Thursday, October 28, 2010

Chuck Butler, Toronto Money Show 2010

Chuck Butler is from EverBank. This is a US bank. His talk was titled “Who in the World Stands Out?” He says that in the US, the Fed is left with toxic debt. He believes QE2 (quantitative easing) by the Fed is a must. This is because the past stimulus did not work. He said that EverBank did not have any subprime loans and that all their problem loans were easily liquefied.

He sees the Federal deficit as a problem. He feels that the Federal government must make cuts to Health & Human Services, Social Security, Defense and Labor. He also thinks that US unemployment is really at 23%. He wonders if there is a willingness in the US to make cuts. The problem with cuts will be social upheaval. He is worried that the money supply has exploded in the US and that this always causes asset bubbles. He also sees commodity prices rising sharply.

Butler thinks that US is back into stagflation. The US has saved the banks, lowered interest rates to zero and has run up its debt. He says this is what Japan did and now what the US has done. He sees that the US international trade deficit in goods and services rising. Butler thinks that the US treasuries are becoming an asset bubble and this is just the latest in US asset bubbles. Butler thinks that at one point, foreigners will stop buying us treasuries and then the interest rates will have to rise.

In the US, he believes that home prices are still too high. Home prices have been rising since 1987 and they are still 10% higher than the rise in CPI. Butler thinks that the average American family’s financials are in shambles still. He thinks there will be more adjustments in the price of houses. He thinks that the US$ will stabilize, but it will decline and that the decline with accelerate. He thinks that the markets are very volatile, but that there is no fundamental reason that they are.

Butler thinks that currencies trade on different fundamentals than companies do and that we should all have some currency diversity in our investments. He thinks that we should diversify our investments into Canada, China, Norway, Australia and Brazil. (I think he feels he is talked to a US audience.) Butler says that gold will always have a value (it will never go to a zero value).

Butler feels that the number one currency winner is Norway. He says that Norway has a pension fund that has fully paid up pensions for everyone in Norway. He says the number 2 currency winner is Australia, the number 3 winner is Canada and the number 4 winner is China. He also mentions that China is trying to suppress its housing market by raising its interest rates. He feels that in 15 years, China’s currency will be the world’s currency. It is currently trading in its currency worldwide (and is not trading world wide in US$).

Butler also thinks that the most speculative currency to buy is the Brazilian real (R$ or BRL), as it is volatile. He also thinks that gold and silver are currencies. He says that gold at $1,300 an ounce is pricing itself out of the retail market and silver (at $25 an ounce) will replace it. He thinks that the US should not rile China on their currency because this is a dangerous tactic.

Butler gave a pitch for his bank saying that we could trade currencies threw EverBank and we could buy and sell gold and silver through his bank.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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