Today legendary value investor, Jean Marie Eveillard, told KWN that elites throughout the world are discredited. Eveillard, who oversees $50 billion at First Eagle Funds, also said, “The implications (if the trend continues) would be a chaotic or semi-chaotic period. If the economy does not recover, in what would appear to be a sustainable manner, then the politicians will be under pressure to take very unusual steps.”
He also discussed the gold market, but first, here is what Eveillard had to say about the danger elites and bankers are facing: “Elites are discredited, not just in the US but throughout the world, including possibly in China if the economy there continues to do poorly. And it’s not just government elites, it’s also business elites, particularly financial elites in many countries, including the US, the bankers and the like. They will end up hanging a few. I suppose I’ll be spared because I’m too old.”
“You look at the recent elections in France where the extreme right and the extreme left represented something like 30% of the vote. I think that’s troublesome because (it means) there is very little trust in the authorities, very little trust in government, very little trust in business, particularly in big business.
That creates an environment which is, I’m not saying they are about to storm the Bastille, as they did in 1789 in France, I’m not saying they are coming down with their pitchforks, but it is, to me at least, a troubling phenomenon which does not speak well for the future if it continues….
“The implications (if the trend continues) would be a chaotic or semi-chaotic period. If the economy does not recover, in what would appear to be a sustainable manner, then the politicians will be under pressure to take very unusual steps.
Already they have taken unprecedented steps, but maybe we’re not at the end of it. And the more bizarre the steps, the greater the risk that some accident will result from the authorities taking those unprecedented steps. Today I think the Neo-Keynesian steps will not be helpful at all, and indeed they are not.”
Eveillard also warned: “We also have to worry about the fact that the central banks are buying so many government bonds. On the one hand the Treasury issues bonds and the central bank buys the bonds. There is something wrong about that. It helps temporarily because it means that demand is provided to a large extent by central banks.
But at some point people will say, ‘Hey, wait a minute, it’s money that’s created out of thin air with which they are buying those bonds.’ It is inflationary. We are not seeing it yet in the consumer price index, but it is indeed inflationary.”
Eveillard had this to say regarding gold: “It’s been almost a year since gold hit $1,900. Gold suffers from the idea that there is no inflation. In fact there is inflation. The Austrians (economists), and I think they are right, they say inflation is the creation of too much money and too much credit. And that has happened, the creation of too much money and too much credit has happened over the past three years, and it’s continuing. So the policies are inflationary.
I think gold, in spite of the fact that it has been in a bull market for 10 years or more, continues to be under-owned. Gold is still seen as an outlier, as a somewhat bizarre instrument. It’s not seen at all for what it is, which is a substitute currency.
Pure paper money systems, historically, they are not inspiring. They always end badly. But (right now) there is no acceptance that things will end badly with a pure paper money system. So it has been a somewhat disappointing behavior of the price of gold over the past nine months or so, but I think eventually the bull market will come back. By eventually, I mean within a few months or so.”