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"The rating agencies have gotten it wrong for 10-15 years," says Jim Rogers regarding Fitch's...

"The rating agencies have gotten it wrong for 10-15 years," says Jim Rogers regarding Fitch's threat of a U.S. downgrade. "America is bankrupt," he argues, but QE3 is coming because "printing money is all the U.S. knows to do."
Comments (30)
  • User 487974
    , contributor
    Comments (1105) | Send Message
     
    Jimmy, this talk of more QE, you should know better! There will be "NO", I repeat "NO" more QE! This balderdash is bad for my nervous system!

     

    Any more QE and the price of oil will skyrocket as the dollar crashes through .72 on the DXY on its way to God only knows! Pick a number, .60? How about we just get on with it and shoot for a .DXY at say .50?

     

    Gold at 3000? Heck why stop there? Lets just shoot for a nice round number, say $5000 an ounce? Come on Rogers, You are smarter than that! Stop talking to Steve Liesman and all those other fools. The dollar will strengthen! The Euro will rip itself apart! Money will flow to its "perceived" point of safety, the greenback! In a few years, then we may face a crashing dollar. Deflation first, then runaway inflation!
    My S&P year end target is 589.85
    Beware the waterfall!
    Jerry
    13 Jun 2011, 06:39 PM Reply Like
  • Stoploss
    , contributor
    Comments (1727) | Send Message
     
    Jerry, if we inflation adjust, that puts gold at 10K. Jus' sayin.
    13 Jun 2011, 08:07 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    Jerry369

     

    How do you see the Euro falling apart but the US prospering?

     

    I think we have similair fates.
    13 Jun 2011, 09:00 PM Reply Like
  • realornot
    , contributor
    Comments (1281) | Send Message
     
    Yes, Jim. Please call up BEN. NO QE... NO NO NO. Enough is enough of money printing. Gasoline is inching back up again. With another round of QEs, this will spell trouble to all of us.
    Saudi will de-peg with dollars. Gas will sky rocket to $8+ as our dollars drop another 20-25%.
    US will face citizen riots like Egypt and cannot have that.
    13 Jun 2011, 06:50 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3316) | Send Message
     
    More QE (or not) will be determined by what is best for Bank's balance sheets, nothing less.

     

    Bet on it!
    13 Jun 2011, 07:04 PM Reply Like
  • Neil459
    , contributor
    Comments (2644) | Send Message
     
    "More QE (or not) will be determined by what is best for Bank's balance sheets, nothing less."

     

    Nope, it will be determined by whats best for the 2012 elections, now that could be bank balance sheets, but could also be something else.
    13 Jun 2011, 07:29 PM Reply Like
  • The Geoffster
    , contributor
    Comments (4011) | Send Message
     
    The dollar might be bankrupt but America isn't. Big difference.
    13 Jun 2011, 08:01 PM Reply Like
  • Stoploss
    , contributor
    Comments (1727) | Send Message
     
    Wha? That's it? Aren't the two tied together somehow?
    13 Jun 2011, 08:09 PM Reply Like
  • The Geoffster
    , contributor
    Comments (4011) | Send Message
     
    Check the balance sheet. See assets anywhere?
    14 Jun 2011, 09:08 AM Reply Like
  • Stoploss
    , contributor
    Comments (1727) | Send Message
     
    NO.
    14 Jun 2011, 09:39 AM Reply Like
  • joe kelly
    , contributor
    Comments (1736) | Send Message
     
    We are being manipulated people. The insiders are ratcheting up the government is bankrupt message. None of them turned down tarp or stimulus money though.

     

    We're being played.
    13 Jun 2011, 08:07 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    Jim Rogers is not part of "them" so not sure what you are thinking.
    13 Jun 2011, 09:01 PM Reply Like
  • IBUYETFS
    , contributor
    Comments (13) | Send Message
     
    If we have QE3 i am going to grad school in New Zealand.
    13 Jun 2011, 08:19 PM Reply Like
  • Marlin Keith DeBramaletta
    , contributor
    Comments (262) | Send Message
     
    This is the first source I've seen in which the downgrade will be halted if the debt ceiling is raised. I wonder the validity of that statement the most because I thought the contentions within the budget deficit was the reason for the possible downgrade. The fact that we have to borrow our own money to pay obligations is the reason why we are at risk for default and to have our credit downgraded.
    13 Jun 2011, 08:25 PM Reply Like
  • bearfund
    , contributor
    Comments (1534) | Send Message
     
    Most of the ratings agencies believe not raising the debt ceiling = downgrade, because it greatly increases the short-term risk of some kind of default. As usual, they are way behind the curve; not raising the debt ceiling may well lead to a default, but raising it without bound will inevitably lead to total collapse. Let's put it this way: under which circumstances would you rather buy a US Treasury bond due in 2041, one in which you can get it at a yield of 7% and may miss a coupon or two because the ceiling isn't raised, or one in which you get it at 4% and will probably miss the last 15 years of coupons as well as the principal due at maturity because the US is unable to pay you? (Note to literalists: feel free to substitute "dollar is worth 2% of what it is today" for the second scenario if you feel that makes a difference.)

     

    The US Treasury should be rated B or thereabouts. If the ceiling is raised, I would lower that to CCC/Negative. If not, I would raise my issuer rating to BB and lower my short-term rating on anything with a coupon due within 6 months to C with a note. Buy long-dated zeros on a ceiling-induced panic if Congress sticks to its guns. Fade the relief rally if Congress caves. This is the most obvious trade of the year.
    14 Jun 2011, 12:02 AM Reply Like
  • Marlin Keith DeBramaletta
    , contributor
    Comments (262) | Send Message
     
    Good example for understanding.
    14 Jun 2011, 08:29 AM Reply Like
  • Tack
    , contributor
    Comments (13035) | Send Message
     
    bearfund:

     

    You are mixing market risk and default risk and have it backwards, as far as ratings go.

     

    Regardless of what Treasury intrument you select, at any yield of your choosing, you're exposed to two risks: 1) that the market for bonds may move up or down, depending on interest rates, and 2) the ability of the issuer to pay. Ratings are only concerned with the latter, without any regard as to whether the bonds intervening amrket value may rise or fall and without regard to what the inflation-adjusted return may be.

     

    If the debt ceiling were not to be raised, the risk of a literal default would be increased because the Government issues new debt to pay obligations and roll over old debt. If that ability were curtailed, then, there would be a measurable increase in the likelihood that they could not produce the currency to either pay your interest and/or redeem your bond.

     

    On the other hand, if the ceiling is raised (in perpetuity, if you wish), there is all kinds of market risk, regarding the effects of inflation on interest rates and the market values of previously issued bonds, but there's little risk that the government will not be able to print the money required to make the nominal payments on your interest and bond redemption.

     

    It's an entirely different matter to argue that those dollar may be worth far less, but that's outside the purview of the bond rating.
    14 Jun 2011, 08:51 AM Reply Like
  • Marlin Keith DeBramaletta
    , contributor
    Comments (262) | Send Message
     
    Bernacke argued today that it is more beneficial considering the state of the economy being fragile to raise the debt ceiling to meet the obligations, and then address the long term liabilities via budgetary means. I saw the opposing statements by several Senators on Bloomberg, but the reality and my understanding is to not even default at all or look like we do. The way that can occur is if the debt ceiling is raised, and then the budget deficiencies addressed. The long term liabilities are not an immediate problem, but is mandatory or required to be addressed.
    15 Jun 2011, 12:05 AM Reply Like
  • bearfund
    , contributor
    Comments (1534) | Send Message
     
    I understand what you're saying, but I'm not convinced that raising the debt ceiling doesn't increase default risk. If I have a credit card with a $50k limit and a $49k balance, does it increase or decrease your confidence in my ability to repay my debts if my bank increases the limit to $75k? Sure, I can't print my own money (legally), but there's no guarantee that the Treasury will be able to do so, either. Things will get weird, politically, as that situation approaches. What we're seeing right now is just the first installment.

     

    I'm actually not talking at all about market risk; I consider the greatest risks in Treasuries to be on paper at the back of the curve held to maturity (i.e., never sold into the market). We can speculate on exactly how the loss will occur, but that any real money owner of that paper is going to lose and lose big has to be the safest bet this side of the sun rising tomorrow.
    15 Jun 2011, 12:30 AM Reply Like
  • Marlin Keith DeBramaletta
    , contributor
    Comments (262) | Send Message
     
    I agree with your example. I still think Bernacke was thinking overall in the short term betterment of appearing to not default on our debt at all, and worry about the consequences later considering the economy's fragilility. I agree. It will affect our creditworthiness, but we won't default at the immediate current time which is what Bernacke was stating. I think you're right the problem can not be tossed aside. The budget deficit has to be addressed.
    15 Jun 2011, 12:34 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    Anyone in a position of responsibility is going to say raise the debt ceiling and then address debt. Even if they don't believe it themselves they have to appear like they are playing ball.

     

    However when is the last time congress addressed spending? Beats me as spending has went up for 40 straight years. So people who don't have confidence in WDC to do the right thing are saying don't raise the debt ceiling without cuts attached that are in the Trillions or don't raise it all. Businesses do this all the time which is to pick a target number and just cut.

     

    Bearfund is right in that raising or not raising the debt limit may yield similair results.
    .
    15 Jun 2011, 10:08 AM Reply Like
  • Tack
    , contributor
    Comments (13035) | Send Message
     
    If people would just get up in the morning and ignore clowns in bow ties and idiots making ratings noisy pronouncements, maybe, we'd actually get some productive work done and move foreward. Sitting with bated breath, waiting for others to advise how life is going, or will go, is nothing short of pathetic.

     

    13 Jun 2011, 08:25 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    Tack:

     

    Jim Rogers has been on this issue for a number of years and you probably know his track record at the Quantum Fund. Either way he is not one I ignore lightly.
    13 Jun 2011, 09:03 PM Reply Like
  • pier0188
    , contributor
    Comments (147) | Send Message
     
    What's his record at the Quantum Fund? We don't really know, do we? Was it Soros? Was it others? Nobody knows how much is directly attributable to Rogers himself and Soros has come out alluding to the fact that it wasn't Rogers all that much.

     

    What's Soros worth vs Rogers? The difference is quite staggering.
    13 Jun 2011, 09:58 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    pier

     

    Soros gave a lot of credit for success back before he started his public personna. So Rogers is worth 100's of millions and that is not enough?

     

    When comparing two investors you also need to know how their results look when adjusted for risk. Never mind Rogers took off to China on a motorcycle for a number of years screwing around.
    14 Jun 2011, 04:56 PM Reply Like
  • Marlin Keith DeBramaletta
    , contributor
    Comments (262) | Send Message
     
    Those bowties are traditional and commonplace. As a person with not enough sense as the smart people in bow ties, I find it impossible to ignore the important person in bowties. Their job is to be the smart people in bowties that talk while everyone else is being productive.
    13 Jun 2011, 08:47 PM Reply Like
  • Michael Shulman
    , contributor
    Comments (161) | Send Message
     
    There is an unfortunate reliance on textbook economics in most people's opinions and those textbooks are based on theories truly brilliant for their time and now out of date. Milton Friedman developed the construct of modern monetary theory people quote -- but do not read - in an era of the gold standard and fixed exchange rates. Given the nature of democracy and politicians in the US, the UK, the eurozone and Japan all four central banks supporting these currencies will reflate. What existing monetary theory does not account for is reflation among major currencies in parallel without the anchor of the gold standard. Logically, all four currencies can be printed to monetize debt without degrading their status against other currencies. And the thought that the yuan and/or a basket of currencies can somehow replace the dollar is amusing, ot use a polite term. So reflation and the printing of currency will probably be used in tandem over a generation without hurting the trading relationships of the four major currency zones. This will push up currencies of commodity driven economies and those now rigged to support exports such as the yuan. And if anyone looks back at the rise of the American greenback after the CIvil War, when it went into circulation backed by gold from California. there are interesting similarities. Bottom line: Rogers is a very bright, very creative guy who was right about commodities having a bull run. He also has been living off of that call for years, abandoned his country to move to Asia and is not someone to listen to when he spouts antiquated, half read monetary theory.
    13 Jun 2011, 08:59 PM Reply Like
  • dividend_growth
    , contributor
    Comments (2883) | Send Message
     
    And commodity price inflation will put a ceiling on how much these guys can print.

     

    It ultimately comes down to the money vs energy ratio.
    13 Jun 2011, 10:01 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    He has been living off that call for years because we have been in denial for decades that it is the right call. Wall Street has hated commodities forever and always looked at oil price price increases as temporary. DC could not put together an energy policy to save our lives.

     

    When an investment becomes a no brainer why do something else? Just be prepared for volatility.

     

    I would not say he abandoned his country just because he lives someplace else. We have a lot of people retired to Mexico but that does not mean they don't think of themselves as US Citizens.
    14 Jun 2011, 05:11 PM Reply Like
  • joe kelly
    , contributor
    Comments (1736) | Send Message
     
    Never heard of Mr. Rogers but from what I see he is being played by repeating the US is bankrupt message.

     

    As I see it, if the Congress engineers a default interest on treasuries goes way up on the downgrade. Those who have these treasuries will make a killing.

     

    If default doesn't come around then they still have the principle and lost nothing. Great upside. I may buy some.
    13 Jun 2011, 10:37 PM Reply Like
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