You are convinced that we will continue to see bazooka after bazooka from central banks?
Well once the war has calmed down, markets will go up and partly because we do not think the central banks are going to get aggressive about raising interest rates for a while but have a big rally. Then the central bankers will say wait a minute, now there is big inflation coming back and then they will start raising interest rates again and that in my view will be the end and then stocks will have a long bear market but commodities will do well because there is supply shortages.
What is the outlook when it comes to lithium and copper largely on account of the demand for electric vehicles which has picked up globally?
Electric cars use much more copper and lithium than petrol cars. So, when you have shortages and big demand at least of higher prices and you have money printing as well, it makes people worry about the value of the money.
What is your outlook on bond yields? Do you believe that they are in a bubble territory right now?
Bonds are definitely a bubble nearly everywhere in the world. Interest rates have never been this low in the history of the world. Never has there been so much money printing and borrowing by governments and central banks. I would not buy bonds unless it is a special situation somewhere.
Going by the way you have predicted the next market cycle and what is going to happen post the war and continued excess liquidity, more printing of money, could a corollary of that also be that once again the FAANG stocks on NASDAQ and across the world go up post this correction?
The US stock market has been going up for 12 years now – the longest in American history. We have had a big bull market and it does not mean it cannot go up another 12 years but it never has. In my view, inflation will come, interest rates will go higher, stocks will get extremely overpriced because of enthusiasm and that will lead to a big bear market, the worst in my lifetime. We had a big bear market in 2008-2009 because of too much debt. Debt is now much higher all over the world. Everywhere debt has gotten higher than conceivable and so the next bear market has to be a very, very bear market. I am not trying to scare you or anything I am just telling you a few facts. The debt situation is much worse than 2008-2009.
Is it really that bad because the world will also show recovery. We will be out of a pandemic, governments around the world will be investing?
Well if you think there will never be another bear market, that is wonderful. In Washington, they say do not worry we will never have another bear market, we have things under control. I know that they are either liars or fools because I know we have always had bear markets and we will have another bear market and when it comes, it is going to be very, very bad. I do not know when it is going to come, I suspect next year.
What do you believe would be the prudent strategy for investors across asset classes and not just equities? It is an awfully choppy market and no one wants to get their fingers burnt?
I always say invest only in what you know. What I am investing in for the next bear market will be agriculture and commodities. I will be so short when things get really hard again. I will sell short after a long time and I will be long commodities and maybe Russian shares or something. Right now, people hate Russia but I always like to find things. I do not know if I will buy Russia but we will try to find things that are depressed when the next bear market starts.
What is the view on property –may be real estate even –when it comes to India?
You know as well as I do that India property is in a bubble at least from what I read. I do not own any Indian property but I read that Indian properties are in a bubble. I read that Indian properties are very, very expensive and probably a bubble but remember when interest rates go higher, which they will in the next foreseeable future, that will affect property everywhere.
If interest rates do go higher, we could of course start to see flight of capital. It has begun in a sense.We have started to see foreign investors selling Indian equity.So when interest rates go up, what will happen to the outperformance of the Indian markets – the straight line rally?
India has been a fabulous market but history shows that when you have a bull market and then a bear market, the things that have been the strongest in the bull market will usually go down the most when the bear market comes. In America, things like Amazon and Apple go up every day. Those stocks will go down a great deal when the bear market comes because they have been so powerful in the bull market.
Would you say that we are towards the end of this bull market, that the bull market is still intact?
Well I am going to use the US example. The bull market started in 2009, 12-13 years ago. In my view, we have to be near the end of the bull market. I am not selling short yet but we have to be near the end of the base, never gone up this much in history. Stocks are expensive now and interest rates are the lowest in history. Interest rates will go higher, inflation will go higher that has to lead to a bear market and it is going to be very bad especially for the things that have been hot. I would not buy Apple at all now.
What about the outlook as things are heating up when it comes to the US dollar, owing to the kind of comments as well that we have seen from the US Fed chair. Where do you see the dollar index headed?
I own US dollars partly because when turmoil comes, people look for a safe haven. They think the US dollar is a safe haven for historic reasons. But what is happening with the US dollar now is the end of the US dollar because an international currency is supposed to be neutral but in Washington, they are not changing the rules. Now if Washington does not like you, they put sanctions on you and you cannot use US dollars. So many countries are starting to look for a competitor – China or Russia or India, Iran, Brazil… some countries are starting to look for a competing currency and they should because Washington does not play fair anymore.
Of course, the US is the largest debtor nation in the world. So for fundamental reasons and political reasons, people are looking for competing currency. I do not know what it will be yet. I hope I am smart enough to buy it when you find it. I do not like saying it, I am an American but I do not like to see what they are doing to the American dollar.
A year ago in January, you spoke about advice that you would give your daughters and you said that it is important to save money and money needs to be saved and not spent. What advice do you want to give because you believe it is a terrible time to be young. Why is that?
I said it is not a good time to be young Americans because America has got staggering debt. A young Indian is probably better off than a young American at this point. America is the largest debtor nation in the history of the world. The debt becomes higher and higher every day. I am not going to pay off the debt. I would not be around in 30 years or something but my daughters are going to have a huge burden left from all this debt.
I remember, 100 years ago the UK was the richest country in the world. There was no number two. Then they went into huge debt and 50 years later, the UK was bankrupt. Unfortunately I will not be here in 50 years but my daughters will and there is going to be a lot of huge debt and the US position is going to change.
Since you are saying that a bear market is on the anvil, what would be your advice for first-time investors?
Be very careful. Learn as much as you can about what is going on because when you learn what is going on then you will become worried and when you become worried, you will start figuring out ways to protect yourself.The best ways to protect yourself is to buy what you know. If you know about automobiles or fashion or whatever, that is the way you protect yourself. Or if you can learn to sell short because selling short will make you very rich in a big bear market. In the 1930s, world had horrible problems but some people came out of the 1930s very rich as they understood what was going on.
Can cryptos ever be an alternative to the US dollar index?
Well it could be. Many people have made a lot of money trading crypto. My view is that if and the bulls say that, crypto will be the new money. I know that every country in the world is working on computer money now including the US. If the US has crypto money but the US is not going to say this is new money. Governments like control, governments like monopoly. I do not like it but that is the way governments are and I just suspect that they will either tax it or regulate it or outlaw it or something because they do not want to lose control. Governments do not want to lose control and therefore they are not going to let us do what we want.
