The Democratic Republic of Congo’s Mines Minister announced that Ivanhoe would have to seek approval of its sale of copper assets to Zijin Mining. The issue, if not resolved quickly, threatens to cloud what is otherwise a landmark deal as the company pushes forward in developing a trio of major deposits. 

Opportunities

• 2015 has been a busy year for acquisitions as the value of gold deals jumped more than 150 percent in the first quarter compared to a year earlier. Producers are seizing on a wave of mine sales and tumbling asset valuations to expand output or secure growth projects. This week Barrick Gold announced that it signed a strategic partnership with Zijin Mining Group which will take a state in its Porgera Joint Venture gold mine in Papua New Guinea. Under the deal, Zijin will acquire 50 percent for $298 million in cash.  It appears that Zijin received a very favorable price on this transaction as Barrick is hoping to bring in a partner on other South American assets which need a capital injection.  Additionally, Evolution Mining has agreed to pay $550 million for Barrick’s Cowal mine in Australia’s New South Wales which went for considerably more than where we see the relative valuation of this asset.  

• China has announced the establishment of a new international gold fund with over 60 countries as members. The fund, which expects to raise 100 billion yuan, ($16 billion) will develop gold mining projects across the economic region known as the New Silk Road. The project will facilitate the central banks of member states to acquire gold for their reserves more easily.  

• While the conventional wisdom holds that rising real rates would strengthen the dollar, which would in turn pressure gold, Cornerstone Macro believes otherwise. In a recent piece of research, they demonstrate how global growth determines the direction of the U.S. dollar, not the U.S. economy.  Only when the U.S. economy briefly decouples, does the dollar strengthen, but this is rarer now as global trade is 60 percent of world GDP and emerging market currencies have a 69-percent weighting the Trade Weighted U.S. Dollar Index.

Threats

• South Africa gold mining groups face tough pay talks as they gear up for the upcoming crucial wage negotiations in the coming weeks. 

• Peter Major, mining specialist at Cadiz Corporate Solutions, announced that issues like government interference, the power and conflict between unions, and BEE legislation have all contributed to a situation where mine productivity in South Africa has declined significantly and speculated the gold industry could be wiped out by 2020 if the current direction persists.  

• McKinsey & Company published a study showing that worldwide mining operations are as much as 28 percent less productive today than a decade ago. They attribute increases in capital expenditures and operating expenditures as having the greatest impact on productivity trends. Up-sizing projects by increasing the productive capacity of the project to shorten the mine life did not yield the higher IRR’s (Internal Rate of Return) forecasted by the models.

http://www.usfunds.com/

The tech news you need to know to start your week.

1. The creator of The Silk Road has been sentenced to life in prison without parole. Ross Ulbricht’s legal team will appeal the decision.

2. Apple is reportedly in talks with Drake, Pharrell Williams and David Guetta to try and bring them on as DJs for its upcoming streaming service. Drake’s contract is worth $19 million.

3. Slack says it has already turned down between eight and 10 acquisition offers. It’s currently worth $2.8 billion.

4. Investors in Snapchat are taking common stock. That means they’re giving up on privileges like voting rights in order

to invest.

5. A North Korean defector has claimed that the country’s hacker army now has over 6,000 people. Professor Kim Heung-Kwang has warned about the country’s capabilities.

6. Google is partnering with Levi’s to create “smart trousers.” Project Jacquard involves a smart thread that can control smartphones.

7. Apple is partnering with Postmates to offer same-day delivery. It’s only available for some areas in the US for now.

8. Twitter’s director of corporate development and strategy is leaving to join Google Ventures. Jess Verrilli had been at Twitter for six years.

9. SuperTrips, one of the biggest drug dealers on The Silk Road, has been sentenced to 10 years in prison. Cornelis Jan Slomp pleaded guilty to running the operation.

10. It looks like Lego is working on a “Minecraft” competitor called “Lego Worlds.” It was spotted on the back of an instruction manual for a Lego set.