Steve Forbes is concerned. He sees the dichotomy our nation is currently facing — what he calls a “tale of two economies” — and is warning for Americans to take action to protect their savings. Disappointing business earnings, growing debt and the stagnant economy don’t match up to the rising stock market, which has been overly inflated by the recent low interest rate policies of the Federal Reserve. How much longer can the markets hold up?
In this exclusive interview with Birch Gold Group, Forbes urges Americans to buy gold as an insurance policy, saying, “when the authorities muck up… you’ve got something that will go up when other things are going down.”
Sheldon Anderson: Sheldon Anderson with the Birch Gold Group. Mr. Steve Forbes, thank you for your time.
Steve Forbes: Good to be with you.
Sheldon Anderson: Yeah. Thank you for your time. I’d like to talk a little bit about the economy and where you see the stock and bond market headed, maybe in the next few months into the next few years. What do you think about where the markets are headed?
Steve Forbes: Well, the economy is still stuck in second gear. You get one good report and then you get a disappointing report. So we’re like a baseball player still hitting .220, .240, when we should be hitting .350. The stock market reflects the fact that large companies have very easy access to credit. They’ve gotten their act together. But credit flows to small and new businesses is lacking. Business investment is lacking. So we’re not setting the foundations for the future. Next year, with the new president, usually, that’s not good for the stock market. The new guy always disappoints, the new girl always disappoints. Then if they get it together, then you get a rising market. So, I’m not a market timer but I think the bond market has been distorted by what the Fed has done. I think, well, the stock market has done well, other sectors of the economy, remember stocks represent large, relatively large entities not the medium to small businesses. So we have really a tale of two economies. And that’s not good. We’ve seen that in Europe. It’s not good. I don’t want that to have to happen here.
We have really a tale of two economies. And that’s not good. We’ve seen that in Europe. It’s not good. I don’t want that to have to happen here.
Sheldon Anderson: You mentioned something, the access to credit and how it’s affected markets in the past in a positive way. But also that access to credit means access to debt. Increased debt, both corporate and what’s happening in our country as far as that debt is concerned. How do you see the debt playing itself out, is there a problem there?
Steve Forbes: Well, the problem with debt becomes a problem when your assets are not growing. And the assets of the country are not growing the way they should. And so the debt is growing. After World War II, we had a debt that was proportionally higher than it is today but then we had then followed 25 years of semi-good fiscal policy and decent monetary policy and so, it went from a 120-25% of GDP down to 35-40%. And so over time, the key thing is prudence and reducing taxation. I want a radical simplification of the tax code, having a stable value of money and people would do fairly well. But the challenge today is that it is growing not because we’re fighting a war, but because we have a spendthrift government and a stagnant, relatively stagnant economy. So, it’s getting big for absolutely the wrong reasons.
Sheldon Anderson: You talked about growth and having your assets grow. It’s very hard to do if you’re holding bonds that don’t really pay you much and you’re holding cash that doesn’t really pay you much, and there’s potential problems for the dollar. How do you potentially see gold as a vehicle for either protection or growth in that environment?
Steve Forbes: Gold is an insurance policy. Unless you’re into gold mining stocks, that’s a different kettle of fish. But the gold itself is an insurance policy. You don’t invest in it. You buy it and you hope you never have to use it in the sense that other things are done right, so your other assets grow. But it’s nice to have there, to know that when the authorities muck up, as they’ve been doing with frequency in recent years, you’ve got something that will go up when other things are going down.
You buy [gold] and you hope you never have to use it in the sense that other things are done right, so your other assets grow. But it’s nice to have there, to know that when the authorities muck up… you’ve got something that will go up when other things are going down.
Sheldon Anderson: So would you advocate, given the size of the problem that’s been created like from quantitative easing, that a person’s allocation to that safety may increase than say, previous years?
Steve Forbes: I think the key thing is to have the discipline. To keep a certain percent and then you re-allocate it, readjust it as the circumstances change. But investing whether it’s in equities or even in hard assets, the tendency is to extrapolate the present into the future. I remember when gold had a surge from 300, 260, 300 then peaked at $1,900 in 2011, people were saying, “Oh 5,000, 10,000…” You get whipsawed. And then when gold plummeted from 1,900 to just a little above 1,000, people thought, “Well, not so good.” And so, as the saying goes “Everyone’s a disciplined investor until the market goes down.” And so you don’t get whipsawed by emotions. That’s why, buy it, have that as a certain percent of your portfolio and don’t look back.
Sheldon Anderson: So, my concern with the simplicity of it is that we live in such a complex environment right now that the size of the quantitative easing and the trillions of dollars that we’ve printed is going to be problematic for the dollar. And since the gold is the anti-dollar, what are your thoughts on the world reserve currency status and the dollar and how gold may play a role in a portfolio?
Steve Forbes: What we see unfolding is a peculiar situation. That is, the dollar has strengthened recently and gold strengthened. Usually they go in opposite directions. What that means is, regulators, monetary authorities have created conditions where the dollar, there’s an artificial dollar shortage, not real shortage but the people who will need it can’t get it. And then you have worries about what’s going to happen in the future. The world looks like it’s unraveling. And so, you get seemingly contradictory trends. But again, don’t let emotions get in the way. And in terms of not getting interest on bonds, well, I think for years, bonds have been a trading vehicle more than the kind of thing you buy and throw away.
Sheldon Anderson: Interesting. Well, I appreciate your time. I know you’re busy and Birch Gold thanks you. If you could give a piece of advice to somebody who has yet to get into the gold market but is considering it, what would you say as far as maybe urgency that would be a catalyst for them to take a position?
Steve Forbes: Well, if you’re worried about the world, and a lot of people are, a certain portion doesn’t have to be a large one, when you’re buying it and then just ignore it and say, “I’ve got it there if it’s needed.” And make sure on gold, you have to make a distinction between owning an ETF – an exchange traded fund – or a gold mining stock and gold itself. If you want gold as an insurance policy, buy the tangible pieces of metal.
You have to make a distinction between owning an ETF – an exchange traded fund – or a gold mining stock and gold itself. If you want gold as an insurance policy, buy the tangible pieces of metal.
Sheldon Anderson: I appreciate that. I thank you for your time Steve Forbes, it’s really a pleasure to meet you. Thank you for talking with Birch Gold.
Steve Forbes: Thank you.
Sheldon Anderson: Thank you so much.