Ned Goodman and the ‘Botox Economy’ – (Northern Miner – September 13, 2013)

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry. 

Ned Goodman, president and CEO of Dundee Corp., spoke about the perils of quantitative easing at the Toronto Resource Investment Conference on Sept. 12. He made the following remarks, as recorded by The Northern Miner:

Ned Goodman: I have a lot to say and I will give you my biases, no problem there. I believe I’m a sensible man and as a sensible man I’ve been told by my mother, actually, that even though you don’t know the hour or the place of your demise, but you do know, that without a doubt, it’s going to come.

So as a sensible investor, I’m ready for the day that the United States Empire crumbles and that’s a hint as to where I’m going … I know that nothing lasts forever and the environment that we’re in could change, but we do not know anything other than nothing lasts forever and right now it looks like whatever is happening is speeding up, not slowing down. But I expect and hope to be here to watch it happen.

The slide that is on there [on the auditorium screen] is nothing more than to show you, that the fixed income market since 1962, which is when I started my career, has had some unbelievable long runs, we’re not talking of short-term things, we’re talking about long-term things. And I’ve watched interest rates from 1962, when I started my career, I’ve watched interest rates go up to 15.8% in the late 1970s; lived through those inflationary days in the late 1970s; and then watched in absolute amazement that bonds outperformed stocks for over 30 years.

So nothing is going to happen to fix what we’ve got right now in a very short period of time. Something is going to happen, I don’t know what it is, but when I’m thinking about what’s going on amidst the global and Middle East chaos that we have, and the violence around the world, and problematic economics that are in existence, and the financial news that emanates from the United States, Europe and the United Kingdom, our world is all screwed up. It’s screwed up in a manner that I don’t think we’ve ever seen before. So the traditional economist has a lot of trouble and that’s why you see so many different views.

So without any certainty, or reason for optimism or confidence of investors, yet the stock markets of the world appear to be blind to the news of the day. Nevertheless I’ve not been more concerned about the future for overall investment at any time in that entire period that you see there since 1962. While I definitely remain an optimist by nature, there are times when rationality takes over my psyche and questions optimism. I remain positive towards those kinds of investments that will retain inflationary protection like infrastructure, real estate and other hard assets such as gold and commodities.

We are fortunate and unfortunate that we live next door to the richest country in the world, and supposedly the most democratic, as established by its Constitution, but not necessarily by its president. But if you search through economic history books, you’ll never find another instance similar to the United States currently. This is all brand new stuff. With their dollar serving as the world’s reserve currency, while backed solely by paper on which is written: “In God we Trust, you should too.” I Trust in God, but not the paper.

In addition to today’s environment, we have a new country, I’m calling Europe a country, with its own currency, which they promised when they put it out that they would never print any more, but it has the same kind of backing as the U.S. dollar has; nothing other than, the backing of these currencies is that, don’t worry, if we need any more, we’ll print some more. And therefore you shouldn’t worry, you’ll get your interest cause we’ll just print some and when you need to get your money back we’ll print more.

The British are all confused about it and maybe that’s why they had to reach out to Mark Carney, and maybe he’s going to help them. But at the same time, the Chinese are collecting U.S. dollars and gold. And what are they doing with it? They are spending it as fast as they can. They have hired or brought into the system, prominent businessmen, nonpolitical businessmen, giving them the actual advice that it’s important that they find some place to spend these U.S. dollars — three and a half trillion dollars.

I was fortunate enough to have a private luncheon meeting with Warren Buffet and a few other people and the question came to Buffet: “What is going to happen when the Chinese want all their money back? And they’re going to ask to have their bonds cashed in?”‘

For the rest of this speech, click here: