Monday, December 26, 2011

US Economy, a Bubble About to Burst?

Jim Rogers, CEO, Rogers Holdings, feels that the US economy is a bubble which would burst at some stage. He added that his view is bearish on emerging markets, including India. Watch the interview here or just watch it below.

I like Jim Rogers, and agree with him, ignore ratings agencies, they are bad for your financial health. But he is totally wrong on the US economy, it remains and will remain the most important economy for many years and only those who believe in the myth of decoupling think otherwise. And US bonds, the most misunderstood asset class, will do just fine. No bubble there either.

I am increasingly optimistic on the US economy which is clawing back from the devastating effects of the housing meltdown and the ensuing 2008 financial crisis due to credit derivatives based on toxic mortgages. Employment gains are meager but they will pick up in 2012 as confidence creeps back into the economy.

Will there be other bubbles? You bet there will. In a world where banksters get money for nothing and risk for free, there will be a series of bubbles but you will never know about it until it is well underway. The only thing I can guarantee you is that these markets, like all markets, are driven by greed and fear, and that sooner or later one of these collective emotions will win the upper hand.

And what about Jim Rogers' call on agricultural commodities and silver? I don't have an issue with these calls but keep in mind he has vested interests in playing up commodities. Also, commodities are related to bigger emerging markets story, and are vulnerable to the Risk On/ Risk Off trade which dominated markets in 2011.

Bottom line: Listen to Jim Rogers below but keep in mind that Rogers, Soros, Dalio and other well known investors are no match for central banks. When they pump up the jam, stocks will take off in a huge way. The big theme going forward will be to forget euro woes and realize that the stock market rocket has already lifted off. Focus on La Dolce Beta and pay attention to what elite funds are doing, not what some are saying on television or on Zero Hedge!

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