Doug Casey: “Whenever A Government Says, ‘Don’t Worry, Everything’s Going To Be Fine’—That’s The Tip-Off To Worry”
April 15, 2013 | By Tekoa Da Silva
I had the chance once again to speak with one of the great market speculators of our time, Doug Casey, chairman and founder of Casey Research. It was a fascinating conversation as usual, as Doug is a world expert on identifying “politically-caused distortions in markets,” and betting on or against them.
During the interview, Doug indicated that we’ve now left the “eye” of the global financial hurricane, to where, “all the banks in the world are bankrupt,” with coming volatility to bring down many markets by 90% or more.
When asked about the larger implications of the Cyprus banking collapse, Doug commented that, “It seems to me that the inevitable is now becoming imminent. This is a major crack in the dike whats going on in Cyprus…The [Russian Oligarchs] were notified by their Cypriot bankers to transfer [their money] out to various other branches [in advance]…[because] the bankers knew that if an oligarch doesn’t get his money back, very, very bad things are going to happen to the banker. As usual, it’s the little guy that got screwed, and the rich Russians worked out just fine. It’s going to be like that in a lot of other countries around the world.”
With respect to ‘warning signs’ governments may demonstrate indicating imminent financial collapse, Doug explained that, “One thing that’s a sure giveaway is whenever a government says, ‘Don’t worry, everything’s going to be fine’—that’s a tip-off to worry. Whenever they say, ‘No devaluations [are] planned, no devaluation is going to happen,’ that’s a guarantee that it’s going to happen very, very soon. So those are certainly two things [to look for].”
With regard to the frightening volatility such chaos’ will create, Doug indicated that, “I’m of the opinion that all these governments are going to end up destroying their currencies, [and] along the way, you can have massive deflation as well. Take Cyprus for instance, their stock market index back in 2007…went to 3300…[now] it’s [at] about 100. That’s a phenomenal collapse…We’re going to see lot’s of things like that in the future—extreme volatility, where values go from some things being cheap, to being shockingly and unbelievably high like Bitcoin, [then back] to [being] shockingly and unbelievably low…”
“Even in the U.S., people forget that [during the great depression] the Dow Jones fell 93%, [and] at the bottom, when interest rates were very low, it had a 13% dividend yield…after dividends had been cut substantially. So anything can happen in today’s world.”
When asked his thoughts on gold Doug said, “It’s the only financial asset that’s not somebody else’s liability, [and] in today’s world, burdened by gigantic and unsustainable amounts of debt on all levels…counter-party risk is critical. There’s no counter-party when you own gold, so I’m a bull.“
Commenting on recent price weakness, Doug said that, “What’s going on [could be] the same thing that happened in 2008, where gold went down in the middle of a crisis. But why did it go down? Because people’s obligations are in dollars and gold is [very] liquid…Weakness in gold is an opportunity to buy it, [although] I hate saying that with gold in the [$1400]-$1500 area, because it’s not at giveaway [prices] anymore…[but] I don’t think the bull market is over…“
Further commenting, Doug said that, “A lot of people talk about gold, but they don’t actually own any…I own quite a bit, and I’m buying more. So I’m putting my money where my mouth is.”
As a final shocking comment to finish up the interview, Doug said that, “All the banks in the world are [now] bankrupt…[and] I think we’re really [into the other side of the hurricane]…2013 is going to be a very tumultuous year and 2014 is going to be [even] worse…and that’s if we don’t have one or more wars that start—serious wars.”
This was another powerful interview with one of the great market speculators our time. It is required listening for serious investors and market students.
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Tekoa Da Silva
Bull Market Thinking