Dominic Frisby says Satoshi Nakamoto is a goldbug and explains how bitcoin was designed to replicate gold mining. Sheraz Mian of Zacks Investment Research says third quarter earnings season will be very important this year and explains why. Jeff Rubin, who used to think we’d see $200 oil prices, is now calling for oil to hit $40-50 a barrel; and, the last guest to our show this week, Don Coxe, explains the difficulty of anticipating geopolitical feedback loops on the financial markets.
Here are a few excerpts from this week’s set of interviews, which recently aired to our subscribers in full (click here for more info).
Here's Dominic Frisby on how Satoshi was a goldbug and created bitcoin to replicate gold mining:
"The guy who invented Bitcoin, Satoshi Nakamoto…if I'm right in who he is, he was a great great student of money. He wrote loads of papers about money and he was a goldbug. He hated inflation; he hated what governments were doing to money—the manipulation of interest rates—and in some of his other work he described inflation as pernicious; and his aim was to as closely as possible replicate the effects of gold digitally. So he wanted a sound money. He wanted a deflationary system of money. He wanted a money where there's limited supply. The whole process of creating bitcoins on your computer known as mining was designed totally to replicate the gold mining process..." (Click here for audio)
Sheraz Mian on why Q3 earnings are so important this year:
"The reason I'm more focused on this earnings season is that the last earnings season, Q2, we had what now in retrospect appears to have been a bounce-back in profitability from the extremely low levels to which business activity had fallen in the first quarter and the first quarter you will remember was really held down by weather and all those issues and even the GDP turned negative. So we had unusual factors at play in the first quarter of the year and one could call the bounce-back in Q2 as unusual as well. And with that background that the Q3 season in a way is the first reporting cycle which doesn't have any of these unusual elements in play so, in my judgment, the reports that we will see in this earnings season and the commentary we will hear from management teams will give us the true lay of the land if you will on the earnings side."
Corporate profits are at record levels. Do you think they are sustainable at current levels?
"I personally fall in the camp that is skeptical of current consensus estimates for Q4 and beyond. For the double-digit earnings growth that is built into estimates for 2015 and the continued gains in '16. I think the objective conditions on the ground are not good enough to give you the top-line gains, which would translate into the type of gains that the market is looking at. To have double-digit earnings growth for any index...into 2015 you need some mix of revenue growth and margin expansion. And the way I look at corporate margins, from my angle, they are already at record levels. They are at levels where we were prior to the 2008 downturn. What the consensus estimates appear to be suggesting is that we should expect further expansion in margins...if you ask my personal view I think the best of margin gains are behind us." (Click here for audio)
Jeff Rubin on why he no longer believes high oil prices are guaranteed:
Jeff, you used to be a huge advocate of triple-digit—even $200—oil prices. Now you are forecasting oil to fall all the way down to $40-50. What changed your view? Is it merely slowing economic growth around the globe?
"I think global economic growth is part of it...As you know, we're not growing at exactly double-digit rates, but I think it's also policy changes that have moved those economies away from hydrocarbons, particularly oil. In the United States we are seeing that more and more people are moving to the inner city as opposed to the far flung suburbs. The number of miles driven per vehicle is also falling and then an increasing number of Americans aren't even getting their license. So I think there are some secular changes that are affecting oil consumption in the US and in Europe and in Japan and that is being compounded by the fact that all of these economies are now growing at a fraction of their previous rates." (Click here for audio)
Don Coxe on the impact geopolitics has had on the market this year:
Don, you predicted that 2014 would be the year of geopolitics and, unfortunately, your forecast turned out to be quite accurate. Looking back, why do you think the geopolitical element may have not been well anticipated in terms of its influence on the market?
"I think what a lot of investors missed was that although these wars have been small in scale they have wider economic impacts. Let me give you a perfect illustration: Several of the countries in the Eurozone are now in recession and it looks like Germany is also in recession. You say, 'How is this related to Ukraine?' Well, Russia basically became a power again because of oil and gas. And they don't have a lot of their own consumer goods industries and they don't have a lot of high technology apart from their weapons industry so they've been importing lots of stuff from Europe in particular—not much trade with the US, but with Europe. So what you see is that the Eurozone was hardly showing a lot of strength anyway and then when you cut off a major major source of exports to a big degree...a fragile economic recovery there turned down when Russia got embargoed and so that's had a feedback loop effect right into the financial market because you now have negative interest rates for short-term deposits with the European central bank and when that happens then the other central banks that hold euros don't roll them over because they want to have some kind of return on it, so they buy treasury bills. And when that happens, the dollar goes up and the euro goes down. So you cannot have even a small war or large embargo without all sorts of shock effects." (Click here for audio)
Our technician this Saturday is Robin Griffiths. He gives his outlook on stocks, bonds, the US dollar, and gold. In the second hour, Jim Puplava talks about the timeframe for the “Next Perfect Financial Storm,” with both of those shows available on iTunes and on the Newshour page this Saturday for your listening pleasure!
