In this interview with Maurice Jackson of Proven and Probable, Jayant Bhandari presents his world view and discusses how it meshes with investment in the precious metals markets.
Maurice Jackson: Joining us for a conversation is Jayant Bhandari, the founder of the world-renowned Capitalism and Morality seminar, and a highly sought-out advisor to institutional investors. Mr. Bhandari, welcome to the show, sir.
Jayant Bhandari: Thank you very much for having me, Maurice.
Maurice Jackson: Always glad to have you on our program, sir. We have a number of topics to address that are important for members of our audience to be aware of that may have an impact on their investment decisions. I would like to begin our discussion by addressing geopolitics in areas of the world that many investors and those in the media identify as emerging economies. But in previous interviews you’ve pointed out that these are not emerging economies but they’re Third World economies, and they will remain Third World economies. Let’s began in Latin America and go to Venezuela. What has your attention there and why?
Jayant Bhandari: What is happening in Venezuela is that that country is imploding, as are many countries in the Third World. In fact, all Third World countries that I can think of are imploding, Maurice. The only exception is China.
What happened with Venezuela is something very similar to what happened in the Middle East. These people became very rich as a consequence of finding oil. And what people might want to look at is GDP [gross domestic product] per capita of countries like Venezuela, Saudi Arabia, United Arab Emirates. The GDP per capita was, in general, about twice as much as it is today, which means that not only they have half as much wealth-generating capacity 50 years later, they have completely failed to benefit from technological revolution that has happened in the last 50 years. And this is a consequence of only one thing, Maurice, and that thing is because Western societies, Europeans no longer rule countries like Venezuela, leadership has got completely depleted in these countries, and these countries, as a consequence, are imploding.
What you see happening in Venezuela or Brazil or Central America—Guatemala, Honduras and many of these countries, El Salvador—they’re all imploding and in my view, they will all fall apart into tribal pieces, which means that there is a huge, huge humanitarian crisis that we are looking forward to, not in the very far future.
Maurice Jackson: How do you see the events unfolding in Venezuela? Do you see regime change? And if so, will that mean that socialism leaves?
Jayant Bhandari: No, that won’t happen. People erroneously project their good views on protests that happen in the streets. So a lot of libertarians and even the international media will claim that these people on the street, Venezuelans, are sick and tired of their regimes, but the reality is that these people, if you look closer, are, of course, asking for Maduro to go. But what they are not asking for is for the free stuff to go away. What they are on the street for is because the free stuff has stopped coming to them. They want free stuff and that is the only reason they are on the street.
So the problem, Maurice, is that socialism doesn’t add up. There’s nothing like free stuff. Someone has to produce wealth to give it to you and a time must come when all this excess wealth will have got used up. That is what happened in Venezuela and these people have now no option but to continue to become poor. Maduro can go and the new regime can come in, but don’t expect anything to really change in a very material way in Venezuela. This country will implode because that is where their thinking takes them.
Maurice Jackson: You know, we’re going to discuss the value proposition of precious metals later in the interview, but it was brought to my attention that the situation is so dire in Venezuela that graves are being robbed for jewelry of the deceased—in particular those that died prior to 1940. And the reason I bring that up is when times get desperate, that’s when people begin to realize the difference between currency and money, which is gold and silver.
Jayant Bhandari: Absolutely, Maurice. When you want to protect your wealth going forward, one of the best ways to protect it is by using precious metals. Precious metals and gems do not die, deteriorate, or fall apart with time, and they become good ways to be used as currencies when time comes for you. And they have been, historically, very good ways to protect your wealth. In a situation in which the society is going into a chaos, property prices fall apart. They don’t add to their value with time. You can’t really invest in the economy, in factories or in infrastructure, and expect to make money from them. And that is exactly the reason why people historically have owned things that preserve their value with time, and gold and silver are among the most important commodities that way.
Maurice Jackson: Let’s move to the Persian Gulf and go to Iran. The situation is becoming more and more tense. What is going on there and why?
Jayant Bhandari: Maurice, what those people among us who dislike American involvement in Iran fail to understand really is that Iran has been trying to build nuclear capabilities. And America has this real responsibility to make sure that Iran does not build nuclear weapons. Now, what people forget is that at one point of time, Iraq, Libya, Brazil, [and] many of countries tried to make nuclear weapons, and America ensured that these people failed to make nuclear weapons.
Now imagine what would have happened had Iran built nuclear weapons. It would start to dominate everything around itself. And if it got capabilities to send missiles to America, this would be game over for America because America can’t afford to have even one city get blown away, and Iran can afford to lose half of its population and not worry about it.
So what America is doing is fully legitimate in my view, America has the responsibility, for its own protection, to make sure that Iran does not build nuclear weapons and missile technology.
Maurice Jackson: Now what are your thoughts on Iran taking the oil tankers of Great Britain here recently?
Jayant Bhandari: Well then, that is the problem. These are completely superstitious, tribal, irrational people and they will create chaos just to look brave to their own people. And the reason is that Iranians themselves are like that. And their government is merely a reflection of its people. I’m reasonably sure people in Iran are feeling very euphoric despite that they are hungry. They’re feeling euphoric about what Iranian government has done. And this is a way to control the crowds, control the masses, and this is what Iranian government is doing, and this needs to be controlled. This needs to be checked as far as Iranian kind of countries are concerned.
Maurice Jackson: There’s a lot of turmoil in Iran as well. The women there are fighting to give up their hijabs, and there seems to be a growing faction that want the mullahs out. What are your thoughts there?
Jayant Bhandari: I think that’s a very erroneous conclusion that a lot of people make [from] watching anecdotal videos of women burning away their hijabs or people fighting against the mullahs. Or they might even show photographs of Iranians from the 1960s or ’70s, in which women are wearing miniskirts or sitting on beaches. These are very inappropriate shows of the truth of what Iran is like.
Now, the reality is that 83% of Iranians are in favor of sharia law. A large, vast majority of people in Iran would want you to be stoned to death for not believing in Islam, or particularly if you are a Muslim and if you want to give up Islam. So it’s a very hard core, fanatic society. And the few women who are protesting are just those rare one or two women who are protesting, or probably they are out of their mind at this stage—[that is] the reason they have the so-called courage to protest in public.
In general, Iranians are protesting against inflation, not against religious fanaticism. Inflation has been increasing and the problem with irrational people, Maurice, is that they think that believing more in Islam or believing more in tribalism, or investing more in military hardware, would somehow make up for this inflation, would somehow make them richer despite inflation. They don’t understand that fanaticism and too much focus on the military actually leads to even more inflation. These Third World countries are in a vicious cycle because they are headless, they are leaderless, and democracy has got them where they are today.
Maurice Jackson: It seems that the citizens of Iran could also benefit from owning physical precious metals. Let’s move further east into India.
Jayant Bhandari: Maurice, the truth is that Iranians are among the biggest buyers of precious metals because individually they know that their society’s extremely chaotic.
Maurice Jackson: And thank you for that input. Let’s move further east to India, which recently had elections. What do you make of the elections?
Jayant Bhandari: Well, this is all noise for me. The path of India is well defined, the future path is well defined. India is imploding. India is in a terrible situation and the international media, the World Bank, the IMF [International Monetary Fund] show all erroneous information about India. India has been going downhill since the time the British left India. Its institutions are falling apart, its economy is getting worse by the day, and all we have today is a very fanatic person ruling that country. And he is going to continue to do more things to correct the problems and he will do those things that led us to those problems in the first place.
Which means that the situation will just get worse, and worse because again, Maurice, he is an irrational person and his actions will take India to a worse situation. Now, if I were a voter in India, who would I have voted for? I would have actually voted for the current prime minister. And the reason is that other people would have been even worse. And that is how bad, headless and brain-dead the leadership of that country is today.
Maurice Jackson: That’s truly unfortunate to hear. So, just for the record, because my next question was going to be, should investors expect to see new opportunities with Prime Minister Modi remaining in power? And that answer is no. Is that correct, sir?
Jayant Bhandari: Absolutely. There is no opportunity in India. Now, of course, there can be isolated opportunities in any society. I mean you can make money probably in Venezuela or North Korea or some really dysfunctional parts of Africa. But in general, as a country, as a society, India is imploding and I have no interest to keep any of my money there except in isolated cases.
Maurice Jackson: Before we move to speculations in the natural resource space, what are your thoughts on the situation between the U.S. and China?
Jayant Bhandari: Yeah, I mean this trade war continues and I like both these countries. I think America is really the best country on the planet even today, and China is the only emerging market. China has shown the capability to continue to improve, and I go to China quite often. I love how Chinese culture and Chinese society is changing, but this trade war is something that will actually harm China. And I think what Trump is doing is quite correct because China has been getting a free ride, and what Trump wants to do is for China to control, to make sure that the playing field is level.
Now the current president of China, Xi Jinping, is certainly egocentric, and my fear is that he might lead to reduction in growth rate of China for the next few years. But China’s future, I think, is reasonably very good in the future. And I hope this trade war blows over eventually. But for now China is suffering.
Maurice Jackson: We’ve discussed some of the challenges in the Third World economies. What is the solution for people who want to see changes?
Jayant Bhandari: It’s too late for changes to happen in the Third World countries, Maurice. Five billion out of seven and a half billion people in the world live in Third World countries. And remember when the populations of the Third World countries was one fifth of what it is today? When it was 1940s and 1950s, and Europeans were ruling these Third World countries, they were starting to find it very difficult to control the chaos of the Third World countries.
Now, what has happened in the intervening 70 years, is that the best people of these Third World countries have moved to the First World. And democracy has meant that the really worst part of the Third World country masses are now in leadership positions in the Third World countries. So there’s really no solution, given the inertia that we are in right now. For individuals, my only suggestion would be to find a refuge somewhere in the West. Now, of course, the West should try to minimize immigration into their countries, because this multiculturalism is destroying the West very rapidly.
So it’s a very strange situation. I think the Third World will certainly implode. It is the biggest humanitarian crisis that world has ever faced in my view. Hundreds of millions—billions—of people will perish when this comes to its conclusion.
Maurice Jackson: Now you referenced that multiculturalism is destroying the West. In what regard?
Jayant Bhandari: Western civilization is a sane civilization for a reason, and the reason is the concept of reason, the concept of causality, the concept of individuality, the concept of property rights, which are all interconnected concepts in a way, and that is really the only culture that exists. That is my definition of civilization.
Now, people from the Third World don’t have civilization. They operate through their animal base instincts. If when these people come to the West and they don’t accept the primary aspects of Western civilization, they participate in destroying the Western society.
My guess is that 90–95% of immigrants do not add cultural value to the West and they should have never been accepted into the Western countries. But again, my guess is that this has led the Western society into a huge problem, particularly America. Where America has been a place where a lot of people have moved to, and they increasingly vote for the left, and the nanny government, exactly the way they voted in the places that they left behind. And they are now destroying America very rapidly.
And that is why, Maurice, my view is that after Trump, America is going to be a very sad and bad place—despite that it is the best country on the planet. The problem is polarization is huge in America today, and once the Republican Party loses its control, it will become ultra-leftist in America.
Maurice Jackson: Well I’m just shaking my head here in despair here. This a not a bright future for American citizens. Let’s switch gears here. In the natural resource space, many speculators are euphoric, with gold seeming to find some price stability above $1,400/ounce. Is this a head fake or are we in for higher gold prices?
Jayant Bhandari: Well, I don’t speculate much in any commodity or precious metals, but really Maurice, if you think into the future, what options do you have? As I said, the Third World is imploding, and these five billion out of seven and half billion people on the planet have really no other choice except to preserve their wealth either by buying Western properties, Western investments, or by buying gold and silver.
Most of these people don’t really understand what is happening outside their boundaries, so they have no option but to buy gold, silver, and currencies of Western countries. And that is why I think support for precious metals will continue to increase going forward. I don’t know what influence it will have in pricing, but really, if I had to suggest to someone on how to preserve his wealth, my suggestion would primarily be focused on gold and silver.
Maurice Jackson: I hear from a lot of speculators in the space. They’re very euphoric regarding the gold price, but I want to delve a little bit into your mindset here and your investment thesis. How does the gold price factor into your investment decisions?
Jayant Bhandari: When I look at mining companies, Maurice, I don’t build into my model prices of commodities and gold higher than what they are today. I always build either spot prices, or actually lower than the spot prices, in my discounted cash flow model. For me, these mining companies are for profit and they should make sense to me at the spot price.
Maurice Jackson: Are you actively buying gold, or are you more focused on the junior mining companies?
Jayant Bhandari: I am certainly interested in buying gold. I own gold and any dips that happen in gold would lead me to buying, accumulating more gold. Now I understand, or I like to think I understand, the junior mining business very well. And I also like to think that I understand other investment vehicles as well. So I, of course, invest in these other companies as well, because they are investment vehicles for me. That is where I expect to make money irrespective of what happens to the metal prices.