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Wealth.net Exclusive: Interview with John Mauldin

MJ: I’m going to jump to a different topic right now. In the book you literary labeled Japan as a ‘bug searching for a windshield’. Did the windshield just hit us a month ago? [ the megaquake ]

JM: No, maybe it moved us up a little bit but it didn’t hit us.

MJ: What will what happened there do for things like nuclear power?

JM: I hope it just makes us think more about nuclear safety and realize that we do have safe alternatives. We’re sitting on top of 30 or 40 years old nuclear reactors that maybe we should think about putting to bed and putting up new safer third generation reactors. I want to see more nuclear not less.

MJ: I always thought we didn’t have much of a choice but to go nuclear in a major way. And then after this happened, that’s going to be a problem now. I think for a while.

JM: It may be, but we’re gonna have to make some big decisions unless you want to be cold.

MJ: Japan is trying to figure it how it’s going to pay for this rebuilding process and there’s something today about a possible hike in the sales tax. What about that? Don’t they have about a trillion in US dollars reserve sitting there? Nobody wants them to sell those to pay for it..

JM: Well, if you’re talking China they got about 3 trillion dollars reserve.

MJ: Yes, but Japan has got a big rebuilding process in front of it right now. Could they do something like issue US-dollar-based denominated bonds against their reserves?

JM: I’m sure it could. But they’re going to pay the spread.

MJ: There’s no chapter on Canada in the book!

JM: Well because Canada went through its crisis in the 90’s.

MJ: I’m calling from Toronto so it’s illegal to have a conversation with a media personality and not work Canada into it.

JM: I understand there’s a constitutional mandate there somehow.

MJ: Yes, this is the Canadian content part of the interview. There’s a guy up here, Garth Turner, who is saying we haven’t already had our meltdown, we just kicked the can down the road. The meltdown is still coming because we sort of have done all the things as the financial crisis hit that everyone else did earlier, so we went down to the zero down payment mortgages. We went out to 35 years mortgage amortizations. The largest subprime lender in the world is now the Canadian Mortgage and Housing Corporation. A lot of people think here that we’re next.

JM: Nothing goes on a straight line forever. Did we do a correction? Yes sure. Your Vancouver housing market looks bubbly to me.

MJ: So you think a housing correction could possibly happen, but you don’t see Canada coming up against the same debt super cycle blow out?

JM: No. Your banks are in good shape, your government budgets aren’t… your deficits are not above nominal GDP.  You are not doing things that are stupid.

MJ: There’s an election on right now, so a lot of people would want to argue with that one. Back in Bull’s-Eye Investing“, in 2004 you said: we’re in a secular bear market. What was the reaction back then when you said that? And that was when we were still headed for an all time high.

JM: I wrote it first in 99. But it wasn’t in the book. I was writing it in letters. So it looked really good in 2000 and 2001 with the market  going back up! But the point in bull’s eye was that markets going from high valuations to low valuations . We’re still in a secular bear, we will not come back to low valuations. I think the next recession, whenever that happens, will probably be enough to push us down into low valuations. Then we can start another bull market and everybody can be a genius!


About the author

Mark Jeftovic

Mark Jeftovic is the creator of Wealth.net, founder and CEO of Canadian domain registrar and DNS provider easyDNS.com and member of the indie rock sensations The Parkdale Hookers.

His personal blog is at markable.com

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