Global equities are “vulnerable to correction” after rallying from their March lows and as governments around the world withdraw stimulus measures, says investor Jim Rogers.
“We’re overdue for a correction” Rogers says.
“Stock markets around the world have been going up for the past 10 months,” he told Bloomberg.
Also, Rogers says central banks need to tighten the money supply further.
â€œI donâ€™t think anybody has tightened enough. I think everybody should tighten more,” he notes.
â€œWe have huge amounts of money printed throughout the world. Itâ€™s going to cause currency instability. Itâ€™s going to cause more inflation. Itâ€™s going to cause higher interest rates.â€
If the governments do, in fact, withdraw stimulus measures, stock markets are going to be destroyed once again, and if your 401k is still sitting in the equities markets, don’t be surprised if it gets vaporized.
Of course, if that happens, the knee-jerk reaction from our political and monetary leaders will be similar to 2008 and 2009. As Dr. Marc Faber has said on a number of occasions, if the stock markets correct or collapse governments will fire up the printing presses once again.
You see, most people in the developed world view the stock market as the economy. These two things are one in the same. They don’t know what GDP means, or how unemployment affects production, or what falling tax revenues indicate – and they really don’t care.
But they do understand that the Dow Jones is at 10,000 now, and if it is at 6,500, it’s way lower than it is supposed to be, and that must mean the economy is in a recession. So, they look to the government to save them, because when the Dow is at 6,500, their retirement accounts are hurting. And if the government needs to print more money to get the economy back up, and their retirement portfolio back to what it was before, then so be it.
So, to pacify the masses and keep them from revolting, the government does whatever is necessary to give the impression that the economy is OK, and they print – $700 billion, $4 trillion, $23 trillion – whatever it takes.
So, if your 401k does collapse in the next stock market crash, not to worry, the long-term ramifications of money printing likely means that your stock portfolio will rise. In fact, it may even rise to new highs. Heck, in the next few years you might even have double what you had in 2007 -Â in nominal terms, of course.
In real terms, the unabashed printing that leads to those news highs in the economy, er stock market, will, as Mr. Rogers points out, lead to currency instability, inflation and higher interest rates.
This means that while your retirement account went from $200,000 in 2007 to $400,000 in 2014, the price of a gallon of gas is $10, your monthly electric bill has quadrupled, and groceries run you $350 a week instead of $100.
A stock market correction is certainly overdue, and the probability is that it will happen sooner rather than later, especially since the US government and others around the world are winding down the stimulus packages of 2008/2009. But be assured that if and when a re-collapse in stock markets happens and there is any hint of a deflationary impact, or if the Too-Big-Too-Fails are once again on the verge of failing, theÂ helicopters will be scrambled immediately.
It seems there is no way out of this. No matter what the US Goverment does at this point will lead to pain.