Now, one thing I want to make clear is this
is not a story that ends well. This is a story that ends very, very badly. The strength of the dollar is going to cause
such chaos in the global monetary system that the safe haven that gold has always provided,
I think, is going to become into higher demand. And there will be a point where they rise
together. This isn’t a Pollyanna view. I’m not saying to go out and buy equities,
because things are good. I’m saying, go out and buy equities, because
things are bad. Things are really bad. It’s just that the road to bad looks much
different than what the typical person thinks. I’m really happy to be able to come onto Real
Vision today, because I haven’t been this excited about markets in a very long time–
not because I think everything is going to be easy, and things are fine, but really,
because I think everything is bad, and it’s going to be very hard. But I think that it’s also going to present
a lot of amazing opportunities for those who can kind of see through the fog of what the
markets are going to do over the next year to two years. Now, I’m sure over the next 30 or 40 minutes,
there’s going to be a few of you out there who agree with what I say. But I know for a fact that there’s going to
be a lot of people who disagree or who maybe agree with part of what I say, but who are
going to disagree with a lot of what I say. And there’s also going to be some people out
there who absolutely disagree with everything I say. And that’s fine. What I’m asking you to do now is, at least
for now, let’s put aside challenging me, and just actually listen to what I say and think
about how I might be right. And if it turns out after you’ve actually
thought about it and more than for a minute or two, and you still want to have a conversation
to discuss it, I’m more than happy to do that. We’ve seen a nice bounce in the dollar after
losing 10% to 12% on the dollar over the last 12 to 18 months. So I think it’s a good time to discuss this. I really think the dollar move higher is really
just getting started. Now, that doesn’t mean that there’s not going
to be starts and stops, and in the short term, it’s probably due for somewhat of a pause
or even a short pullback. But one thing I want to get across to people
is this move is only just getting started. The dollar, in my opinion, is going to go
much, much higher over the next year to two years. And so as I get into what the actual dollar
milkshake theory is, it really comes down to the fact that I think the whole world is
really one trade right now. And it’s the trade on the dollar. Everything wraps around the dollar. I’m going to talk about gold after a while,
but I think even gold– all roads go through the dollar. So even though I’m very bullish gold long-term,
that road also goes through the dollar. And so at the end of the day, why I think
the dollar is so important is because whether you’re talking about a company, whether you’re
talking about a family, or whether you’re talking about a country, everything comes
down to cash flow. Everything investing ultimately comes down
to cash flow. And if you don’t have enough supply of cash,
then you need flow of cash coming through to keep operations going. And I really think that’s where the whole
monetary system is right now. And that’s really the heart of the dollar
milkshake theory. And so I’m going to get into that as we go
further into the conversation. Now, one thing I want to make clear is this
is not a story that ends well. This is a story that ends very, very badly. But I think the road to badly is much different
than a lot of my peers think it is. To get really into the theory, we all know
that the central banks of the world injected $20 trillion of new money into the global
economy over the last 10 years. And I kind of title this as this is the milkshake
that all the different countries created. They pushed down on their syringes, and they
injected this tons of liquidity into the market– euros, yen, pounds, yuan, dollars. And they created this soup or this milkshake
of all this liquidity out there. But now, while the rest of the world is still
pushing down on their syringes, the United States has– we’ve gotten this monetary policy
divergence, where we’re not using a syringe anymore. We’re no longer injecting liquidity. In fact, we’ve swapped out our syringe for
a straw. And so as we lift up on our interest rates,
that sucks that liquidity to the US domestic markets. It sucks that liquidity up into our domestic
markets. And I think it’s going to push asset prices
higher. In other words, we’re going to drink the milkshake
that the rest of the world is still mixing. So the implications of this milkshake theory
are several, and I’m going to try to walk through them step by step. But they really kind of all happen at the
same time, and they all kind of go on at the same time. So while I’m going to try to walk through
this linearly, I don’t want you to think of it as necessarily a progression. One might happen before the other. They might happen at the same time. But it’s really this soup. It’s this milkshake that we’re dealing with. So there’s three main implications of the
theory, and the first part of the theory is that
the US dollar is going to strengthen. And when I say the US dollar is going to
strengthen, I don’t mean that it’s going to strengthen a little bit. I mean it’s going to
strengthen a lot, and I hesitate to use the word “supernova,” but it has the opportunity
to really break out to incredible highs. The second implication is that this dollar
strength is going to lead to all kinds of trouble in the global marketplace, specifically
in the international markets and the emerging markets. And finally, the third implication of this
is it will ultimately react into a currency crisis. And we’re already starting to see the beginnings
of that. The
monetary system is just not designed for a strong dollar. So the implications of a
strong dollar are really profound. It really comes down to the flow that I was
talking about earlier, but it’s the monetary policy divergence as interest rates differentials
eventually pull flow into the dollar. Now, that hasn’t happened for a while. The first part of the year, it didn’t look
like interest rate differentials mattered. But you’re starting to see with a two or three-month
lag that it actually does matter. We’re also in a period where there’s not only
this increasing demand for US dollars due to the
flow into the higher interest rates, but we’re also– it’s compounded by the fact that
we now have a situation where supply is contracting. So you have increased demand with contracting
supply. That’s through
the quantitative tightening that the Fed is currently pursuing. The other thing is that demand for dollars–
there’s a lot of talk about a lack of demand for dollars. There is an incredible amount of demand for
dollars just to pay the interest on dollar-based debt in the world. Now, a lot of people will focus on the
$20 trillion that the United States government owes. And that is a problem. I’m not
going to deny it. But the fact is that there’s another $20 trillion
outside the United States, either through direct dollar loans
or the shadow dollar market, that international entities own. Oh, and those are dollar-based demand that
they need as well. And so if you add up all the dollar-based
debt in the world, and if you just assume that all that debt has the same rate as the
US Treasury, which is 2.3%, which is ridiculous. There’s no way that that’s what all these
different loans are actually made at, but if they did, there’s over a trillion
dollars a year in demand for dollars just to
pay the interest on the dollar-based debt. And that stays the same, whether– even if
people totally move away from the dollar and never borrow another dollar going
forward, there’s still a trillion dollars in demand to service the existing dollar-based
debt. And the reality is it’s probably twice that
high. It’s probably $2 trillion. Now, another reason is that– we’re getting
into a period where the dollar is going to go higher– is that the US debt ceiling is
now gone. And we’re at a place where the
government is providing fiscal stimulus. And this provides increased demand. And
what I mean by that is a year ago, we bumped up against the debt ceiling, and we
could not issue new bonds. And so the checking account that the US government,
that the Treasury has at the Federal Reserve, had
about $500 billion in it. And they drew
that down to less than $100 billion. So they pushed $400 billion out into the system. That created supply of dollars, and
that’s part of the reason why the dollar dropped. That’s completely flipped now. Not
only is the government not pushing that $500 billion or $400 billion out into the
market, but they’re actually entering the dollar market to get funding. They’re selling
bonds in exchange for dollars. So you have a situation where the supply of
dollars is no longer increasing, and now you have the
biggest buyer in the world– the US government– entering the dollar market, buying
dollars, competing with everybody else. That’s a recipe for price to rise. Another part of the cash flow back to the
United States theory is the US repatriation after the new tax bill. A lot of people didn’t think that even if
they passed it, governments– or I mean corporations– wouldn’t
repatriate. But we are seeing a
repatriation. And I think one thing a lot of people forget
is it’s not just US corporates repatriating cash back to the United States. Foreign banks, foreign entities can also
send cash back to United States, and they can get that higher interest rate on doing
it. Now, if you don’t think that’s possible, just
go look at the breakdown of the reserves of the Fed. Over half of the reserves, bank reserves at
the US Fed, are from international banks. So not only are they going to do it, but they’re
already doing it in a big way. Now a fifth reason that the dollar will gain
some of this flow coming from around the world is that as the dollar does get stronger,
it creates chaos everywhere else. And so
the dollar will start to get flow just from a safe haven demand. And we’re actually
starting to see this already. We’ve got problems in Turkey. We’ve got problems in
Italy. China has just recently come out and said
they’re probably going to have to lower their reserve ratio requirements and
provide stimulus at some point over the summer. So we’re already seeing that the strong dollar
is impacting other markets. And I don’t
really have time to get into the whole euro situation, other than to say that the euro
is just– I mean it’s really a disaster. I really don’t know how else to say it. It’s just not a
currency that is going to be able to function long term. They have all the same
problems that we do. Their balance sheet is bigger than ours. They’re still providing
stimulus. They don’t really have a way to draw down
the stimulus. And they’ve also
got the political problems on top of it. So as people real– and they’re overregulated. The number of regulations that have
gone on in the EU in the last two years are dramatic, and we’re already starting to
see the impact that that has on corporations. So I think all of these five combined are
really going to push the flows back to the US dollar. So one of the arguments that I often hear
is that, what if people just leave? What if
they default on the dollars that they owe and just go off to a new agreement that
they’ve created? Fine? Would that cause chaos? It would absolutely cause a lot of
chaos. But is it possible? Yes, it’s absolutely possible. And that’s one of the reasons,
by the way, you should own gold, because you never know what could happen. That said, one thing you have to realize is
if these people default on their dollar loans, and they leave, and they go somewhere
else, in a debt-based monetary system, it’s not just the debt that leaves. It’s not just the obligations that leave. Money
disappears as well, because in a debt-based monetary system, when debt gets
defaulted on, money evaporates. Money disappears. And if money disappears, that
means supply falls. So if you think about this like a musical
chairs example, and we’ve got a number of digital or paper participants swirling around
the limited number of monetary base dollars that actually exist, if some of these
players decide they don’t want to play anymore, and they leave, and they default
on that debt, that’s fine. Demand falls. But
when they leave, money disappears as well. So the chairs disappear as well. And if
the chairs start to disappear at the same rate that the obligations disappear, if you
get supply falling even faster than demand, price still rises. So I don’t buy that
argument that they can just walk away and that there won’t be any chaos and any
implications involved with that. Another thing I would say is even if they
do raise rates, and it does cause a recession, well, then, that means the US is now in recession,
and the rest of the world’s biggest customer now have a cold and cannot buy all
the goods from those other countries that they were selling before. So that has a knock-on effect to EM, and I
actually think it hurts EM and international more than it
hurts the US. So even if that does turn out to
be correct, I don’t think that that’s necessarily dollar negative. Now, the big one that I always hear is that
the Fed is going to have to– again, they’ll have to– they can’t keep raising rates, so
they’ll have to reverse course, and they’ll actually have to implement QE again. And that’s not going to happen either, in
my opinion. And the reason that I don’t think that that’s
going to happen is because the whole point of QE is to provide artificial
flow from somewhere outside the current market. That’s the whole point of buying the bonds
to get that injection. When the Fed
would buy bonds, they would inject currency into the system. So if you can get that injection of currency
into the system from somewhere other than the Fed, then the Fed doesn’t need to provide
it. And this is the heart of the dollar
milkshake theory. The rest of the world is still providing an
incredible amount of stimulus into the market. But we’re the only ones with a straw. Everybody else is
pushing the liquidity out into the market. The Fed has a straw, and they’re sucking up
that liquidity. And as they suck up that liquidity, that is
an injection from outside the domestic market into the market that allows
the flow to keep happening. And that is
no different than QE if we were doing it ourself. Just because they’re operating QE out of Tokyo
or out of Frankfurt doesn’t mean that those dollars or that liquidity– the euros,
the yen, whatever– stays in those domestic markets. In a global marketplace, all those assets
can flow to the US, and I think that’s what’s going to happen. And that is literally the heart of the dollar
milkshake theory. It doesn’t really matter who provides the
QE. What really matters is who captures the
QE. And with our higher rates and relatively better
economy than the rest of the world, we’re going to capture that QE. One of the other arguments that often gets
made is the fact that if the Fed continues to
raise rates, then it’s going to invert the yield curve. Now, I can’t argue with that. If
you look back at history, whenever the yield curve inverts, it almost always does lead
to a recession. But what many forget to put forth when they
put forth this argument is that the length of time from when it inverts
until when it goes into recession is typically 18 to 24 months, and that goes back on several
occasions as well. Not only that, but what happens during that
18 to 24 months is typically a speculative frenzy. And that leads to the blow-off top. And if you think about it– and I can’t prove
this– but if you think about the typical yield curve that a bank would want, they want
a very steep curve. They want short-term interest rates and high
long-term interest rates. They want to lend long, and they want to pay
short, and they make that spread. Well, if that’s great for the banks, that’s
probably not great for the speculators. But if
you reverse it, and you get into an inverted yield curve, that’s not good for the banks,
because they’re having to pay short and lend long, and they’re upside down. But if
it’s bad for the banks, who takes the other side of the banks’ trade? Well, that’s the
speculators. And if the speculators can borrow long and
invest short and make that spread and lever it up, that’s like Disneyland
for them. And that leads to the
speculative mania, and that’s what leads to the crazy excesses, and that’s what leads
to the blow-off tops that nobody think can happen. And that’s why I don’t think that an
inverted yield curve– I don’t think it’s negative for the dollar, and in the short
term, I don’t think it’s negative for the markets. OK, so where does all this lead? What does this dollar milkshake mean to us
in the United States? Well, I think what it means is that we haven’t
seen the blow-off top yet. I still think it’s coming. I think equities are going a lot higher. And again, this isn’t a
Pollyanna view. I’m not saying to go out and buy equities,
because things are good. I’m saying go out and buy equities, because
things are bad. Things are really bad. It’s
just that the road to bad looks much different than what the typical person thinks. And I think that as we get into this inverted
yield curve, as we get into problems around the world, as we have currency crises,
the United States is going to be seen as a safe haven. And all roads go through the dollar. And when that money flows
into the dollar, it eventually goes into US assets. And I think it’s going to push equities
to all-time highs. I also think that it’s going to have a big
impact on bonds. Now, I’m of the opinion that
interest rates are headed higher. I don’t necessarily think that bonds are going
to crash, but I think they are going to break. And I think that that is going to have a big
impact on assets as well. Now, there’s no doubt that there’s going to
be some moments of pure panic and terror along the
way. I’m not sitting here saying that
bonds are going to fall, equities are going to go up, and it’s all going to be smooth. I
don’t think that at all. I think it’s going to be really frightening
at points. But I think rates are headed higher. And when you think back to the fact that there’s
been a 40-year bull market in bonds, that means somebody could have invested their
whole life for 40 years and been a fixed income investor and made money quarter
after quarter, year after year, decade after decade. They have never really lost
money on bonds as long as they were buy and hold. Sure, along the way, maybe
they did some trading of bonds where they lost money, but essentially, nobody has
lost money in bonds in 40 years. Well, now we have interest rates heading higher. We seem to have broke out of the
chart of truth. Will we retest? Sure. Will there be some moments where bonds rally? Sure. But I think interest rates are headed higher,
and when people actually start losing money in bonds, I think that’s going
to be a real wake-up call not just for finance, but from an emotional perspective. If you have made money on something
for 40 years in a row, and then all of a sudden, you wake up, and you’ve lost money,
it’s kind of like the turkey at Thanksgiving. They have 364 great days, but that 365th
day is kind of a nightmare. I think that can happen in bonds. And as funds flow out of bonds, I think a
lot of that’s going to flow into equities. And so all of this– again, I’ve kind of walked
through this linearly, but this is really all going on
at the same time. And as we’ve got a period
where interest rates are headed higher, I think around the world, as bonds start to
break– not crash, but as they break– and funds start to flow out of it, as dollars
flow– as funds flow into the dollar and push asset
prices up, I really think we get into this benign circle. George Soros talked about it in his book,
The Alchemy of Finance. You get into a
place where dollar strength begets more dollar strength, because as the dollar
strengthens, it causes all kinds of problems for yen. And as the yen gets into
problems, people seek out safe haven back into the dollar. Now, gold will, obviously, I think, be a beneficiary
of this. But I don’t think people
around the world are going to sell everything they own and put all their money into
gold. In fact, we don’t need them to put everything
into gold. They can just put a little
bit into gold, and gold does really well. But I think the dollar is going to be the
big beneficiary, and I think, again, as I’ve said
many times, all roads go through the dollar. So of course, as always, I have a lot to say
about gold. I think the first thing I want to
get across is that my thesis on gold has not changed. Everybody should own gold. It
should be part of everybody’s portfolio. And I’ve said for a long time that gold is
going to go to at least $5,000. That hasn’t changed. Gold is going to go to $5,000,
and the reality is it’s probably going to go a lot higher than that. But you know, for
anybody that’s trying to put me– peg me down as far as time and price, I’ll say
$5,000. Now, I don’t know if I’m going to necessarily
tell you exactly when, but I still think gold goes to at least $5,000. The only question is when. But part of the other thing is that– part
of the reason that gold will go that high is
because it will be at least part of the solution when this horrible system that the central
banks have created eventually comes down. This dollar milkshake theory is not one in
which the dollar remains the world reserve currency. I think we’re going to get to a
place where the dollar gets so strong, they’re going to have to come to some new
kind of Plaza Accord or some kind of a system where they dramatically reduce the
dollar. But it’s not going to be that we reduce the
dollar, and people are mad at us. I think
the world’s going to beg us to reduce the value of the dollar, because the strong
dollar, quite honestly, it just breaks the entire monetary system. It breaks international
markets. It breaks the emerging markets. And it actually is, in the long term, not
great for the US market either. But it doesn’t mean it’s going to happen right
now. So I think over the next couple of
years, the dollar goes much, much stronger. I think initially, that breakout is going
to surprise a lot of people. I think it’s going to create a lot of chaos,
and it will ultimately be that chaos that makes gold go a lot higher. I tell people all the time that a lot of
the typical gold theory is that dollar gets inflated away, and gold goes through the
world, goes through the roof. And there is that view. But there is nothing that is more
long-term bullish for gold than a strong dollar. Before we get into that, let’s talk about
a little bit why gold, quote, unquote, hasn’t worked for the last several years. Well, the reality is I think gold has worked
for the last several years. Many of us in the gold world got it wrong
as far as timing when it would work in US dollar terms. But if you’re not a US dollar investor, and
you lived in Cyprus or Russia or Argentina or Venezuela,
gold works just fine. Gold did what it
has always done for 5,000 years. It’s provided a safe haven when things got
bad. And the reality is that things did not get
worse here in the United States over the last five or six years. And as a result, gold has not performed as
it has in those other currency terms. But it doesn’t mean that gold isn’t working. I think a lot of the pain and a lot of the
frustration with those in the gold world that are feeling the frustration from gold not
having done anything are those who bought gold as a speculation, not as insurance,
or it’s those who told themselves they bought it as insurance, but really bought it as a
speculation or a get rich quick scheme. If you bought gold as a hedge against the
rest of your portfolio and the rest of the world
blowing up or all the spinning plates that the central bankers have going crashing, then
gold is still working, because the reality is the plates have not crashed yet. They will. There’s no doubt that they will, but they
haven’t yet. And so gold hasn’t needed to do anything. But gold’s been around for 5,000 years. It’s always been, at least from a market
perspective, a currency and the last currency of resort, and that’s not going to change
over the next 5,000 years either. So if you’re a gold investor, and you have
it in your portfolio, and you didn’t put all your money
in gold, you’re probably just fine. So now there’s also many people in the gold
world who will say that the only reason gold hasn’t worked for the last five years
is manipulation, that the decades long gold manipulation scheme between the central banks,
the governments, and the commercial banks have worked together to keep
the price of gold low. Now, even if
you take that view, the fact is you are still wrong, because if you– this is not a new
theory. This manipulation theory has been out there
for decades. Anybody who’s
spent more than five minutes in the gold world knows about this theory. So if you bought gold five or six years ago,
four years ago, whatever it is, and you were wanting it to pay off much quicker, and
it didn’t, because you think it’s been manipulated over that time period, well, the
only reason you would have bought it four or five years ago is not because it wasn’t
manipulated. You knew it was
manipulated. The only reason you bought it then was because
you thought that the manipulation was going to fail. And the reality is the manipulation hasn’t
failed. If you
subscribe to the view that gold has been manipulated lower, then the manipulation is
still working. And so I think it would help a lot of people
in the gold world if we would just admit that we’ve been wrong for the last five years. I didn’t think that the monetary
authorities could keep the plates spinning for another five or six years. I thought it
would come down much sooner than that. I was wrong. The plates are still spinning,
but it doesn’t mean that gold has failed. It just means we got timing wrong, and I think
the fact that if you say the words, “I was wrong,” it’s very freeing. It actually takes a
lot of pressure off you, and you can actually then move on to the next step and say,
well, why was I wrong? Why did the gold not go up? Why are the plates still
spinning? And I think that will help prepare you for
the next five or six years. So now let’s talk a little bit about the dollar
milkshake theory and how it applies to gold. Well, I think it largely depends on where
you’re sitting and in what currency you’re denominated. You know, if you’re an international person
or entity, and you are not denominated in dollars– I don’t know
if you’re in euros, or you’re yen, or you’re yuan, or bolivar, or whatever you are–
I think you can probably pretty much back up the truck and buy over the next couple
of months. I think the dollar is going
to get a lot, lot stronger. But if the dollar gets a lot, lot stronger,
that means a lot of these other currencies are getting a lot,
lot weaker. That means gold, in those terms,
is probably going to go a lot, lot higher. It would not surprise me at all if these other
currencies of gold rises 15% to 30% over the next 12 to 18 months. I think that could
easily happen. So I think determine where you’re at and which
currency you’re denominated before you just say, gold is going up or down. I think that’s a very important point to make. Now, I think it gets a little bit more complicated
if you’re a dollar investor. I have said
for over two years now that I think eventually, we’re going to get into a situation
where dollars and gold rise together, and I still firmly believe that. The strength of the
dollar is going to cause such chaos in the global monetary system that the safe haven
that gold has always provided, I think, is going to become into higher demand. And
there will be a point where they rise together. Now that said, for those of you that heard
me say gold’s going to $5,000 earlier, I want you to keep those positive feelings that
you had when I said that, because I don’t know that it’s going to happen over
the next five or six months. In fact, I think
there’s a good chance that gold goes lower in the short term. It might not, and if it
goes higher, I will embrace the break-out, and we’ll be on to probably another five or
10-year bull market in gold. But I’m just not sure that it’s going to break
out yet. We had another great opportunity
this spring to break out, and it didn’t happen. And I think with the move that the dollar
is going to make over the next six to 12 months, I think it will be very challenging for
gold to break out initially with that. And so I think if you are a US investor or
a dollarbased investor, I’m not saying that you should sell
your gold. The gold theory is still
very much intact, but I’m just not convinced it’s going to break out right now. So as far as gold and the dollar rising together,
I know that seems kind of contradictory. But at the end of the day, I really don’t
think it is. They’re both
currencies, and they’re both measured against all the other currencies in the world. And so I think in the same way that the yen
and the euro could rise together, dollars and gold could rise together against a number
of different fiat currencies. Again, I
don’t think that– I’m not even sure that the dollar bulls have a proper appreciation
for how much damage that the dollar bull market
is going to cause. Again, the design of
the monetary system was just not built for a strong dollar. And when it gets going and rocking and rolling,
it is going to cause all kinds of damage. And that should be very good for gold. When markets start melting down,
and when chaos starts to happen, and confidence starts to get lost, and you can feel
the panic in the streets, that’s typically great for gold. And so whether or not things
panic and break down in the United States, if they panic in Europe, or if they panic
in Africa, or they panic in Asia, that’s a good
opportunity to provide a chaos trade, so to speak, or a safe haven trade. And I think dollars will benefit from that,
but gold will benefit too. And again, we don’t need everybody to sell
everything they own and go buy gold. The gold market’s very small on a per capita
basis. We just need the rest of the world
to put 1% or 2% of their assets in gold, and gold doubles. So we don’t need a mass
exit out of fiat currency into gold for gold to do very well. The other reason that gold and the dollar
can rise together is that we talked about gold being a small market. Well, if the dollar is rising a lot– and
I mentioned other currencies would be going down a lot– if
those investors do start seeking out gold, if
Europeans start buying gold en masse, or the Asian continent starts buying gold en
masse, that can have dramatic implications for supply of gold. And so again, we
don’t need it to be really big for it to impact. And that’s another reason why, even
though the dollar may be getting a safe haven trade, that gold can get a safe haven
trade as well. And once we get to a place where the dollar
and gold is rising together, I mean then it’s just really rock and roll time. I mean that’s just where the gold really starts
to go up. And then I think in a couple of years from
now, whether it’s 2020 or 2021, after the dollar has caused all this damage, the
global authorities will have to get together, and they will either have to, at that point,
weaken the dollar either through QE or some type of Plaza Accord, or maybe they introduce
a whole new monetary system, whether it’s an SDR or whether it’s a combination
of a basket of assets. I don’t know what it is, but what I know is
that the monetary system, as it’s currently designed, has a dramatic flaw. And that dramatic flaw is about to be thrown
a real curve ball with the dollar getting stronger. And that should be good for the US dollar. It should be good for gold, and it should
be good for those who are prepared. A lot of people say that nobody sees the fact
that the dollar has this problem, that they have all these liabilities, all these
unfunded liabilities, that our trading partners are wanting to move away from the dollar. I just don’t think that’s the case. I think a
lot of people see that this is a problem. I think a lot of people want to leave the
dollar. I think there’s a big mistake in saying that
this is a small problem that a few people have discovered and that they’re going
to profit wildly when the dollar gets thrown by the wayside. I go to meetings all the time. I talk with investors all around the world
all the time. I
can’t remember a meeting in the last couple of years, where it either wasn’t brought
up already or that I didn’t bring it up about the dollar and its status in the world, that
everybody around the table wasn’t familiar with the issue. Never once has anybody
said, well, what are you talking about, “leaving the dollar?” Everybody starts nodding
their head, and everybody starts putting their two cents in. I think a lot of people have talked– or I
think a lot of people have thought about this. I
don’t think this is some small issue. I don’t think anybody’s come up with a real
answer, but I don’t think it’s an issue that nobody knows about and nobody discusses. Now, even though I don’t think gold has got
it wrong over the last five or six years, and while I don’t think gold has stopped working,
per se, I think gold is doing exactly what it has always done. Again, I think, as I alluded to earlier, I
think we’re the ones that got it wrong. Now,
why did we get it wrong? Well, I think part of it is that a lot of
us, me included, thought that quantitative easing was going
to be dramatically inflationary. I didn’t
think that the world could inject $20 trillion into the global economy and not inflate
fixed assets, gold being one of them. But you know what? They did. We got that
wrong. It was inflationary to asset prices. Real estate went higher. Equities went higher. Some
commodities went higher, but some commodities went lower. In my opinion, all the
low rates and the QE ended up being deflationary to some assets, just as much as it
was inflationary to other assets. And I think keeping rates at the zero bound
is overall deflationary. And so the fact that $20 trillion pumped into
the economy was going to create hyperinflation– it didn’t happen. We got that wrong. And I think it’s important– I really do think
it’s important that we admit that we got that wrong, because if you just say, “buy gold,”
all the time, and you never say that it could possibly go down, well, then we’re no
different than those who say buy equities all the time, and never buy gold. I think we’ve got to be very careful that
we don’t fall into the same hypocritical arguments that
the traditional Wall Street does. I have a lot of friends in the gold world. I have a tremendous amount of respect for
them. Most of them are my friends. If you’re in the gold world, and you’re not
my friend, I think it’s probably because we didn’t
spend too much time together. But I do
think that we can do ourself a lot of good by kind of taking a step back and really
trying to understand why gold didn’t do well over the last five years. Just admit that
we got the timing wrong. There’s nothing wrong with that, because just
because we got the last five years wrong, it doesn’t
mean that we’re going to get the next five years wrong. I mean, in fact, I’m pretty sure we’re going
to get the next five years right. But I think
in order– for credibility’s sake or to be able to take a step back and be objective
and try to really understand why gold didn’t break
out in dollar terms over the last five years, I think it’s important to just acknowledge
that we missed something along the way. Now, somewhere else where I think you can
see it is in equities. Now, at the
beginning of the year, I said I thought that equities were going to go higher. I thought
they might very well have a 5% or 10% correction before that happened. I said I
thought it would be nice if we had it. It would be helpful. Well, we got it. So kind of
be careful what you wish for. But if you look at equities, both the S&P
and the NASDAQ are both in a wedge pattern. And I think they’re kind of near the bottom
of that wedge pattern. I’m not
saying it’s going to be a straight line, and it’s going to be easy, but I think we’re going
to move higher to the top of that wedge pattern, and I think we’re going to break out
of that wedge pattern. I think equities are going higher. I think the Fed’s going to
continue to raise rates, and I think this dollar milkshake theory is really going to
get going. So again, I’m really excited about where markets
are headed, not because I think things are going to be easy. I actually think they’re going to be hard. I think they’re
going to be scary. But I think they’re going to be fun, to be
honest. I think they’re
going to present a lot of great opportunities. And I think if you have a plan for how to
get through it, I think the opportunities are actually pretty incredible. I think one thing to remember is never be
closed off to any ideas. I always consider
everybody’s arguments that they send back against me. I’m happy to think about
them. It doesn’t mean that I’m giving up on my own
opinions, but I think one of the most important things to do over the next
couple of years is keep an open mind. I
think we’re going to see things happen that many people just don’t think can happen. And I think that for those who kind of stay
nimble and have a plan, there’s going to be an opportunity to make some good profits
in the years ahead.