All Things Jim Rogers

From commodities to oil to the dollar, when he speaks, the investment community tends to listen. That appeared to be true two weeks ago when he took on Gordon Brown and slammed sterling, saying the City of London was finished, and that the UK would be too once the North Sea’s oil reserves ran dry.

The pound responded quickly, hitting a 24-year low later that day, as followers appeared to agree.

But as the Royal Bank of Scotland’s Ross Walker and David Simmonds promptly pointed out, the UK has been running an oil deficit for four years, and manufacturing contributes more to the UK economy than the Square Mile ever has done.

Not that that stopped Mr Rogers predicting just last week that sterling would again reach parity with the dollar.

The problem with Mr Rogers’ rants, however – as the past fortnight has perhaps shown – is that he is not always as right as he seems to think he is.

Take one of his more recent punts, on the rise of China and the growth of the Asian region as an economic superpower – a viewpoint in which he believes so strongly he has relocated to Singapore and is teaching his young children Mandarin.

But China’s growth is slowing, and fast. From an annualised growth rate of 9pc in the third quarter of 2008, the International Monetary Fund predicts the Chinese economy will grow by 6.7pc in this year, its slowest pace of growth for more than seven years.

The Chinese economy is stagnating – as seen in news that more than 20m rural migrant farm workers had lost their jobs by the
start of the recent lunar new year festivities. Mr Rogers may yet prove to be right in the long term, but not right now.

When it comes to oil, Mr Rogers has long been a bull, predicting a price of $200 a barrel long before last summer’s $140-plus price squeeze, and again as recently as this month.

But his thesis is predicated on a lack of supply, which perhaps seems valid, until you look at his other theories.

After all, one of Mr Roger’s favourite current mantras is that the US economy is ruined, thanks in part to the mishandling of the recent crisis by the Bush administration.

So, given that the US remains far and away the largest consumer of oil, if its economy is in freefall, surely its need for oil will wane sharply, freeing up supply?

The investment “guru” also contradicts himself by being bullish on the future of shares in airlines, a sector that tends to be crippled by high oil prices.

One of his most resounding ideologies is his unnerving belief in the value of commodities, which led to him being coined the “commodities king”.

So fervent is his belief that in 1998 he even set up a tradable commodities index in his name – the Rogers International Commodities Index (RICI).

But, unfortunately for him and for those who have invested in it, the RICI delivered a negative return of 41.35pc in 2008 in large part due to the slump in commodity prices at the tail-end of last year. As a result, the index’s return since inception, as at the end of December, was 159.36pc, a five-year low.

The RICI – which is based on a “basket” of 36 commodities – is led by the man himself, along with a committee of eight others from banks including Merrill Lynch and UBS.

Interestingly, crude oil and Brent account for 35pc of the indices’ weighting, perhaps in part explaining the recent fall in its value.

To be fair, Mr Rogers has in the past admitted he is not the best when it comes to timing, and that when it comes to short-term trading, he is “horrible”.

Behind the sound-bites for which he has become known, he recently admitted that if it hadn’t been for shorting US banks and investing in the Japanese yen, his own personal portfolio wouldn’t have made a profit last year.

Mr Rogers has proven to be bang on the money in the past, and his current overriding mantra, that Asian economies will replace those of the West, will be no doubt proven correct in the long-term.

But, to paraphrase an old adage, you shouldn’t believe everything you hear, no matter who it is that’s saying it.