The market set up is so different from what we witnessed about a month ago. Given the fear with respect to the rising dollar index as well as FIIs who have returned and continued to buy, what is the overall equity market landscape looking like for India ?
There has been a lot of pessimism all around and usually when there is a lot of pessimism, something comes along to make people optimistic again and that seems to have happened. People think the central banks are going to calm down now. We have optimism and so we are probably going to have a rally for a while. I have not sold anything. I am waiting for this big rally.
Why is the volatility in global financial markets so high this year? At the beginning of the year, it was euphoria, then came the fear, now there is a comeback. We have seen all emotions getting played out in less than eight months – fear, excitement, greed, euphoria, bubble, realisation. Am I missing anything?
Sounds like Bollywood, doesn’t it? That is what India is. You are right. But remember we had 12 years of a big rally in the US. We never had such a long bull market in American history. Of course, everybody got excited. They always get excited at the end of a long bull market and then things started calming down. We had huge pessimism because of inflation and other things. Now it looks like inflation and pessimism is breaking, but just remember, this is probably the last rally.
Last time, you said the rally was coming. It could be because of technical factors, it could be because of geopolitical factors. I think technical factors and a decline in commodity prices have led to this comeback from the June low of about 10% plus. But why are you of the view that this could be the last rally?
Because of all the signs that we have seen before. New investors are coming in. They have discovered this new thing called the stock market, it is fun and one can make money and they are betting on crazy stocks. Crazy stocks are going through the roof. Now all this has happened before. It is not the first time I have seen this rodeo and it is happening again. Usually towards the end, stocks go crazy. Previous bull markets in the emerging markets used to go crazy. Everybody comes in betting on SPACs, But SPACs have been around for years. It has all happened before.
So is it still a lot of silver, some gold, a lot of rice and sugar in your backyard?
I own commodities and commodities are going to do well because of supply constraints that are developing and the central banks will print more money eventually because that is all they know to do. When we have a recession, they will panic and print more money and when there is a lot of money printing, the main thing to own are real assets – whether it is rice or silver. Whatever it is, you should own real assets.
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You have in the past said that silver and agriculture probably are the least dangerous in the next two to three years. What we are seeing in the US bond markets, the way the dollar is also strengthening, what can that mean for commodities and safe havens like gold and silver?
Whenever you have money printing, the price of real assets rise. It is a historic fact. You may say why would you own the US dollar? I own a lot of US dollars because when there is turmoil, people look for safe havens; they think that the US dollar is a safe haven for historic reasons. It is not, but I own a lot of it because during the turmoil, people will reach for the US dollar, it will get overpriced and I hope I am smart enough to sell it.
What about gold, what is your view here?
Well I own gold. How can I not own gold? I have had gold for many years. My plan is for my children to own my gold some day. I hope I do not ever have to sell my gold but if gold turns into a bubble, of course I will have to sell it someday. But India knows more about gold and silver than any country in the world. I own both and do not plan to sell either unless they turn into a bubble.
You have been fairly categorical about your views regarding crypto and that is something that you do not believe in at all. Could you reiterate that theory?
I do not believe in it. My analysis is that if they become successful as money, governments will react. Governments do not want to lose their monopoly and governments will do something. The American government and every government is working on crypto money but when money is on the computer, the American government is not going to say this is your money now. But if you want to use that money you can, that is not the way the governments think. That is not the way bureaucrats think, they want control and they want to know everything.
You have said this has been the worst bear market in your lifetime. You have also blamed the US Fed for a lot of what we are seeing in the markets. Can the Fed finally be ahead of the curve and stop overreacting?
If it is the worst bear market in my lifetime, it is going to be the worst in your lifetime too, I assure you. I have seen plenty of bear markets; there was a bear market in 2008 because of too much debt. Since then, the debt has skyrocketed everywhere and so the next bear market has to be the worst in my lifetime. I am stating a simple fact because gigantic debt has been built up around the world and even China has debt now. They did not have much debt last time. So the debt is huge. We have to have the worst bear market in my lifetime.
I am just trying to tell people to do a little research, I do not want to scare people but they need to understand what is going on.
What are some of the other assets that you would like to pass on to your children apart from gold?
I will pass on gold and silver. If I were passing on anything today, it would be silver which is much cheaper. Silver is down something like 70 or 80% from its all time high and gold is 15% below its all time high. I will buy both at the right price but at the moment, I would prefer silver to gold.
For the next three years, if you had to go long on just one commodity or one currency what would that be? Also, what would be the three-year short trade for you?
The one thing I would buy would be silver or agri. The one thing I would sell would be the American stock market, the FAANGs, the technology stocks in America.
How will China change the matrix this decade? China was the big demand factor, the driving factor for global economy for the last one and a half decade. The direction in which China moves would have an impact on supply chain, consumption, metal prices, global geopolitics, policy making everything?
China had a huge bubble in property and that bubble is finally popping and it is affecting the entire economy in China. China will probably continue to have problems for a while but I would remind you that in the 20th century, America had many problems including many recessions and depressions on the way to being this great success. China will have problems but they will come out of it okay, if you ask me.