muses of the moment

November 25, 2013

Another Jim Rogers interview

Boom-Bust on RT interviews Jim Rogers (via zerohedge). Click here. Good interview, Jim starts around 4:30.

Groovygirl just finished Jim Rogers latest book Street Smarts (she got it at the library). She highly recommends it!! Very good. Remember that Jim is a long-term investor. He is always early, and he admits it. There are several fundamental investing practical points worth reading. But pay attention, they are sprinkled throughout the story-telling.

Jim on China’s announcement last week:

10:15 China’s Plenum
“the Chinese are becoming more and more capitalist”… they are
becoming more and more market focused… as opposed to the US where when
there is a problem “the government decides how to fix it… look at
Obamacare” – “the government says “we will figure out the
solution”… “I much prefer the Chinese system of open markets than the
US with the government dictating everything”

Side musing: make sure you watch the entire Boom-Bust show after Jim Rogers. They discuss very important US housing data regarding foreclosures that in gg’s mind supports Martin Armstrong’s real estate cycle (slight uptick through 2015 and then decline). Housing bubble popped in certain areas and then moved toward the center of the US (takes about 18 months to 3 years for that move). The rise in foreclosures in bubble areas lately signal a renewed decline.

They also discuss two important points. The go-between in the housing market doesn’t have the incentive or know-how to do things in the best interested of the homeowner and the investor. Very important! Until this is fixed, we will continue to have long-term problems in housing, regardless of the huge derivative issue that was not covered in this segment. The mortgage forgiveness act is going to expire at the end of the year. That means that homeowners who have their loans reduced (forgiven) must pay regular earned income tax on the forgiven amount. That’s huge. If someone can’t pay their mortgage, they certainly can’t pay the tax. They will have to walk away. Walking away means empty houses, no income for investors, and continued overall depressed housing prices once the banks put them up for sale. More negative feedback loops in US housing and real estate markets. 

Also, pay close attention to that regular earned income tax on debt forgiveness. It will come up again when the student debt bubble pops. First of all, debt is NOT income, so it should not have a regular earned income tax on it. And since the debt is not paid and will never be paid, I don’t know how anyone can call it income in the first place. The IRS is trying to get some money as they are losing money hand over fist because businesses, banks, and investors can write off their losses (the debt they loaned out for housing) as tax deductible. It is another example of corporations (since they are considered people now) having more “individual rights” than actual individuals.

Government policy determines what people and business will do, either by carrot, stick, or indifference. Jim’s interview was a great illustration about how that works well (in China) and is not working well in, say, the US.

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